SMARTMONEY.COM: The Brave New World of Wireless
By Tiernan Ray
07/12/1999
Dow Jones News Service
(Copyright (c) 1999, Dow Jones & Company, Inc.)
Smartmoney.com
NEW YORK (Dow Jones)--What would you do with a PalmPilot hand-held organizer that could connect to the Internet at 2 million bits per second - as fast as a cable modem, in other words? You might watch clips from your favorite James Bond movies while lying in your backyard hammock. You might use the thing to hold a videoconference at your local Chock Full O'Nuts. If you're a doctor who travels, you might study high-res X-ray images when you're away from the hospital. You most certainly could do a few simple things you can't today, such as download electronic books from the Web; make reliable stock trades in real time while zipping across town; or simply play an audio broadcast of the day's sports highlights.
The latest Holy Digital Grail for the communications industry is something called Third Generation Wireless, or 3G, for short. It's still a ways off, but the prospect of what's known as broadband wireless connectivity has striking implications for all segments of computing and communications technology. Larry Vanston, president of Technology Futures in Austin, Texas, forecasts that 3G will have more than 10% of the U.S. wireless phone market in 2005. It's not too soon to look at some of the likely winners and losers in what may be a huge new product category.
Here's the scenario: Over the next two years, phone companies will start testing wireless handheld devices that can carry upward of two megabits per second (mbps). Ericsson is already performing demos of such gadgets in the United Kingdom, with its customer, Vodafone Airtouch (VOD). The big question here is how quickly new radio spectrum will be allocated - the timetables vary from country to country.
No one knows exactly what these gizmos will be, although many think they'll represent some kind of convergence of computer and phone. They'll probably have a large display - larger than a phone's, at least for playing full-motion video. From a moving car, a user of one of these devices will be able to connect to the Internet at speeds of up to 144 kilobits per second, which is the same as a low-end ISDN connection. (Hello, Officer! I hit a what?)
For a user walking down the street, the data rate may be more like 384 kilobits per second. That's perfectly good for swiftly downloading images and even low bit-rate video like RealVideo from Real Networks (REAL). Indoors, when you're just parked in the Barcalounger, the device will get you that golden two mbps.
A 3G "phone" will handle voice, but only as a minor function. Voice may well be processed as packet-based streams of Internet data, which would make phone calls just one of the many uses of a wireless Internet connection. Still other 3G devices might not do phone stuff at all.
No, these won't be phones mostly, but rather new computers of various sorts with wireless connections, perhaps shaped like a slate with an accompanying stylus for input. And I'm of the opinion that the cell-phone makers could end up owning a big chunk of the computer market as a result of 3G. Sure, the fastest connections will still be with wires, but some users would no doubt buy a computer that can do a lot of networking without being tethered to the wall socket. Nokia (NOKA), Ericsson (ERICY) and Motorola (MOT) are more than phone makers: They have what it takes to integrate high-frequency wireless radio circuits with computer chips, while avoiding electromagnetic interference between the components.
Nokia won't even admit to being in the computer business at this point. (I've asked; they're shy.) Japan's Kyocera (KYO), which trades on the NYSE, has been aggressive in developing phones with relatively high bandwidth-network access for Japan's Personal Handyphone System (PHS), as well as phones for the troubled Iridium (IRDI) network. Certainly one to watch.
Most 3G boosters say video and, possibly, some form of videoconferencing will be an important application for the new devices. The latter is a somewhat dubious proposition, given that the phone companies have been hawking video-conferencing since the 1964 World's Fair. Nonetheless, there are many patentholders who will be helping to develop 3G video technology, which is known as MPEG4.
MPEG4 will probably be the de facto format for all next-generation, Internet-based high-bandwidth video, wireless and wired. A follow-on to the MPEG standard used today, MPEG4 is truly wild. It will allow viewers to, say, shift camera angles during a basketball game, or even change the characters in a sitc om. Patentholders include Apple Computer (AAPL), but also Lucent Technologies (LU), Sony (SNE) and dozens of others. C-Cube (CUBE) obviously has a role to play, given its lead in the market for computer chips that process the current flavor of consumer digital video, MPEG2. Otherwise, there are few pure MPEG plays, although I've noticed a raft of new start-up companies in the past year, including iCompression of Santa Clara, Calif.
Qualcomm (QCOM), a San Diego-based concern that owns patents to perform the coding technique for transmitting these wide-band signals, is also positioned to benefit. But experts point out that there are already three different technology standards for 3G wireless, including Wideband CDMA, CDMA 2000 and something called Edge, and others waiting in the wings. Whether Qualcomm and others can play all these plans successfully and come out on top no matter which wins remains to be seen.
On the equipment and component side, some public companies may find 3G to be a boost to their current revenue streams. RF Micro Devices (RFMD) and Conexant (CNXT), the former Rockwell Semiconductor subsidiary, are both strong competitors in the area of high-frequency amplifiers for cell-phone handsets, and they sell to Nokia and others. With the wireless chip companies, however, the devil is in the details. The varying standards for 3G also mean that the radio spectrum used for these devices will vary in different countries and with different carriers. Europeans will most likely use strips of 15 megahertz spectrum blocks, while in the U.S. 12.5 or 5 megahertz may be used. Point is, these variations can affect product design. When evaluating RF Micro or others, look for expertise in the two gigahertz frequency range.
As the industry heats up, it's also worth keeping an eye on other parts of the wireless arena. Advanced Radio Telecommunications (ARTT) has been around for years as a so-called wireless cable service provider in metropolitan areas. The company recently received $251 million from Qwest Communications (QWST) and others to develop a 100 megabit-per-second Internet service for business. Among equipment companies, P-Com (PCMS) has expertise in point-to-point radio systems, which should be important in building so-called "local loop" phone services, like the kind Teligent (TGNT) is providing. Remec (RMEC) has expertise in antenna technology that will be useful for base stations and handsets.
But while you shouldn't count out these stalwarts, there are many, many private companies in the wireless arena waiting to eat their lunch. Just a few of the companies that have received funding in the past year are WavTrace, a maker of point-to-multipoint radios similar to P-Com's products, which on Friday announced $24 million in funding from Harris (HRS) and Microsoft founder Paul Allen (after receiving $15 million last year!); Fujant, a developer of high-power linear amplifier technology; and Rangestar, an antenna manufacturer.
Even non-wireless companies such as 3Com are getting involved. As mentioned here before, 3Com is getting into wireless network technology with a product that can transmit 11 megabits inside an office building or home. Alpha Industries (AHAA), a wireless chipset manufacturer, has been active in helping the Palm computing division of 3Com with the wireless version of the Pilot.
There will probably be lots of companies like these that play around the edges.
What's most unclear about 3G is what it will be to the consumer. All the talk of wireless video and tablet-like computer devices is awfully vague. With a couple of years to go before deployment of 3G, carriers are already rolling out 2.5G wireless, which will offer some of the features of 3G - such as Web browsing - but without new allocation of spectrum. The evolution of 3G wireless in this way, from today's cell phones into Web-enabled phones and something else entirely tomorrow, means consumers will be the best judges of whether 3G is shaping up to be a dud or something genuinely worth waiting for.
(END) DOW JONES NEWS 07-12-99
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