PHCM. A Little more Info.
JohnG
To: LBstocks who wrote (2239)
From: Ruffian
Tuesday, Oct 12 1999 6:43PM ET
Reply # of 2244
October 11, 1999
How the Cell Phone and the Web
Contracted an Arranged Marriage
By GAUTAM NAIK
Staff Reporter of THE WALL STREET JOURNAL
Five years ago, entrepreneur Alain Rossman bumped into a GTE Corp.
executive at a Las Vegas trade show and handed him six drawings showing
how a cellular phone could retrieve stock quotes, e-mail and flight
schedules from the Internet.
"It was an 'aha!' for me," recalls Chuck Parrish. "It took me 30 seconds to
realize why this was important."
A few months later, Mr. Parrish left GTE and joined Mr. Rossman's
venture, Unwired Planet, to pursue the pair's shared vision: a
Netscape-like browser that would make Internet services available over
the airwaves.
Today, the new technology, known as Wireless Application Protocol, or
WAP, is spreading like wildfire in Europe and Japan and is due to hit
American shores in earnest next year. Motorola Inc. estimates that half of
the 200 million cell phones that will be shipped world-wide in 2000 will be
equipped with WAP browsers. And in Britain, Germany and Scandinavia,
rarely a day goes by without the announcement of another WAP
application.
Meanwhile, companies developing WAP ideas
have seen their stocks go through the roof.
Shares of Phone.com Inc. -- the new name
Unwired World adopted earlier this year --
themselves have quintupled in value since June,
closing Friday on Nasdaq at $179.9375,
down $10.0625.
Discouraging Words
But when Messrs. Rossman and Parrish first
floated their concept for expanding the
Internet's reach from bulky desktop computers
to tiny cell phones, the response wasn't nearly
so enthusiastic; in fact, major wireless
operators such as Bell Atlantic Corp.
dismissed the idea as unworkable. Along the way, developing and
commercializing the technology proved unexpectedly complex, and the
project sometimes looked likely to stall. Later, the effort presented
cell-phone manufacturers such as Nokia Corp. and Telefon AB L.M.
Ericsson with a major dilemma: Should they try to champion their in-house
technologies or break with past practices and embrace a new global
standard?
This time, however, the wireless industry may have finally gotten it right. In
a sector where major players have often counterproductively pursued
separate standards for digital cell phones -- three of them in the U.S. alone
-- two years of often-contentious negotiations have produced a truly global
technology. The WAP club now has 150 members, representing 95% of
the world market for cellular handsets. Even Microsoft Corp., a former
holdout, has signed on.
'Betamax vs. VHS'
"We realized that if this was going to be another Betamax vs. VHS battle it
would slow things down, confuse the market and not take off for years,"
says Joakim Nelson, director of strategic product management at Ericsson,
the Swedish cell-phone maker. Having agreed on a standard, adds Mr.
Nelson, "We're now ready to fight."
Mr. Rossman, one of the first to pursue such an accord, didn't realize how
tough his task would be. The French-born entrepreneur, trained in
mathematics and engineering, had moved to the U.S. in 1981 and later
made a tidy sum by selling his tiny company, EO, to AT&T Corp. In early
1995, Mr. Rossman began to shop his "Internet-in-your-pocket" idea to
technology firms in Silicon Valley. Those were the early days of the
Internet, and California's software experts were fixated on personal
computers. They considered the tiny monochrome display of a cell phone
too confining. "You don't want a small device," Mr. Rossman says one
executive told him, "You want a 27-inch monitor that can do pictures and
color."
Mr. Rossman decided to try his luck with the big American phone
companies, all of whom had wireless operations. Equipped with a laptop
and a cell phone, he would arrive at their offices and demonstrate how it
was possible to receive almost any information -- from news to
horoscopes -- on a cell-phone screen. Bell Atlantic executives were
intrigued, he says, but they insisted the project wasn't viable -- either
technologically or commercially. Executives at another Bell company,
which Mr. Rossman won't name, were even more dismissive. They said the
Internet wasn't likely to be big. And if the cell-phone idea really had such
huge potential, how come it hadn't already been brought to them by
Bellcore, the Bell companies' shared research arm?
A Like Mind
Finally, someone listened. And when Mr. Parrish, then GTE's vice
president for marketing mobile phones, took a look at Mr. Rossman's
computer-generated drawings, he was hooked. In May 1995, following a
discussion with Mr. Rossman in GTE's parking lot, Mr. Parrish decided to
quit the then Stamford, Conn.-based company, forsake a separate job
offer, and join Mr. Rossman. Despite its ambitious-sounding name,
Unwired Planet, their Redwood City, Calif., start-up initially had just three
engineers and less than $5 million in venture-capital funding.
As Unwired Planet's engineers labored to write the complex software their
venture required, Netscape Communications Corp. started to market an
easy-to-use Web browser for PCs. Suddenly, the Internet was available to
anyone with a moderately powerful computer and a clear phone line. That
gave Messrs. Rossman and Parrish hope: The dream of creating a similar
"microbrowser" for cell phones didn't seem so ridiculous after all.
Others had watched the rise of the Internet with equal interest. More than
3,000 miles away, in Sweden, Ericsson's engineers were huddled in their
labs trying to create their own software for Web-phones. The project
sparked an internal debate: Would it make sense for Ericsson, with 45% of
the market for cellular gear based on the dominant European standard, to
use its pull to promote its own technology as a global standard? The
naysayers within the company made two arguments. First, Unwired Planet
already had a sophisticated system. Second, a cooperative effort would
yield an open standard and create a much bigger market for everyone.
Before making their decision, Ericsson invited Unwired Planet in for a visit.
The meeting, in the spring of 1997, was friendly, if occasionally tense.
Messrs. Rossman and Parrish and several Ericsson product managers took
turns walking up to a whiteboard and drawing elaborate pictures of their
companies' approaches. The Swedes, it turned out, were the more
impressed. After lunch, they offered a proposal: Would Unwired Planet be
willing to work with Ericsson to create a global standard? Ericsson would
contribute some of its proprietary technology and also would cajole Finnish
rival Nokia and others to join the effort.
The proposal took the two California entrepreneurs by surprise. "We were
a young company, and Ericsson was a giant. I wondered whether we were
going to get crushed," says Mr. Rossman, chief executive of Unwired
Planet. Adds Mr. Parrish: "It was a big decision: Did we want to contribute
our crown jewels to a public standard?"
An Inescapable Conclusion
The two asked for a break, and during a 20-minute walk along the
bleached-wood corridors of Ericsson's office, they came to a conclusion. If
they didn't collaborate, big manufacturers might create a global standard
anyway, and Unwired Planet would be entirely locked out. "OK," Mr.
Rossman recalls saying, "Let's do it."
But an even bigger hurdle lay ahead. Ericsson had to persuade Nokia to
jump on board. As the world's No. 1 cell-phone maker, Nokia wielded
tremendous clout in the wireless industry. But the Finnish company didn't
like the Ericsson plan.
One reason was that Nokia had quietly developed its own microbrowser,
Smart Messaging, and already had launched precursor versions of a
Webphone. Its 8110 model, unveiled in March 1997, roiled the industry as
rivals got a glimpse of where wireless was headed.
At a conference center near Stockholm airport that May, the Swedes and
Finns met to explore the global-standard idea. Mikko Terho, the chief
Nokia negotiator, took a hard line. He argued that his company's Smart
Messaging could do everything Unwired Planet's system promised. And he
was unhappy that Unwired Planet was planning to charge wireless
providers about $1 for each handset that included its technology. (At
Nokia's behest, Unwired Planet later dropped the idea, deciding instead to
make money by developing Webphone services.)
Mr. Terho, Nokia's vice president for wireless data, didn't refuse to join --
but neither did he agree to do so. "He was upset about why we'd push for
this," says Ericsson's Mr. Nelson.
But the balance of power shifted a few months later, when Motorola, the
Schaumburg, Ill., electronics giant, joined the Ericsson-Unwired Planet
team. Even then, Nokia continued to balk. Ericsson brought in more
backers, including Alcatel SA of France and Matsushita Electric Industrial
Co. of Japan, and delivered all but an ultimatum to Nokia: Either join or
risk being shut out of the biggest thing to happen to the wireless industry in
years. Indeed, when the creation of the new wireless club, the WAP
Forum, was about to be announced, two separate news releases had to be
written up -- one that included Nokia's name and one that didn't. Mere
minutes before the announcement, the Finnish company relented.
Microsoft Demurs
But the battle wasn't over. There was still one major holdout -- Microsoft.
The Redmond, Wash., software maker, having conquered the PC
business, now was keen to provide software for the new breed of Internet
cell phones. The WAP group fretted that if Microsoft didn't join, the entire
project could stall.
During a speech at a trade show last October, Cameron Myrvhold, then
vice president of Microsoft's Internet customer unit, explained that his
company didn't want to join WAP because the WAP idea was only for cell
phones; Microsoft preferred a standard that could also link the Internet to
a host of other devices, from television set-top boxes to game consoles. "It
was a very difficult decision," says Kevin Dallas, head of Microsoft's
wireless-phone business unit. WAP had achieved "a tremendous amount of
momentum."
The WAP group agreed to a compromise: WAP would be made
compatible with technology devised by an Internet standard-setting body
called W3C. In other words, WAP would become part of a much larger
universe of gadgets that could be linked to the Internet. In May, Microsoft
joined the team.
The unusual nature of the WAP collaboration has helped keep its
development costs over the past two years to a modest $30 million. (The
figure, however, is higher if earlier years' R&D efforts by various WAP
companies are included.) The group's four founders, Ericsson, Nokia,
Motorola and Phone.com, the former Unwired Planet, together have
committed about 100 employees to the effort. These far-flung staffs work
from their home countries and communicate via the Web. Everything they
develop is publicly available on the Internet.
Certainly, WAP-ready phones won't be widely available overnight. The
services available to them still are relatively few, and wireless operators will
need to upgrade parts of their networks so that downloading a Web page
over the airwaves doesn't require a long wait. But industry expectations are
high, as scores of companies race to become part of the WAP world.
In the U.S., two major cellular carriers -- AirTouch, a unit of British-based
Vodafone AirTouch PLC, and Sprint Corp., recently announced data
services that link cell-phone users to the Internet. In Britain, National
Westminster Bank PLC and wireless operator Orange PLC are testing
WAP-based phone banking. In France, closely held Webraska Mobile
Technologies SA provides traffic information and driving directions on a
cell-phone screen. In Italy, Omnitel Pronto Italia SpA has started to offer
restaurant guides and theater information on similar devices.
The founders of Phone.com are pleased. Says Mr. Parrish: "We can now
make the cellular phone a first-class citizen of the Internet." |
