interesting aritcle on mobile internet.
Will the mobile Internet be next?
Heady with the success of optical networking startups like Chromatis, Cerent
and Qtera, investors are beginning to pour money into a new telecom
infrastructure area-- companies that are betting that Internet-equipped wireless
phones and as-yet-unthought-of wireless devices will be more ubiquitous than the
personal computer.
If the mobile Internet is as successful as many expect, it will present
opportunities as well as challenges for established players. It has already
spawned a squadron of new companies that are targeting everything from
wireless Web portals to location-based services to mobile e-commerce, creating
a variety of new company categories within the mobile Internet grouping.
The phone as wallet The Internet already offers a means for people almost
anywhere to exchange data with people almost anywhere else using a common
language, the Internet protocol. The mobile Internet takes this capability a step
further by connecting the existing Internet infrastructure to users on the go.
Some mobile Internet applications e-mail, for example - will be familiar to users
who've become accustomed to connecting via modem or T-1. But developers
also are betting that the mobile Internet will enable totally new ways of
communicating.
The idea that a Web-enabled phone could some day eliminate the need to carry
cash has particular appeal. Sprint PCS (PCS), a pioneer that has already begun
to offer primitive mobile Internet service, sees a lot of potential in the "phone as
wallet" concept, says Jay Highley, vice president of the business customer unit
for the carrier. A vending machine manufacturer, for example, could handle
transactions and billing behind the scenes, Highley says.
As much as 45 % of all electronic commerce will be conducted over mobile
devices, says Andrew Cole, analyst for Renaissance Worldwide, who predicts
the rise of mobile virtual network operators. These companies will be retail
organizations that will lease network facilities from traditional players.
"The virtual network operator's whole mission will be to generate revenues for
ecommerce," says Cole. "Voice will be a requirement for doing business and
operators will give away voice to get subscribers."
The prototypical virtual network operator is Virgin Mobile, funded by Richard
Branson. The music and airline mogul's wireless venture keeps more than 10%
of revenues from subscribers' electronic purchases for itself.
Cole believes wireless portals, like wireline counterparts such as Yahoo and
Excite, will play a key role in mobile e-commerce. "The portal is the thing around
which the e-commerce revolution will evolve."
Recognizing this, and wanting to ensure that they obtain their tithe in the
impending mobile e-commerce boom, wireless operators are working closely
with portal developers. Portal developer InfoSpace (INSP), for example, has
agreements with Alltel, Version, US West and others, while OmniSky has a
similar arrangement with AT&T (see page 27).
But some question whether wireless operators will be able to monopolize the
portal segment.
"Right now, wireless operators own the customer," says Todd Dagres, general
partner with Battery Ventures. "In the future, users will go to whatever portal they
want."
Jane Zweig, analyst with Hershel Shosteck Associates, is more blunt. "To
expect network operators to get a cut is fairly ridiculous. The network operator
will make money from access, and that's not a bad business to be in."
Beating bandwidth challenges
Perhaps the biggest factor challenging mobile Internet adoption today is the
paltry bandwidth that wireless networks offer in comparison with their wireline
counterparts. Depending on the underlying technology, wireless networks top out
today at around 14.4 kbps - a data rate that even analog modem users
surpassed several years ago. That means the content available to mobile Internet
users lacks the exciting graphics that provide much of the World Wide Web's
appeal.
In looking for lucrative opportunities in the mobile Internet area, Battery Dentures'
Dagres says, "I like to look where the pain is and how to soothe it, and the main
pain in this area will be bandwidth."
Many of the opportunities springing up in the mobile Internet market pertain to
the transformation of existing Web content for transmission over low bandwidth
wireless networks to the small screens of Internet-enabled phones.
Transforming content designed for higher bandwidth and smaller screens is one
of the functions that microbrowsers, such as Phone.com's (PHCM) Wireless
Application Protocol (WAP) provide. WAP capability, which is being built into
Internet-enabled wireless phones from several manufacturers, is widely viewed as
the catalyst that will kickstart mobile Internet service - although some question
how much longevity WAP will have (see sidebar at right).
Another new company type, dubbed wireless application service providers, works
with operators of existing Web sites to transform content for viewing by
WAP-enabled devices (see page 29).
A related opportunity will be within the core Internet infrastructure. Caching
companies like Akamai (AKAM) already specialize in minimizing the amount of
time it takes to download content for end users, while also enabling network
operators to use resources more efficiently. A natural step for companies like
Akamai will be to optimize the delivery of content to mobile Internet users by
recognizing how much bandwidth is available to each user.
"They'll know about the nature of the connection, so they can provide the
information required to know what data rate to send the data at," says Dagres.
"They're not in the content transformation business, but as content is
transformed, they'll optimize the delivery of content."
Recognizing the limitations of today's low bandwidth connections, most wireless
carriers expect to begin upgrading their networks to support data rates equivalent
to 56 kbps modems or even into the hundreds of kilobits within the next year or
two. Sprint, for example, is in the process of boosting its data rates to up to 56
kbps this summer by adding compression capability. Next year, the company
expects to deliver 144 kbps to the handset, Highley says.
"As bandwidth increases, we'll see more people accessing the Internet," says
Highley.
Ultimately, depending on the technology used, today's wireless networks could
support data rates up to 384 kbps using various 2.5G alternatives including
EDGE and GPRS. Perhaps the ultimate bandwidth boost will occur whenever
operators undertake more extensive upgrades to their networks to support 3G
initiatives that can provide data rates up to 2 Mbps. Those upgrades may require
that the government allocate additional spectrum to wireless operators. Several
companies, however, say they can deliver bandwidth comparable with 3 G
without undertaking 3 G upgrades - as long as users are willing to accept a lower
level of mobility.
Jack Biddle, general partner for Novak Biddle Venture Partners, calls these
solutions "portable" or "nomadic": They don't do high-speed handoffs required for
use in a car. But, unlike with LMDS, MMDS and other broadband wireless
solutions, users can take their computers with them and obtain a wireless
connection anywhere the service is offered. Broadband wireless, in contrast,
typically requires a rooftop antenna that anchors the user to a single location.
Qualcomm is working on a technology it calls HDR that can support burst rates
up to 2 Mbps from a fixed location using a dedicated 1.25 MHz channel on an
existing CDMA network. At least one startup, Tantivy, is developing a similar
product, which Biddle claims can provide more revenue per MHz (see page 26).
We know where you are
The mobile Internet may also give rise to new categories of end user devices -
and could challenge the dominant players in that market, such as Nokia (NOK),
Ericsson (ERICY) and Motorola (MOT).
"People like Toshiba and Kyocera will bombard the market with new form
factors," says Ira Brodsky, president of Datacom Research. "The next Walkman-
or Nintendo-like success will be some sort of wireless device from one of these
players."
Such devices might incorporate audio or video functionality, adds Brodsky.
Jonathan Roberts, managing director for Ignition Corp., a startup that plans to
counsel and fund wireless startups, also predicts a shakeup in the end user
device market. The mobile Internet enables "very personal computing," Roberts
says. Rather than productivity tools, the new devices will be lifestyle tools.
"One of the most personal devices today is the notebook computer - and that's a
very dynamic space," says Roberts. "The leader changes from year to year. As
you move to very personal devices, it will be tough to stay on top over a long
period of time."
The network computer concept could get a boost from the mobile Internet, says
Jeff Can, director of operations for Broadwing's (BRW) Zoom Town unit.
"What we see as the end user device is a thin client running off of a Citrix
server," Carr says. "It will have a touch-screen keyboard and be light and
durable."
Another mobile Internet opportunity will leverage the unique ability of wireless
network operators to know a subscriber's location down to the cell site sector.
Coupled with demographic and lifestyle information about a subscriber, that
information can be very powerful, says lain Gillott, group vice president for IDC. A
subscriber walking into a mall could obtain coupons for all the stores in that mall
- or only for stores that would be of interest to him.
Customer location is a valuable commodity, for which wireless carriers should be
able to charge a tidy sum, Gillott says, which in turn, could answer questions
about how network operators will make money on the mobile Internet.
"Location is the most valuable piece of information carriers have about their
subscribers," says Gillott. "If they give that information away to e-commerce
companies, they've lost."
Accompanying this overview are profiles of companies that are pursuing a variety
of opportunities within the mobile Internet area. Predicting winners in the mobile
Internet is a challenge few care to undertake today What is clear, though, is that
these companies are helping to create brand new product categories that have
captured investor attention - and dollars.
The microbrowser as catalyst
One of the first players in the mobile Internet market, Phone.com delivers
browser software, Internet gateways and call-management applications via a
mobile handheld phone.
The vast majority of wireless Internet handsets sold in the United States and
abroad are enabled with the wireless application protocol (WAP), which
Phone.com developed. In 1999, 1.12 million WAP-enabled handsets were
shipped domestically. By 2004, that number is expected to jump to 112 million.
Part of the Phone.com appeal is its software developer program that allows Web
designers to condense or repurpose content so that it can be transmitted over
today's low-bandwidth wireless systems to the tiny screens of WAP-enabled
devices.
That revenue stream may be tested as alternatives, such as the iMode
technology that has seen deployment in Japan, become available- and as
wireless networks are upgraded to support higher bandwidth.
"WAP won't be the standard," predicts Todd Dagres, general partner with Battery
Ventures. "It's the lowest common denominator, and people innovate on top of
the lowest common denominator."
Others disagree. "What WAP does is bridge the gap between the PC and the
mobile environment," says lain Gillott, group vice president for IDC. "Has the PC
stood still? Absolutely not."
Eventually PCs will operate at 2GHz with big high-definition screens, says
Gillott--but even when wireless bandwidth increases, the screens of mobile units
will be small There will always be a need for something like WAP because there
will always be a gap between PCs and mobile devices, Gillott predicts.
Supporting this view is the experience of Japanese service providers DDI,
DDI-Cellular Group and IDO, who used Phone.com's UP.Link Serv er Suite to
deliver wireless Net connectivity even after they upgraded their networks to
support higher bandwidth.
Phone.com's staying power may depend on its ability to reinvent itself. Beyond
its flagship infrastructure software, the company recently added applications for
over-theactivation, unified messaging and call-management features.
"The key differentiator we have is that we're the only company that has both
platform as well as the applications position," says Alan Black, Phone.com cheif
financial officer.
Founder: December 1994 as Libris Inc. Name change in April 1996 to Unwired
Planet and then again in April 1999 to Phone.com. IPO in June 1999.
Revenues: Third quarter ended April 19 $18.7 million.
Market Capitalization: $6,814,567,349, as of June 14, 2000.
Key executives: Alain Rossmann, chairman and CEO; former CEO of EO Corp.
(a PDA developer) with a background in the semiconductor and digital video
arenas.
Chuck Parrish, executive vice president; previous general manager of GTE
Mobile Communications' Mobile Data unit. Held executive positions with Contel
Cellular and former chief of staff for the Department of the Interior.
Alan Black, chief financial officer; former CFO for Vicor, which specializes in
Internet systems for financial services firms. Also worked with KPMG LLP for 10
years.
Bandwidth liberator: Tantivy
For the past three years Tantivy has been quietly hovering below the radar,
methodically developing and fine-tuning its technology for an entrance into the
"portable" high-speed wireless sector. Now that the TANlink System has
undergone successful field trials, the company intends to break its cover.
The product, which will be available early next year, provides data rates similar to
digital subscriber line (DSL) using existing wireless networks. The penalty for
higher bandwidth is that Tantivy's system doesn't support the high-speed
handoffs required for use in a car. But, unlike LMDS, MMDS and other fixed
broadband wireless offerings, Tantivy's system is not anchored to a single
desktop. Instead of a rooftop antenna, it has a device the size of a hockey puck
that attaches to a laptop computer using a USB connector or PCMCIA card.
"It's portable," says Jack Biddle, general partner at Novak Biddle Venture
Partners. "You can take it home or go to a stadium with it. Customers will get
access comparable to DSL, and carriers can expect high returns on investment
because of the system's efficiency."
Along with Novak Biddle, New Enterprise Associates was one of four VCs that
poneyed up the initial funding for Tantivy. "Normally, I don't invest in firms more
than 100 miles from home, but Tantivy's approach was compelling," says Art
Marks, general partner with New Enterprise Associates. "The technology has
proceeded as planned with a few difficult moments and delays, but nothing
unusual."
Still Tantivy believers, both VC firms have since upped their antes in the
company during a recent round of financing.
Tantivy's system overlays the CDMA and PCS spectrum and requires carriers to
upgrade their current base stations with Tantivy data stations. These
improvements, the company claims, will provide 25 times the capacity of current
mobile solutions. With its technology beginning to show proof of concept, Tantivy
president and CEO Randy Roberson is moving the company into its second
development phase: building distribution plans. Unlike current strategies that
require truck rolls, Roberson foresees plans similar to cell phone and paging
services. Carriers will offer services in general retail stores or over the Internet.
"Once a subscriber signs on, he will have service within hours," says Roberson.
Tantivy is already in discussions with silicon providers and manufacturers to put
the technology into other appliances. Roberson says cameras, PDAs and game
stations could be adapted easily.
With future expectations high, Roberson deftly turns aside concern that carriers
may not want to make changes to their infrastructure that are not supported by
the major wireless equipment manufacturers. "All the national and international
carriers that that we've talked to have been so impressed with our ROI numbers
that they haven't been fazed by the necessary investment for network upgrades."
February 1997
Key Executives: Ron Carney, chair man; co-founded AirNet Communica tions
Corporation and served as chieftechnical officer.
Randy Roberson, CEO and presi dent; previously senior vice presi dent of
General Instrument`s tele phony business unit.
Funding: Novak Biddle Venture Part ners, North Bridge Venture Partners New
Enterprise Associates (NEA), Ven rock Associates.
Pocket portal:
OmniSky
Sock puppets, medical exams and sundry other wacky television ad campaigns
have become standard fare among young companies hoping for a big splash wit
audiences. OmniSky joined the tomfoolery with its recent campaign of happy
chimps romping on a rotating, heart shaped bed.
As with many of these ads, "who and what" information is scarce, but the
pleased chimp's face is etched in memory. Already, some fledgling companies
with similar advertising strategies have faded into startup oblivion, but OmniSky
intends to break that pattern.
In less than a year, the wireless portal has created a one-stop shop for delivering
data to 3Com's Palm V via CDPD. Combining wireless service, applications,
modem, content, billing and support, OmniSky has taken responsibility for
moving the Palm Pilot from a mere address and calendar device to a gotta-have
communication tool. With a $299 modem and $39.95 monthly service fee,
OmniSky subscribers can use their Palms to get e-mail, share schedules, and
access intranet and Internet content over AT&T's Wireless network.
To bring this service to market, the company put intensive development effort into
its user interface and back-end servers. With the Palm's small screen space,
OmniSky had to create a transparent intermediary system that would take HTML
designed for a PC and optimize it for the Palm. This development work and
numerous content provider partnerships have created a wireless Web portal
where subscribers can choose from 12 initial subject categories and multiple
subcategories of content and news feeds from more than 1000 Websites.
Company material claims that OmniSky will extend its services to Windows CE
devices, pagers and WAP-enabled phones, but don't look for it anytime soon.
When asked about the company's schedule for adding new devices, Didier Diaz,
director of product marketing at OmniSky could not provide a timetable. "As we
see new platforms gaining popularity and alternative networks with suitable
coverage, we will add our support."
In November, OmniSky launched a six-month beta trial with 8000 users.
Although service was introduced in May, the company says it's too early to
reveal subscriber numbers. Preliminary interest in the OmniSky service among
Palm users in the San Francisco Bay Area - one of the first regions where the
service is available - has been lukewarm at best.
OmniSky, created by and for 3Com`s Palm Computing platform, has founded its
business model on self-sufficiency. Rather than relying on other companies to
develop applications for the Palm or to build market momentum, 3Com Ventures
formed OmniSky to be an accommodating partner for 3Com. OmniSky was
funded initially by 3Com Ventures and populated with executives from the 3Com
workforce.
In the future, OmniSky may modify its autonomous nature, but it intends to wait
until the wireless market matures. "We will continue to offer the entire solution
until we can be sure that our customers can receive a similar rich experience
elsewhere," says Diaz. "Eventually the wireless world will be more like the PC
industry, where customers can find a varie applications that work together. When
the market ev focus our efforts on services and applications."
- Hanna Hurley
Founded: June 1999
Key Executives : Patrick McVeigh, chairman and CEO; former vice president of
worldwide sales and business development for 3Com's Palm Computing division.
Barak Berkowitz, president; former senior vice president and general manager of
The Go Network.
Funding: 3Com Ventures, Aether Systems, DLJ (Donaldson, Lufkin & Jenrette)
Sprout Group, News Corporation, PSINet Ventures, Akamai, AT&T Wireless,
InfoSpace.
location, location, location: Vindigo
visionaries claim that the mobile Internet's success will depend on leveraging the
unique characteristics of the wireless network - and one of the mobile
Internet-enablers cited most frequently is location-based services.
Vindigo, for example, is an electronic Yellow Pages designed for use with the
Palm OS handheld computer to help users navigate city streets. The potential
customer base of 7 million Palm owners can download thi Vindigo software free
from the Web and then access a location database with a series of pull-down
tabs.
After clicking on the two closest intersecting streets, users choose from
restaurants, shops and nightclubs. The software then calculates the distance to
any given outlet and provides directions on how to get there.
While GPS is not currently part of the Vindigo experience, the company expects
to slice into that market by incorporating GPS functionality before year's end. For
now, the benefits of Vindigo include free service with periodic updates, all
delivered via the Net.
Just like with the original Yellow Pages, revenue is linked to advertising. In the
electronic format, it is displayed for readers along with the list of outlets.
"While advertising is going to be an extremely important revenue stream for us,
and one of the first that will kick in, I also expect that the overwhelming majority
of so-called mobile-commerce transactions will hang off of a service like
Vindigo," says Jason Devitt, co-founder and chief executive officer of Vindigo. "If
fm looking for a new Stephen King novel, a service like Vindigo will be able to tell
me where the nearest physical copy of that book can be bought and then show
me how to get there."
Some industry observers question whether users will accept applications that
require extra keystrokes - and require users to know where they are. A better
option, they say is to design applications that can trigger off of information
provided by wireless network operators about a user's whereabouts. Vindigo
representatives say the company has no plans to develop that capability-
perhaps because it envisions eventually partnering with a company that can fill in
the gaps.
"We think that either as a stand-alone company or a unit of a larger firm, Vindigo
is going to be the category leader in delivering local information to people on the
move," says billion Cohen, president of Carlin Ventures, one of five entities that
supplied Vindigo with its startup cash. "We also think that advertisers are going
to pay top dollar for access to these kinds of customers."
Vindigo's nearest competitor is a European Palm-based city guide called Citikey.
Domesdia, which requires users to purchase a Scout handFounded: June 1999;
launched in New York, March 2000
Key executivesand co-founders:Jason Devitt, research analyst/manager in
investment banking, over-the-counter options and wireless video.
David Joerg, programmer/software designer for genetic analysis and online
trading.
A total of $9 million invested by General Atlantic Partners, Carlin Ventures,
Flatiron Partners, Gradient Ventures and the Stephens Family,
The wireless ASP:2Roam
Wireless application service providers like 2Roam may have borrowed their
nomenclature from the wireline world, but their opportunity is a uniquely wireless
one: to enable businesses with an HTML presence to repurpose content for
transmission over the Internet to mobile devices.
"I'd sold e-commerce payment solutions to Internet startups and I knew how
software services were licensed on a monthly basis," says 2Roam CEO Bryan
Wargo. "That financial model made sense, so we decided to apply it to wireless
Web sites."
During the closing months of 1999, 2Roam worked on a business model and
began to build software tools to let Webbased businesses and businesses with a
Web presence tailor content for different kinds of wireless terminals.
This approach struck a chord with investors.
"As a 2Roam customer I can download their tool set and repurpose my site out
onto the wireless Internet for any device," says Peter Nieh, a general partner with
Weiss, Pack and Greer Venture Partners. "Until now, content providers worked
with a job shop to re-engineer their sites, and had to revisit each time they made
a change."
With this vote of confidence, and additional funding from Trans Cosmos USU
Inc.. and Panasonic, 2Roam began operations in April with an accumulated
investment of $7 million.
Also in April it began collaborating with Mediaplex to deliver services from Web
site content and advertising to handheld paging devices. Shortly after, it formed
another key alliance with Sunnyvale, Calif.-based Interwoven Inc., a Web
management company.
"We talk to our clients, and provide tools and training," Wargo explains. "They
submit reformatted pages and our Nomad product sends them to our Catalyst
gateway that does the translations. Our biggest client is eBay, a
person-to-person trading community with a very loyal user base that sends out
constantly updated information. Our future lies with the 50 Web sites that will do
wireless because they have to. We grew from eight people in December to more
than 60 in May. We're in production, we're signing up our major customers and
we're ready to start producing revenues." 2Roam created a brand new
marketplace, says Nieh. "As an investor, we specialize in strong stand alone
companies that can go public. We believe the real big win for 2Roam is for them
to be known as the businsess partner for Web site providers to deploy their
service over the wireless Internet."
Founded: July, 1999
Key executives: Bryan Wargo, CEO; Kevin Beals, CTO; Mark Jamtgaard, CFO
Funding: Weiss, Peck & Greer Venture Partners, Trans Cosomos, USA Inc.,
Panasonic.
A new/old network operator: WebLink
Although most of the interest in the mobile Internet has been from conventional
wireless network operators, don't count out the paging companies. WebLink
Wireless plans to expand its consumer-oriented two-way wireless messaging
service by offering users Motorola's T900 Personal Interactive Communicator.
Subscribers will gain access to stock prices, sports scores, weather forecasts,
driving directions, movie schedules and more.
"We've been waiting for a consumer device that retails for under $100 and is
simple to use, and now we've got one," says WebLink president N. Ross
Buckenham.
WebLink's new Wireless Data Division had revenues of 413 million to offset
infrastructure costs of about $27 million last year, but these costs have now
fallen substantially and Buckenham forecasts a positive cash flow during 2001.
"The combination of WebLink Wireless' services and the low price point of the
user-friendly T900 means wireless instant messaging will be widely accepted,"
says Brett Fialkoff, portfolio manager at Performance Capital Co. "The T900 will
be one of the hottest consumer products of the year and I can't see how every
young adult in America will not have one." The capabilities of WebLink Wireless'
network also will prompt on-the-road employees to interface with corporate
networks through specific applications on two-way devices, he adds.
Currently the 19.2 kbps bandwidth that WebLink offers customers is comparable
with what conventional wireless networks provide. But will paging companies be
able to compete after voice networks are upgraded to substantially higher
speeds?
Iain Gillott, group vice president for IDC, believes users will continue to want a
simple device they can carry anywhere that provides basic functionality like
email access. Founded: 1994
1999 Revenues: $311,181,000 (Paging Division),
$13,387,000 (Wireless Data Division).
Key executives: John Beletic Chairman and CEO.
Russell Villemez, VP Information Technology and CIO.Wayne Stargardt VP
Carrier Services Division. |
