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Technology Stocks : METRICOM - Wireless Data Communications -- Ignore unavailable to you. Want to Upgrade?

To: majormember who wrote (2738)	11/27/2000 8:12:44 AM
From: Herc	Respond to of 3376

Today's WSJ Editorial Page <<Who Will Win On the Wireless Web? By Jonathan Hakim. Mr. Hakim, a former managing director of Lehman Brothers, is co-founder of A2Q Inc., a wireless bandwidth management company. What happened to Wall Street's love affair with the wireless Internet? Only six months ago analysts were churning out reports bearing such titles as "Wireless Web Goes Wild." Wild has certainly been the word. Stocks such as AT&T Wireless and Sprint PCS are down more than 45% from their highs last summer; once-sexy "pure play" wireless Internet stocks such as Go America and Metricom have tumbled by 53% and 86% respectively, since their public offerings early this year. The mania for wireless stocks was fuelled by near-unanimity from analysts and industry consultants alike about the huge coming bonanza from the wireless Internet. They predicted that within five years the market will grow from very little today to around $65 billion a year. But what has given investors cold feet is the realization that, while the market may indeed turn out to be very big, it's not at all clear who the winners will be. At first, investors assumed that the big beneficiaries would be the cellular phone operators -- AT&T, Sprint, Nextel and the like. But the operators have some severe handicaps. They have all just made huge investments (more than $60 billion collectively in the past three years) upgrading their networks from analog to digital. Those spanking new digital networks are designed primarily for voice traffic, not data. So data transmission rates for wireless Internet are tortuously slow -- approximately one-fifth of the speed of an average desktop dial-up Internet service. On top of this they require cumbersome data compression using the so-called Wireless Application Protocol before Web site slivers can be viewed on tiny cellphone screens. Little wonder the initial consumer response has been less than rapturous. Upgrading these networks requires frightening sums to be spent on spectrum and equipment, even before the existing investments turn a profit. Investors have been spooked by the enormous sums forked over in auctions for "third generation" wireless spectrum in Europe -- an average of over $6 billion a license in Britain and over $7.5 billion in Germany. The operators point to the rake-off they expect to get from distributing content, displaying ads and from sales of goods and services ("m-commerce") made over their networks. But will consumers really use those tiny phones with little keypads to do all these things, as opposed to a laptop computer or some form of Palm-style personal digital assistant? And is it realistic for Sprint and Verizon to compete with AOL and Yahoo! in providing the gateway to the mobile Internet? Or will consumers insist on open access to the content provider of their choice? One straw in the wind may be recent decisions by European phone regulators. These oblige mobile operators in Britain and France to provide their customers with codes to program their mobile phones to go directly to a content provider of the customer's choice, bypassing the operator's Internet portal. Once the operators lose their grip on their customers those juicy Internet revenues will be hard to capture. If developments in the wireline world are anything to go by, prospects for the cellular phone operators are far from rosy. The wireless operators' current business model is vertically integrated one-stop shopping. They distribute handsets, own the networks, sell the services and provide content. In the wireline world, by contrast, you might buy a handset from Radio Shack, use Verizon for local phone service, have AOL as your Internet Service Provider and select AT&T for long-distance. This "horizontal" model has commoditized many parts of the business, leading to mounting problems for AT&T and WorldCom. Up to now, the wireless operators have been able to defend their turf because the capacity of cellular networks was limited. But this is changing. At least two rounds of spectrum auctions are due to be held by the Federal Communications Commission in the first half of next year. More fundamentally, the gradual introduction of Internet protocol-based networks will do for wireless what fiber-optic cable has done for long distance -- multiply capacity through the ability to squeeze an ever-greater number of data packets down a wireless "pipe." Even today, some cellular operators are loading their networks to little more than one-quarter of their current capacity. Hence the proliferation of low-priced plans offering large bundles of minutes. As the pressure grows to earn a return on their big capital outlays, the price of wireless bandwidth will continue its steady decline. The end game will be the development of a spot market for "raw" bandwidth as the technologies used by the different networks converge. Wall Street is only dimly beginning to perceive these shifts -- yet the implications are profound. The wireless Internet remains an exciting new frontier. But who exactly is going to capture the prizes remains very unclear.>>