New wireless services could prove a hard sell
philly.com
[ A bearish take on 3g with an AT&T Bend ]
By SUZANNE KING and DAVID HAYES
The Kansas City Star
Posted on Tue, Jun. 25, 2002
For Sprint Corp. and other large wireless companies, the good news is that everyone seems to be carrying a wireless phone.
The bad news is...well, everyone seems to be carrying a wireless phone.
With more than 137 million customers already, there is less room to grow. Sales of mobile phones in the United States declined for the first time last year, and phone companies no longer can add a million or more new customers per quarter as they did only a year ago.
That reality has sent Overland Park-based Sprint's wireless tracking stock and other wireless stocks reeling.
Now, the big national wireless carriers -- Sprint PCS, Verizon Wireless, AT&T Wireless, Cingular and VoiceStream Wireless -- are hoping that a relatively untested new technology will drive business customers and consumers back into the market.
At the very least, the companies hope the new technology, dubbed 3G, will get existing customers to spend more time -- and money -- using their wireless phones.
But the next wave of wireless -- which even the companies admit may have been overhyped -- could be a hard sell.
Critics contend that the technology, which enables wireless networks to carry data faster and handle all calls more efficiently, is hardly the antidote to lagging customer growth and slumping stock prices.
For one thing, many carriers still lack the wireless spectrum needed to support true 3G services. For another, there is no "killer app" to entice customers to spend more money every month on their wireless phone bills.
"They just can't get nickel and dimed forever," said Ken Dulaney, a vice president and wireless analyst with Gartner Inc., an industry research firm in Stamford, Conn.
Dulaney said the wireless companies need to come up with solid 3G applications to which customers will respond, price them simply and inexpensively and figure out how to sell them.
"The operators have not proven to us that they really understand the issue," Dulaney said. "They have a tendency to throw things at the wall to see what sticks. There are known successes and known failures, and continuing to throw things at the wall to see what sticks only frustrates people and turns more people away from the service."
Even carriers admit they have their work cut out.
"The consumer is at best mystified and probably turned off by the whole thing," said Jim Grams, vice president of network services for AT&T Wireless. "It's going to take a little time for both business customers and consumers to absorb the new technology."
Phones on steroids
Even explaining what 3G is gets complicated.
Next-generation services, already available from some wireless companies in the Kansas City area, are referred to as 3G -- for third generation. However, they also are referred to as 2.5G -- they use next-generation technology, but they do not send data fast enough to truly be considered 3G.
Simplified, 3G allows business and consumer wireless users to add Internetlike services -- e-mail, instant messages, rudimentary Web browsing and online games -- to their wireless phones. Most of the wireless phone companies have been offering some of these services -- at slower speeds -- for more than a year.
To some degree, those services have done the job -- keeping customers on their phones. Sprint PCS has 2.5 million customers who regularly use the Wireless Web, said Dan Wilinsky, a company spokesman. Verizon has more than 1 million customers who use their phones to access e-mail and other services.
Both companies have offered relatively slow service -- slower even than that offered by 28.8-kilobit modems sold for computers six years ago.
In its infancy, 3G can speed up phone data service by a factor of three or more. Eventually, 3G could rival speeds currently available through home broadband connections.
Sprint's 3G service is expected to roll out nationally later this summer. Verizon Wireless, which is offering 3G in about half its markets, rolled out its 3G service in May in Kansas City. Slower next-generation data services using different technology also are available in Kansas City through AT&T Wireless, Cingular and VoiceStream.
Verizon's service in Kansas City now offers data speeds of 40 to 60 kilobits per second -- similar to, or slightly faster than, dial-up Internet connections. Sprint is expected to offer similar speeds.
But because of differences in the technologies used by the various companies, services offered by AT&T are slower -- often in the range of 20 kilobits per second.
Many in the industry contend that all the next-generation services on sale or soon to be on the market are more appropriately called 2.5G because of their slower data speeds. True 3G will not be available until carriers get access to additional wireless spectrum and add technology, the analysts said.
In the meantime, high expectations about "superphones" worry some in the industry.
"If you tell people this is the Internet, you're lying," said Jim Straight, Verizon Wireless vice president of wireless data and Internet services. "A phone with a small screen is not the Internet."
The wireless companies, which collectively have invested billions of dollars to upgrade their networks for 3G, agree they will be able to sell the high-speed service only by telling consumers what they can do with it.
But the list of what is available is pretty short.
All the services allow customers to read and send e-mail. Some will let customers access corporate computer networks. And some will let them play games, send photos and send instant messages.
All the services are available on a wireless phone or by connecting a laptop computer or personal digital assistant to the network with a special wireless card.
"We like to refer to it as wireless that you can not only hear, but can also see," said John Garcia, a senior vice president for sales and distribution in Sprint's wireless division.
Eventually, 3G also is expected to give customers more advanced applications, including location-based retail and information services and mobile commerce applications. But none of that will come until the networks get faster.
Most of the wireless companies need access to additional radio spectrum before they can send data at those speeds. But a series of factors -- including the bankruptcy of one wireless company and political issues -- has meant that government-controlled spectrum has not been made available as carriers had hoped. And a spectrum cap, which prevents carriers from merging to increase capacity, will not be lifted until Jan. 1.
Those issues mean 3G will come gradually for some companies.
"Our company views this as a marathon, not a 100-yard dash," Straight said.
As speed increases, other applications become more likely to catch on, Straight said.
But few details have been announced about future applications, and some analysts said that is because the companies developing applications have not come up with anything to really drive customers to 3G.
"People, for the most part, don't see any real need to upgrade," said David Hoover, an analyst with the Precursor Group, an independent research firm based in Washington. "There's going to be a lag time between real applications offered for 3G and the willingness for people to sign up for them."
Selling 3G
Right now, the next-generation technology primarily means data. You can check your e-mail on your phone, do some rudimentary Web surfing, play games online or send instant messages.
But ask 100 people in a room if they are interested and they'll probably say they can live without it, said Dulaney of Gartner Inc.
"Nobody in the U.S. knows what to do with it," Dulaney said.
The wireless companies, however, are optimistic they can sell 3G from the start.
They believe it is just a matter of time before consumers climb on board the 3G bandwagon. People will want to be able to click on their mobile phone to check e-mail, play games, and send a picture off to friends while on vacation.
Before launching the service later this summer, Sprint's salespeople will be trained to understand the new service, Garcia said.
Customers, in turn, will learn there is "a whole new world beyond just voice," Garcia said recently, standing outside a tractor-trailer that Sprint has retrofitted with marketing trappings designed to help with the "education" process.
The 3G handsets alone, some of which will come equipped with color screens, may cause interest in the service, said Grams of AT&T Wireless.
"Those stodgy black phones people have been used to are going to look pretty sleepy compared to what's coming," Grams said. "People, even if they don't know anything about 3G, will perceive that something is happening."
But, so far, 3G efforts already launched in Kansas City have not generated much of a buzz from consumers or businesses.
Analysts contend consumers were confused by the AT&T Wireless "mLife" campaign, and did not know what it was about. Verizon launched service in Kansas City, but customers can use 3G only by hooking a phone up to a laptop, purchasing a wireless card for a laptop or buying an $800 Audiovox computer/organizer that has the company's 3G technology built-in.
How much is too much?
Many also contend that companies have priced the service too high to interest most consumers.
"It's really priced for the early adopters, ...someone who has to get access to information," said Lance Frey, chief operating officer with LetsTalk.com, a consumer Web site that focuses on the wireless industry. He said early 3G prices had been too high to interest most consumers.
"The average consumer just wants to be able to make a phone call and get it connected through and not get dropped," Frey said.
Consumers will need a new phone to access 3G. Prices are expected to range from $100 to $800. Their current phones will continue to work, but won't take advantage of the faster speeds offered by 3G.
Pricing is likely to offer some substantial hurdles, and Sprint has kept details of its pricing plans a close secret.
Garcia said phones would cost $179 or higher for a color screen. A "stripped-down" 3G phone will be available for $99. In addition, the company will change the way it prices 3G services, Garcia said. Rather than charging customers for the time they're using data functions -- sending an e-mail or photo, for example -- customers will pay by the megabyte.
Verizon offers several pricing plans for its current 3G plan. Its top plan offers unlimited data access for $99. Business users and consumers also have options to pay for access by either the megabyte, or the minute.
"We know that people in the consumer space don't have any idea about bytes, and how much they've used," Straight said.
AT&T Wireless, on the other hand, currently offers unlimited phone access for $49.99, and includes 1 megabyte for Internet downloads. Additional data downloads come with a monthly access fee and per-kilobyte pricing.
But while carriers wait for average consumers to become interested in 3G service, they have the lucrative corporate market, full of businesses they say are raring to use the service.
HNTB Corp., a Kansas City based architecture and engineering firm, recently started a three-month trial of Verizon Wireless' next-generation service, making it available to a handful of executives. Eventually, said Joel Sorensen, associate vice president of technology, the firm hopes to expand the service to all its mobile workers.
"If they're sitting out at the airport for an hour-and-a-half waiting for a flight, they're able to fire up the laptop, connect to the Internet and get some meaningful work done," Sorensen said. "It's primarily a time and efficiency issue."
To reach David Hayes, senior technology writer, call (816) 234-4904) or send e-mail to dhayes@kcstar.com.
To reach Suzanne King, technology and telecommunications reporter, call (816) 234-4336 or send e-mail to sking@kcstar.com. |
