A Brave New Wireless World
Everyone’s talking about a world where mobile Net-linked devices offer connectivity around the clock and on the run. Yet, as evidenced by PDA-wielding Americans and their mobile phone-toting European brethren, both devices and communications standards vary widely. Will the promise of seamless global access ever come to pass? CE’s Peter Buxbaum offers an update on the status of wireless infrastructure and the quest for global compatibility around the world. In short, who’s got what-and when will it all come together?
August 1 2000 by Chief Executive
Ads for wireless gadgets suggest that a new anytime, anywhere Internet is available in the here and now. Mobile professionals, whether in Singapore, San Francisco, or St. Petersburg, they imply, can access the Internet to receive and send e-mails or to log onto corporate databases for a last-minute dose of intelligence on the customer they are about to visit. All this is available with a few short taps on a handheld device.
Not so fast. There are a number of problems with this scenario. For one, global protocols for wireless data transfer don’t exist right now. That means that a device capable of logging on in Brussels may not work in Beijing. In fact, not only have different regions embraced different standards, but leading carriers operating within major markets like Asia and the U.S. have adopted different-and incompatible-standards. What’s more, wireless business applications have yet to approach the aesthetics and functionality of the desktop experience.
Of course, any modern hotel anywhere in the world will likely have wired Internet hookups. But a company taking the next step of setting up an office in China, Brazil, or any number of in other countries will suffer a long wait before its operations are on par with North American standards. The wired infrastructures in those countries are incomplete and stretched to their present limits.
In fact, infrastructures for both wired and wireless communications are still being built out around the world. Emerging global regions are playing a game of infrastructure catch-up by emphasizing the implementation of wireless infrastructures, while the hardwiring of broadband networks is going on everywhere.
“Wireless technology provides access; wired provides bandwidth,” explains Eileen Eastman, a technology analyst at the Yankee Group, a Boston-based consultancy. Wireless telecommunications infrastructures represent a quick fix-a less time consuming and relatively low-cost way for developing areas to achieve global connectivity. But today’s wireless technologies are unable to transmit data at the speeds required for the downloading of graphics, audio, and video-let alone the full-screen, heavy data requirements of Web-based enterprise applications. Even as these wireless networks become heftier, they still can’t compete with wired infrastructure, especially in the business realm.
But new, better wireless technology is on the way. Wireless infrastructures are currently moving from first- and second-generation systems to the much-awaited third-generation or 3G technology. The first generation of wireless data communications allowed the transmission of short text messages. The second introduced Internet protocols, allowing a pared-down Internet to be offered on wireless handsets, and also employ data packeting techniques, which transmit data more efficiently and use dedicated data networks that don’t have to compete with voice communications for transmission capacity.
Enhancements to second-generation wireless technology sometimes referred to as Generation 2.5, are now being rolled out in Europe, North America, and Asia. These will increase data transmission capabilities from the present 8 to 10 Kbps (kilobytes per second) to the 30 to 64 Kbps range over the next two years, according to research by Gartner Group. But the Generation 2.5 technology, which is being overlaid on present systems, encompasses competing protocols. GPRS (general packet radio service) is the 2.5 standard accepted throughout Europe, while its counterpart, CDMA (code division multiple access, a technology that allows multiple radio frequencies to be used simultaneously), has made inroads in North America and Asia. “It’s a problem we are always coming up against,” explains Clare McCarthy, an analyst at Ovum, a wireless technology consultancy in London. “There’s no packet data industry group to standardize the protocol.”
There will, however, likely be such a group for 3G wireless technology, according to McCarthy. That technology, which will be capable of transmission rates of 64 to 115 Kbps, may incorporate global standards that could transform the promise of ubiquitous global wireless communications into reality. Unfortunately, it’s about five years away, according to Gartner Group. Even then, says Forrester Research analyst Mark Zohar, 3G wireless technologies are unlikely to replace wired business networks. Broadband wired networks have transmission rates at least 100 times faster than the fastest contemplated 3G technology.
Fixed wireless technologies, such as those being implemented in China and Brazil, and which were very recently introduced in North America by Sprint, boast bandwidth comparable to fixed networks, notes Zohar, and “may, over time, help to narrow the digital divide.” But, although touted as less costly alternatives to wired networks, fixed wireless technologies remain less reliable than the wired variety because line-of-site problems interfere with full geographic coverage. “These are not business grade networks, and they won’t run corporate applications,” says Zohar, who sees wireless as a complement to rather than a substitute for the existing wireless infrastructure. “They will not replace core infrastructure.”
That core infrastructure continues to be represented by hard wire. For example, the undersea fiber-optic cable currently under construction around South America, together with other such projects around the world, suggest that wired technologies-because of their reliability, stability, and lower costs of data transmission-won’t be shunted aside in favor of wireless at any point in the foreseeable future.
Yet, despite its current limitations, wireless may indeed be the Next Big Thing, as its proponents claim. Hybrid handheld PDAs and phones that work as mobile units and can link to broadband networks are on the way, as are cell phones capable of transmitting up to two megabits per second-a vast improvement on today’s average of 9,600 bits per second. London-based consulting firm ARC Group estimates that 100 million of the 500 million mobile phones in use around the world will be capable of Internet access by year end. Within three years, says ARC, a whopping 300 million-of 900 million total-will be Internet-enabled.
Even in North America, which has a high level of wired Internet penetration compared to Asia and most of Europe and lower levels of wireless penetration, wireless Internet growth is outpacing that of wired. And markets that already have high levels of mobile communications penetration-such as Italy and Spain-are likely to quickly embrace wireless business applications, such as the CRM, m-commerce, and business intelligence tools now being offered on mobile telephones.
Clearly, while wireless access is far from refined, the movement is picking up momentum in markets around the world. At the same time, each regional market is influenced by a range of factors, from the status of both wired and wireless infrastructure development to the cultural and social nuances that influence a population’s chosen method of access. In the pages to follow, we take a region-by-region look at the issues, concerns, and technological progress-and how they’re influencing the evolution of a brave, new wireless world.
Most of Europe has embraced GSM (Global System for Mobile Communications) as a format for wireless technology. This more standardized wireless telecommunications infrastructure has yielded a higher level of acceptance and penetration, which has led to speculation that Europe will drive innovations in wireless communications.
“The wireless infrastructure is moving faster in Europe than in North America,” says GartnerGroup senior analyst Phillip Redman. “The coverage is better and the penetration is deeper in Europe. One of the main methods of access to the Internet in Europe is the mobile phone.” Penetration of wired Internet-connected PCs is also generally lower in Europe than in North America. More than 28 percent of U.S. households have Internet access through PCs, for example, while PC Internet penetration is well below 10 percent in Germany, France, Italy, and Spain, according to a Merrill Lynch study of Internet penetration rates.
To a certain extent, there’s an inverse relationship between the level of penetration of Internet-connected PCs and the popularity of wireless technology. Countries like Italy and Spain, which have relatively low levels of wired PC penetration, have high levels of wireless telecommunications acceptance. Will the penetration of wireless telephony speed up the evolution of wireless business applications on phones? “For consumers, mobile phones may very well be the gateway to the Internet in Europe,” answers Forrester Research’s Zohar, “but no business will be running applications primarily over a wireless medium.”
Nicholas Bontron, a Paris-based wireless technology specialist at Business Objects, a developer of business intelligence software, sees wireless enterprise applications finding a home in countries where the wireless Internet consumer has penetrated the market. Business Objects is beta testing a wireless version of its WebIntelligence software product in Finland, Italy, and Spain, where mobile phone use is pervasive. The software runs on the wireless application protocol (WAP) microbrowser-a technology increasingly appearing on European cell phones that enables Internet information to be displayed on the small screen of a mobile telephone and at low data transmission speeds.
“A WAP phone user might start by accessing information like weather reports or traffic information,” says Bontron. “Then he realizes that he can also look at business and professional information.”
Europeans’ ongoing love affair with their mobile phones means wireless Internet access is likely to be accomplished with phone-like devices, notes Vinit Nijhawan, CEO of Billerico, MA-based Kinetic Computers, a provider of handheld wireless computers. “My prediction is that given the state of the industries in Europe and America, American mobile devices will evolve from the PDA [personal digital assistant],” he says, “while in Europe, innovation will come from the phone side, and the telephone will evolve into a more PDA-like form.”
While WAP has its detractors, its advocates believe that it will revolutionize Internet banking in Europe, according to a Financial Times survey. In Spain, a country not known for its enthusiasm for the wired Internet, Banesto became the first Spanish bank to offer banking services to customers via wireless devices. WAP-equipped customers are able to manage personal accounts and to buy and sell shares via WAP-enabled phones. Finland, which, like other Scandinavian countries, is saturated with both wired and wireless technology, leads the world in the percentage of its population using Internet banking, according to the same FT survey, with 1.5 million online banking accounts out of a total population of 5 million.
North America represents the flip side of the European situation. Wireless communications, though far from rare, lag behind Europe’s penetration levels, while participation in the wired Internet is the highest in the world. The North American wireless infrastructure is not as widespread nor as standardized as its European counterpart. Adding to the confusion, each of the top players in the American market have adopted different technical formats. Sprint and Verizon use CDMA, while VoiceStream Wireless and Pacific Bell use GSM. Adding to the morass of incompatibility, AT&T uses TDMA (time division multiple access, a technology that allocates a different time slot on a given frequency to each user). “Because TDMA does not support data transmission, AT&T has been forced to overlay an older format to provide Internet access through its cell phones, adding further complexity to its current generation of handsets,” reports a recent article in The New York Times.
Currently, mobile hardware (PDAs, PCs, and mobile phones) is designed to work exclusively with one wireless technology transmission format-and therefore tends to be network specific. However, the Internet applications run by such devices, such as stock-quote services or airline ticket reservation systems, have overcome the barrier of multiple standards by incorporating WAP technology, which can adapt to any of the existing transmission formats.
Another factor that currently differentiates the American wireless market from its European counterpart is method of access. “Opportunities for wireless telephony are probably greater in Europe than in the U.S.,” says Mary Ann O’Loughlin, a London-based analyst for the wireless consultancy Ovum. “The U.S. is still a laptop and Palm-driven market.”
3Com’s Palm VII, which features a built-in wireless modem, already boasts more than 100,000 wireless customers. Limited applications have proven an early stumbling block for wireless service customers, but dot-corns like Amazon.com, Yahoo, and Travelocity are stepping up to the plate with bite-size versions of existing Web sites suitable for wireless browsers. Earlier this year, AOL announced alliances with both Nokia and Ericsson to allow AOL subscribers to access their accounts through their mobile handsets.
Despite these new offerings, many feel that North American business will view mobile communications as a complement to, and not a substitute for, the wired Internet; “Internet applications will likely be driven by consumer applications in Europe and by the enterprise market in the U.S.,” asserts GartnerGroup’s Phillip Redman.
Still, the wireless Internet is growing faster than the fixed Internet in North America. Wireless Internet users will rise from 7.4 million in 1999 to 61.5 million by 2003, according to IDC research, a technology consulting and publishing firm, while home Internet use in the U.S. will grow from 67 million to 101 million subscribers during the same time period.
U.K. & ENGLAND
While the U.K. rolls out a new third-generation wireless system, Ireland is adding more iron to its pipeline. Mobile phone use has expanded in the U.K.-about half the population now owns one-to the point where the networks have begun to creak under the strain.
In an effort to alleviate some of this stress, BT Cellnet, one of the U.K.’s four main cellular carriers, took its general packet radio service (GPRS) network live to commercial customers in June. GPRS, a network dedicated to data transmission, makes more efficient use of network bandwidth than GSM, the standard now prevalent across Europe. BT Cellnet claims that its Genie Internet is the world’s first such system and that it is making the network available initially to companies in the southern half of England, excluding London, before rolling it out across the U.K. later this year. The company reports that it already has 500,000 customers for the service and has lined up several top-name content providers, including BBC News, BskyB, and online travel agency lastminute.com.
In Ireland, the government has endeavored to expand high-speed Internet connectivity by linking with Global Crossing’s undersea transatlantic cable to provide a broadband connection to the main U.S. Internet backbone and a 36-city European network. The goal is to reduce Internet access rates and boost levels of Internet adoption. Irish officials predict that the country will be the first in Europe with every home and office wired to broadband Internet access, according to a report in The Financial Times.
Ireland’s investments in advanced telecommunications infrastructure have lured foreign companies to set up European call centers in Ireland. Ireland already hosts over half of all pan-European call centers, according to the FT, in addition to accounting for a large proportion of shared-office services, an arrangement in which corporations pool their back-office activities. Both the call-center and shared-office industries depend heavily on the telecommunications infrastructure. On a retail level, however, the use of the Web in Ireland is still behind that of most EU countries.
While Internet use is currently relatively minimal in Latin America, the region is seen by many as having great growth potential. A mere 1.5 percent of the region’s 500 million people have Internet access, but the last four years have seen the wireless telephone market grow exponentially. In 1995, there were 4 million wireless phone subscribers; by 1999, the number had climbed to 30 million. Many see the growth in wireless subscribers as indicative of the market potential-and the population’s growing comfort level with embracing new technology.
Economics has been a major barrier to the growth of the Internet in South America, suggests Erica Eppinger, program manager for Latin American communications at The Yankee Group. While the Internet is already extensively used by corporations, educational institutions, and wealthy individuals, lower access rates are likely to promote access among the middle classes and to boost sales at some of the larger B2C e-commerce sites.
The lower costs and quicker implementations characteristic of fixed wireless infrastructure build-outs have spurred a proliferation of such projects in South America, most notably in Brazil. With fixed wireless networks, handsets operate by radio waves, like cellular phones, but can only be used in a fixed location. Because the only installation necessary is an outside antenna, fixed wireless networks are ideal for the largely rural markets of South America-and should fuel greater Internet use in the region. “Fixed wireless technologies can provide throughput comparable to that of wired systems,” notes GartnerGroup’s Phillip Redman, “because they are transmitting to a fixed point rather than to a mobile unit.”
Canada-based Nortel, which is in the process of building fixed wireless systems in Mexico City is also active in areas in South America, Central America, and the Caribbean, and has emerged as a leader in the region. It also operates a wireless systems research center in Campinas, Brazil, where it has signed a $240 million contract with GVT, a local and long-distance telephone company, to install an advanced telecom network for Brasilia, the country’s capital, and nine nearby states. In Colombia, Nortel is supplying equipment to competing cellular companies that control more than 85 percent of thetotal market, while in Chile it is building data networks for CTC, the primary Chilean telecom company, as well as several competitors
On the wired side, a consortium of fiber-optic cable and telecommunications providers is installing undersea cables to connect South America with the U.S. “Fiber-optic capacity is cheaper and more reliable than satellite communications, and it’s quicker,” says Eppinger, who says that the entire region is likely to benefit from lower Internet access rates and higher levels of technology penetration from the efforts of the consortium, which includes Global Crossing, Telefonica, GTE, Worldcom, and AT&T. “What this means is that Internet service providers are going to get international capacity cheaper and will pass those costs savings on to the consumer,” she says.
Motorola has emerged as a technology powerhouse in the Middle East, having secured 15 wireless infrastructure contracts in regional markets over the last 12 months, most recently in Kuwait. Motorola’s work in Kuwait involves a $14 million contract with wireless GSM operator MTC to implement a countrywide capacity enhancement. The “dual-band” network implementation will enable cell phones to utilize the most efficient network route and frequency, thus optimizing network performance.
Israel has developed a robust research and development community, according to GartnerGroup’s Redman, as well as a high level of wired and wireless communications technology penetration. “Israel is asmall market compared to the rest of the Middle East,” he says. “But it has invested a lot in wireless technology. Much of the frequency-hopping technology now incorporated in global wireless telecommunications technologies was originally developed in Israel for military security applications.”
Motorola operates an R&D center in Herzliya, Israel, and that facility has recently turned out what the company terms a “revolutionary” component that will be included in wireless devices beginning in 2001. According to a report by the Israeli business magazine Globes, the new platform will facilitate the reception of a variety of mobile services through cell telephones, PDAs, and other devices. Among other things, it will accommodate high-speed Internet access, conference calls, two-way video transmission, remote monitoring of homes and businesses, and the remote control of medical equipment.
The component includes 100 million transistors and can perform 3,000 calculations per second, as compared with the 80 calculations per second characteristic of existing devices. Motorola reportedly plans to use it not as a stand-alone unit, but as a tool to customize products on behalf of customers.
Asia, like Europe, shows lower levels of Internet PC penetration and higher levels of wireless communications acceptance than North America. Markets like South Korea, Japan, Hong Kong, Singapore, and Taiwan are all heavy users of wireless communications, reports GartnerGroup’s Redman. “China will also be a major market,” he adds.
The Chinese State Development Planning Commission recently announced plans to invest $650 million in a two-phase project to install 3G mobile networks, a project designed to increase bandwidth to enable faster wireless transfer of video and multimedia images than current systems. Beijing is negotiating with U.S. investment bank Goldman Sachs to finance the investments.
U.S. wireless developer Qualcomm, one of the world leaders in CDMA technology development, has announced that it is working with China Unicorn, the second largest telecommunications provider in that country, to install a 3G CDMA wireless network. CDMA has already been implemented in South Korea and Japan, as well as other areas of Asia.
Cultural nuances play a roll in the use and acceptance of communications technologies in Asia. San Francisco-based Meetchina.com, the largest provider of Web hosting and e-commerce services in China, uses wireless notification services to alert its 60,000 business customers of the presence of inquiries at their e-commerce sites. “Online behavior is different in China,” says CEO Leonard Cordiner. “People log on one or two times a week to collect their e-mails.”
Laggard response times, of course, won’t satisfy global customers who come online expecting an immediate response to product inquiries, so Meetchina has had to fine-tune its service processes. “We send a message to the supplier over a pager to check the e-mail,” says Cordiner, who notes that pagers are more prevalent in China than e-mail. “Motorola has 30 million pagers in China.”
Literacy levels also impact technology penetration levels in China and India-two very large markets. Massachusetts-based Kinetic Computers supplies handheld wireless computers and supply-chain management systems to trucking companies, and has successfully penetrated markets in North America, Europe, and Japan. “In China and India, companies are interested in what we are doing,” says Vinit Nijhawan, CEO of Kinetic, “but the truck drivers are mostly illiterate. They can’t work with an application unless it’s totally graphic. Even then, they would likely not accept it. We can’t sell in those markets.”
MAKE WAY FOR M-COMMERCE
H-P and Swatch have joined forces to market an e-commerce equipped wireless wristwatch; already wearers in Switzerland can use their watches as virtual tickets at train station turnstiles.