Wireless Nets Aren't Just For Big Fish AnymoreLois Therrien
Frederick W. Smith became a business legend by creating the overnight package-delivery industry with Federal Express Corp. He did it by assembling his own airline and guaranteeing that your package would arrive at its destination the next morning, no matter what. But less known is the critical role that telecommunications technology has played in keeping the $7.7 billion company the dominant force in its market. Back in 1977, FedEx began building a radio-based communications network that eventually tied all its offices, planes, and couriers to the company's computers in Memphis. That lets FedEx trace any package from the moment it's picked up at a customer's office to when it's delivered.
Until recently, the only way to get the kind of network that FedEx runs was to build it yourself--at a cost of hundreds of millions of dollars and years of development. But now there's an alternative. Everybody from cellular phone companies such as GTE Mobilnet to IBM, Motorola, and Swedish giant Ericsson is trying to bring wireless networks to the masses. Two new systems--Ardis and Ram--are already up and running. These networks are relaying electronic mail to traveling executives and exchanging information with field-service technicians, insurance-claims adjusters, and other on-the-move workers. Early customers include ADP, National Car Rental, and ICL Retail Systems. The payoff, as at FedEx, is improved customer satisfaction, higher productivity, and greater operating efficiency.
TIMESAVER. Take Maersk Inc., the Danish shipping company. It sometimes misplaced containers in its huge U.S. shipyards, leading to delays in delivering cargo to customers. Now, Maersk cargo-yard operators in Newark, N. J., and Charleston, S.C., relay container reports to a data base using wireless terminals. That saves about two hours a day of workers' time. "It gives you a competitive edge," says Maersk Telecommunications Director Tivadar Macskassy.
The mobile data business is a major part of an even bigger market for all kinds of wireless data communications, including office computer networks that use airwaves instead of wires. This year, sales of all kinds of wireless data equipment will reach $450 million, while revenues from wireless data services will hit $160 million, estimates Ira Brodsky, president of Datacomm Research Co., a market researcher. Within 10 years, equipment sales could more than quintuple, to $2.5 billion, and services could surge to nearly $1 billion, he estimates.
Meanwhile, communications companies are modifying existing networks for wireless data. Cellular carriers such as McCaw Cellular Communications Inc. are pursuing a variety of technologies to boost data traffic over their voice systems (box). Specialized mobile radio (SMR) networks that have been used to dispatch fleets of taxis are now being fitted for data communications. Paging services are also getting in on the act. SkyTel Corp. last September began the first national service that delivers text and data to pagers. Motorola Inc., the world's leading maker of pagers, is rolling out a service called EMBARC that will connect palmtop, notebook, and laptop computers via paging channels.
But Ardis and Ram, designed specifically for data seem to have the edge over services that piggyback existing wireless networks. Both use the packet-switching technology that telephone-based data networks use. Packet-switching encapsulates data in "envelopes" which ensures that information arrives intact. Paging systems, SMRs, and cellular networks don't yet have packet-switching, which makes sending data on them more cumbersome.
Ardis Inc., which is jointly owned by IBM and Motorola, began offering wireless data services in April, 1990, over a network designed by Motorola in the mid-1980s for IBM field technicians. In 1989, Ericsson teamed up with New York-based Ram Broadcasting Inc. to develop a competing system using Ericsson equipment. BellSouth Corp. bought a 49.9% stake in Ram Mobile Data for $300 million this January.
Despite high costs for the hardware--terminals run as high as $2,000 and radio modems about $1,700--the companies are signing dozens of customers. Ram says its customers spend $70 to $100 a month per terminal, while Ardis says its customers average $90 to $120. Companies such as National Car Rental System Inc. say it's worth it. National uses Ram to manage its huge inventory of cars. Workers with handheld terminals prowl vast lots, recording the location of cars and the latest scratches and dings. Now the company can check customers' claims that a car was already damaged and find out quickly when one has been stolen. The big payoff: Moving cars in and out faster should boost utilization by 2% and each percentage point means more than $1 million in savings, says Chief Information Officer John Livingston.
A MYTH. As archrivals, Ardis and Ram devote nearly as much energy to knocking each other as to promoting the concept of wireless networking. Ram says its system will be able to handle more traffic than the Ardis network because it has more radio channels. Ardis President Jack W. Blumenstein fumes: "The myth that we have a capacity problem is just that." He says that with new digital technology, Ardis can meet all its capacity needs through the year 2000. Ram also claims its system is more open to innovation because it is encouraging other companies to build radio modems for use on the network. Ardis, on the other hand, requires customers to buy Motorola modems. That policy is a big reason that Hewlett-Packard Co. isn't working with Ardis, says Clain Anderson, HP's program manager of communications products. HP is interested in selling its 95LX palmtop computer as a wireless data terminal. Ardis says it's watching to see if its policy is a deterrent.
At this point, Ardis is by far the leader. Its service is available in 400 metropolitan areas, vs. 30 for Ram. While Ram promises to expand to 100 cities by yearend, Ardis is using its nearly blanket coverage to sign up customers now. While only a few hundred people now use Ram, Ardis provides service to nearly 20,000 workers at such companies as Pitney Bowes, NCR, and ICL. Then there are 20,000 IBM technicians who continue to use Ardis.
But the race is far from over. New players and new technologies are entering the market all the time. What is clear is that wireless data services are here to stay. The era when companies could give employees a pocketful of change and tell them to call in from the nearest pay phone is gone forever.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.