Wireless Web, Take Two

It's new and improved, but will it sell?

It's no secret that the wireless Web has been a bust in Europe. Three years after mobile carriers rolled out heavily hyped information services using wireless access protocol technology, or WAP, fewer than 10% of consumers have ever used their phones to check stock quotes, browse news headlines, or view their bank balances. Data services, excluding messaging, will generate only about $1 billion in revenues across Europe this year, says researcher IDATE of Montpellier, France.

There's too much at stake, though, for carriers to write off the wireless Web as just another dot-com fantasy. "The future of our business is conditioned on the use and acceptance of mobile data," says Jean-François Pontal, CEO of France Télécom-controlled Orange, Europe's second-largest mobile operator. So he and others are giving it another go. In recent weeks, Orange and rivals have rolled out snazzy new data services that make WAP look as dated as the telegraph.

Gone are the poky connections, clunky menus, and crummy content. Instead, Europe's carriers are trotting out zippier, always-on access to a wide range of carefully screened services, all via the latest color camera-phones. The services run on carriers' upgraded 2.5G networks, an intermediate step on the road to costly third-generation, or 3G, technology. Prices aren't half bad, either: Orange offers a $9 per month data plan that covers up to 10 megabytes, the equivalent of 500 e-mails plus 100 Web pages. It used to charge $40 for the same amount of data. "This is the second major push for the mobile Internet," says analyst Michelle de Lussanet of Forrester Research Inc. in Amsterdam. "It's a completely different experience."

Telcos had better hope customers agree. Slow uptake of WAP was a blow to companies counting on data growth to counteract declining voice revenues. It also was a scary omen, since carriers need massive, enthusiastic adoption of info-on-the-go to justify the billions they're pouring into 3G. Otherwise, 3G will never amount to anything more than an extremely expensive upgrade to the voice network--an Apollo mission that never reaches the moon. "Operators have got to get it right this time," says telecom analyst Paolo Pescatore of researcher IDC in London.

They're certainly trying. The new Vodafone Live! service, launched simultaneously in six European countries on Oct. 25 and debuting in two more by Christmas, offers e-mail, picture messaging, downloadable ring tones, games, and one-click access to information such as sports scores and flight schedules. Compared with earlier services, Live! is faster, more comprehensive, and easier to use. Prices are pay-as-you-go, ranging from 57 cents to send a photo and up to $8 to download games. Analysts praise the service's array of options and its secure billing system, which lets users charge purchases to their Vodafone account. Customers seem intrigued, too: On Nov. 12, Vodafone CEO Christopher C. Gent revealed that 50,000 have already signed up, even though the new handsets required for the service cost $300 and up. "Vodafone really has a head start," says WestLB Panmure analyst Benedict Evans, who has a buy rating on the company.

Reactions to Orange's new offering are more mixed. Set to kick off in mid-November in Britain and soon after in France, the service is the first anywhere to use a handset based on Microsoft Corp.'s Smartphone mini-Windows software. The slick new custom-built phone contains versions of popular programs such as Microsoft Outlook and Internet Explorer. Its biggest selling point: tight links with Windows PCs, including the ability to synchronize calendars and address books. Critics, though, say Orange hasn't woven together as complete a package of content as Vodafone. "Orange is falling behind a bit," says de Lussanet.

Other carriers are also getting into the act. Britain's mmO2 unveiled a package called Revolution on Nov. 4 that it will roll out across its four European units starting next year. Telecom Italia Mobile introduced picture messaging and enhanced data services last summer. And Holland's Royal KPN and France's Bouygues Telecom have launched new services based on Japan's popular i-mode technology. The quandary for many carriers, though, is whether to offer customers a "walled garden" of preselected services--in the same way that America Online made the Net safe for the masses--or to follow the Netscape model and let a thousand flowers bloom. Microsoft's camp favors the latter, saying that as phones become more like PCs, users will demand total freedom of choice. But many analysts argue that the simplicity and comfort of services such as Live! and i-mode are key to drawing consumers to wireless data.

Question is, will any of these services be hot enough to ignite the mobile Net? Carriers surely are betting big: Orange and Microsoft have earmarked $25 million to advertise their new service, while Vodafone may spend 10 times that much pushing Live! But even optimists figure data, including messaging, won't amount to more than a quarter of mobile revenues by 2005, up from 12% now. That's not enough to kick-start growth. "Voice declines will overshadow data takeup," says analyst Mark D. James of brokerage Nomura International in London. To plump up their top lines, and recoup massive 3G costs, carriers are going to have to dig even deeper to come up with more dazzling uses for mobile phones.

By Andy Reinhardt in Paris, with Kerry Capell in London and Kate Carlisle in Rome

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