What's Putting Wind in Wireless' Sails

Technologies, particularly network software and new applications, that have been in the works for years are now coming together

For the 15 years that couriers of delivery service Federal Express (FDX ) have used wireless technology, they've acutely felt its limitations. They've had to rely on the FedEx internal network, since public wireless service was too slow and expensive. And they were limited to a few basic tasks, such as transmitting codes of picked-up packages back to the office. If a customer asked a courier what the cut-off time was for sending letters overnight to India, the employee could only shrug and suggest calling customer service.

Now, that's changing. Per-minute cell service prices have fallen 80% in the past decade, to less than 10 cents a minute -- undercutting the rates of FedEx' own network. Thanks to recent upgrades, public networks have also become faster and more capable. So starting in mid-2004, FedEx' 50,000-strong delivery staff will migrate to AT&T Wireless (AWE ) and a powerful new piece of internally developed software, which will let couriers answer most customer questions, says Winn Stephenson, senior vice-president for technology systems at FedEx.

This decision is just one of many signs that a new era is dawning in wireless network technology. The U.S., long the developed world's wireless laggard, is catching up, says Keith Waryas, an analyst at tech consultancy IDC in Framingham, Mass. -- and that's feeding into a recent and continuing revolution in mobile software. Surveys of chief information officers show that mobile applications and networking are at the top of many corporate tech departments' software shopping lists. And consumers are waking up to this new opportunity as well -- turning on to wireless applications such as fancy ring-tones, text messaging, and games.


  The catalyst for all this: Pieces of wireless technology that have been in the works for years are now coming together. For instance, wireless service providers have increased network speeds with hardware and software upgrades. Last month, to take one example, No. 1 U.S. provider Verizon Wireless rolled out DSL-like (for digital subscriber line) Net access speeds to its Washington (D.C.) customers whose laptops are outfitted with special modems. And W-Fi (short for wireless fidelity, another technology for using the Web wirelessly at high speeds), is taking the U.S. by storm.

Those faster networks have turned tablet PCs and laptops into wireless devices. They've also allowed handset makers to roll out new gadgets such as smart phones, a cross between a phone and a personal digital assistant (PDA). Unlike today's "dumb" phones, these devices include an operating system (OS) -- the software that runs the basic functions of a computer -- and the processing power and memory that PCs had a decade ago. By 2007, perhaps 80% of all handsets sold will contain an OS, estimates Ken Hyers, a senior analyst with market consultancy Cahners In-Stat.

An OS will enable those smart devices to run more complex software. Already, makers of mobile operating systems, including Microsoft (MSFT ), the Linux community, software developer PalmSource (PSRC ), and Nokia (NOK ), which helped create the Symbian OS -- are rolling out new software-development tools. On Oct. 28, Microsoft announced plans for Visual Studio for wireless, which, when it's ready next year, will let developers familiar with Microsoft's PC software development tools create new programs for cell phones.


  Another critical boost for developers is the cell-phone industry's agreement on a standard java programming language for such offerings as games played on mobile phones. Due out in early 2004, this standard will reduce the number of alterations developers have to make to adapt an application to a particular device. "It will be a huge leap forward," says Michael Bordelon, vice-president in charge of consumer technology and software at handset maker Motorola (MOT ), which will ship its first device based on the standard this quarter. "Developers will be able to reach a much broader set of customers with each application."

Coupled with big investments by Microsoft and PC microprocessor king Intel (INTC ), which this fall has poured $300 million into marketing its Centrino laptop chip for wireless uses, these efforts are leading to an explosion in mobile applications. Developers released 6,480 programs in the third quarter -- everything from games to business software -- up 70% vs. a year ago, according to Handango, a provider of mobile content for downloading onto handheld devices.

Today, business applications are where the most money is, says Fred Hoch, director of e-business at the Software & Information Industry Assn. In their original incarnations, these programs simply replaced paper: Instead of carrying printed manuals, airline pilots would download information onto their handhelds. More recently, however, corporations have begun using wireless software to help increase productivity and cut costs, says Terry Stepien, president of software maker iAnywhere, a unit of Sybase (SY ).


  This trend will affect nearly every traditional software supplier. "At some point, you won't be able to sell your software unless it has a mobility feature," says Jacob Christfort, chief technology officer for mobile products and services at database maker Oracle (ORCL ). Its software already does -- for instance, allowing mobile users to dip into customer, inventory, and other databases back at the office. This so-called middleware market is expanding fast: It should grow from $333 million last year to $1.6 billion in 2007, estimates Steve Drake, an analyst at IDC.

Mail-sorter maker Pitney Bowes (PBI ) provides an example of what's to come. It cut its emergency parts orders by 90% and its overall parts inventory by 15% -- saving millions of dollars -- after equipping its repairers to wirelessly update inventory data when taking parts off the shelf, says Ralph Nichols, a service program manager at the company. Pitney Bowes created its system with software from privately held Antenna Software and from software maker Siebel Systems (SEBL ).


  Another popular new application is radio frequency identification (RFID). Programs from mobile software company iAnywhere and privately held SAT allows workers at Lyondell-CITG Refining, one of the country's largest crude-oil refiners, to get read-outs of temperature and other data relating to critical systems by simply walking past them. RFID beams the information onto their handhelds automatically, an approach that's much more efficient than one used only a few years ago, when operators had to enter data by hand.

Location-based services are becoming more popular as well. For a year now, No. 5 U.S. wireless service provider Nextel (NXTL ) has used satellites to pinpoint locations of cell phones within 165 feet by using imbedded global positioning system (GPS) chips. The service, which costs $5 to $70 a month, depending on the features, is taking off with businesses such as limousine companies, whose dispatchers can now more easily figure out which driver to send on a call, says Greg Santoro, vice-president for Internet and wireless services at Nextel.

Providing such services is often difficult and costly. Instead of just servicing PCs, tech support staff now also has to fix a plethora of mobile devices. Yet, that's another opportunity for software companies. In December, Oracle will release an application server that lets corporate tech managers control remote devices by sending text messages to them, says Christfort. When the target gizmo accepts the message, the device's software is automatically updated.


  Similarly, Programs from specialized software company Insignia (INSG ) allow cell carriers and handset makers to send software fixes -- such as programs that fight viruses -- to handsets. Today, call quality is subpar for up to 20% of U.S. cell-phone customers because the software that controls their phones can't be easily updated, says Peter Bernard, chief product officer at Insignia. Bernard says Insignia can fix that -- and also send a program to a stolen phone to kill it and secure the customer's private data. The company expects to sign up its first U.S. cell carrier this quarter, Bernard says.

Consumer software is hot as well: The U.S. wireless gaming market is growing at five times the pace that it did in mobile pioneer Japan during the same stage of development, says Dan Kranzler, chairman and CEO of Seattle-based Mforma, a leading distributor of wireless entertainment content. Sales of his profitable, privately held company are rising 20% to 30% per month, Kranzler says.

In fact, U.S. wireless-gaming revenues should nearly triple, to $366 million, next year, estimates Dana Thorat, a senior analyst with IDC. Revenues of simple software such as ring-tones will more than triple over the same period, to $57 million, she says.


  Other popular applications include so-called productivity trackers. Some allow runners to keep track of miles, time, and performance while training for marathons, says CEO Laura Bordewieck Rippy of Handango, whose sales have been growing at 27% a quarter for the past 15 months. Among coming location-based services are ones that might let parents track their kids' locations via GPS-enabled phones.

What's more, Microsoft is starting an all-out effort to enable cross-communication between different types of devices, such as wireless PCs and phones. On Oct. 29, it announced an agreement with British phone company Vodafone (VOD ) to create a standard way for developers to enable certain functionalities -- such as using a desktop e-mail program to send a text message to a customer of any cell-phone carrier (see BW Online, 10/13/03, "Time for New Thinking in Telecom"). Early next year, the Redmond (Wash.) giant hopes to strike similar deals with U.S. carriers, says John Maffei, director of the platform strategy group at Microsoft.

Test versions of such applications should come out in the second half of 2004 -- both in the U.S. and abroad -- and could revolutionize wireless shopping. They will, essentially, offer consumers and business buyers an alternative to paying with credit cards, since it'll be possible to charge purchases to wireless accounts -- eventually providing merchants with entré to more than 100 million U.S. PC owners, says Maffei.


  Cell carriers are still working on wireless payment systems, since they're used to billing by the minute, not the item. Many are looking at offerings from wireless software companies Qualcomm (QCOM ) and Portal Software (PRSF ) for a solution.

Much remains to be done for wireless software to stimulate a boom, of course. One need is more cooperation between carriers, so that customers of one can engage those of another. Cell carriers are starting to take the first steps in this direction by enabling cross-carrier text messaging. And on Nov. 6, AT&T Wireless, Cingular, Sprint PCS (PCS ), T-Mobile, and Verizon Wireless launched America's first multi-carrier game, a Drag Racing contest. Next, cell phones and the software they run have to become simpler to use, says Andrew Cole, an analyst with wireless consultancy Adventis.

Still, with industry players threatened by increased competition and declining per-handset and per-customer revenues, those problems could be solved quickly. "The ability to work wirelessly will be the most significant trend in computing over the next couple of years," says Jeff Krisa, a director of market development at Intel. And no one with a stake in the business wants to be left behind.

By Olga Kharif in Portland, Ore.

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