A Whole New Wireless Order

Nokia and rivals are turning out phones that switch between rival technologies

Pretty soon, that mobile gizmo in your pocket may spend as much time chatting over the air as you do. But instead of closing a sale or trading gossip with a friend, your phone will be jumping from one network to another, tirelessly seeking the right wireless access at the best price in every location.

One minute, the phone might be connected to a conventional cellular operator. Moments later, as you pass within range of a Wi-Fi hotspot, it could switch automatically to a faster and cheaper connection to download a batch of e-mails. While you stroll around the mall, it might pick up coupons from stores via free short-range Bluetooth radio. Then, overnight, it could receive the day's sports highlights via digital-TV broadcast for you to watch on your morning commute.

A world where many different types of wireless networks coexist and compete for traffic is just around the corner. And nobody is pushing harder to make it happen than Finnish giant Nokia Corp. (NOK ), maker of nearly one-third of the world's mobile handsets. The company is racing into every imaginable type of wireless technology. Says Antti Vasara, vice-president for corporate strategy: "The world is not just cellular anymore. There are lots of other ways to make bits fly."

The ferment at Nokia's headquarters in Espoo, Finland, confirms how seriously the company is thinking beyond cellular -- especially when it comes to the promised land of wireless data. Half of all new Nokia phones now come with built-in Bluetooth radio, which can beam data 30 feet over unlicensed airwaves at speeds of more than 700 kilobits per second, enough to zap a digital photo to a friend's phone in a half-minute. Nokia also has started building Wi-Fi into some products, including the $800 9500 Communicator phone/PDA hybrid and a new $700 high-end camera and music phone, called the N91, that stores up to 3,000 songs. The N91 can download tunes over zippy third-generation (3G) mobile networks, but Wi-Fi is up to 10 times faster -- and often free. "Some scenarios work better using access other than cellular," says Anssi Vanjoki, who heads Nokia's $6.5 billion multimedia products division.

That's a new message from the Finns. Nokia once hung its future on 3G, but now it's collaborating with Intel Corp. (INTC ) on microwave technology that could eventually rival 3G. Called mobile WiMAX, it's a faster, longer-range version of Wi-Fi that doesn't require users to be stationary. Separately, Nokia is also testing technology that turns handsets into portable TV sets. Perhaps Nokia's most radical departure is the new N770 Internet Tablet. No thicker than a deck of cards, the $350 palm-size Web browser has no cellular radio at all. Instead, it connects via Wi-Fi to a home network or public hotspot or, using Bluetooth, through a nearby mobile phone, to the Wireless Web. Analysts see this wealth of new options as a plus for customers. "As long as the technology works and services are seamless, users will get better prices and performance," says Lars Godell, telecom analyst with Forrester Research in Amsterdam.

The shift is already rocking the rest of the wireless industry. Mobile operators that have built their businesses around cellular technologies such as GSM and CDMA must sort out the threat from the likes of Wi-Fi and WiMAX. Some, such as Vodafone Group (VOD ) and most of the U.S. giants, are staying loyal to cellular. That's a defensible position: Some of the new air links, such as Bluetooth and home Wi-Fi, are free, so carriers earn no revenues from them; others such as mobile WiMAX are unproven. Boston's Strategy Analytics figures that even by 2008, cellular will account for 98% of the $703 billion wireless services market.

Other carriers are hedging their bets. Germany's T-Mobile runs some 13,000 hotspots in the U.S. and Europe and is testing WiMAX and other non-cellular wireless schemes in Germany and the Czech Republic. Wi-Fi's rise is even drawing some fixed-line operators back to the wireless game. Britain's BT Group PLC sold its mobile unit years ago. But it recently rolled out a service that uses cellular outdoors while routing calls made at home to a cheaper Wi-Fi Internet connection.

Nokia isn't alone in eyeing the splintering market. Motorola Inc. (MOT ) makes the dual-mode phone used for BT's new service and has rolled out a GSM/Wi-Fi phone, called the CN620. The Koreans, as usual, are charging ahead -- not just with Wi-Fi and Bluetooth but also with WiBro, a system for mobile digital-TV broadcast. "Every five years there's a rumble in the operator world," says Mark Whitton, a general manager at Canada's Nortel Networks Corp. (NT ), which has announced a new push into WiMAX and "mesh" networks of overlapping Wi-Fi hotspots.

To stay in the game Nokia knows it must keep innovating. The company won't say how much of its $4.8 billion annual R&D budget is spent on multiradio technology, but it has committed to including Wi-Fi in virtually all future devices from its multimedia and enterprise products groups. The technical challenges are immense. Nokia's 9500, for instance, contains no less than eight radios and antennas to support various GSM and 3G frequencies, plus Bluetooth and Wi-Fi. "It's getting more and more difficult for engineering," says Niklas Savander, senior vice-president for mobile devices in the enterprise group. Fortunately, chipmakers are doing their part. Sequoia Communications has just unveiled a chip that handles five different kinds of radio while boosting battery life.

It might have been easier for Nokia to stay focused solely on cellular technology. After all, 3G is just getting off the ground, and planned cellular successors will offer sizzling speeds with the ease of use and broad coverage consumers have come to expect. But ignoring the threats and opportunities from radical alternatives would be foolhardy. "We have to invest in them all," says Ilkka Raiskinen, Nokia's senior vice-president for entertainment products. And that makes for a new day in wireless.

By Andy Reinhardt in Helsinki, with Moon Ihlwan in Seoul

Before it's here, it's on the Bloomberg Terminal.