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Wireless World
The Web is going mobile on a new wave of wireless devices.

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By Robert Burke

Bert Katz has glimpsed the future, and it makes him dizzy. A vice president at Annandale-based Invertix, Katz makes his living helping wireless carriers squeeze every drop of capacity out of their networks. But lately the speed of change is overwhelming. Today, there’s a mad scramble to push everything the Internet can offer into a new generation of pocket-sized wireless devices. "You go to these trade shows and there’s 500 other people with different gizmos, different ideas," he says. "It’s just changing too quickly. I don’t know how to handle some of this stuff."

The rest of us are probably not far behind. The seismic shift coming in telecommunications — the movement of the Internet from the hardwired PC to portable wireless devices — is reshaping every corner of the telecom industry, from handset makers like Nokia and Ericsson to carriers like AT&T and GTE to content providers like America Online. Some predict that the arrival of Web-enabled wireless gadgets will match or even surpass the sweeping impact that the Internet has had on society and business. The consumer appetite for these gadgets is there, says Elliot Hamilton, director of global wireless for The Strategis Group, a Washington, D.C.-based research firm. "First you need your office or home phone with you, and then you need your Internet with you. You start getting used to something, and it’s very hard to do without it."

wire.jpg (9909 bytes)When will all this happen? Today about 5 million people in the United States subscribe to a wireless Internet service. That number is expected to soar to 20 million by 2004. Handset maker Motorola predicts the number of worldwide wireless Internet users will hit 1 billion in just three years, up from around 260 million today. "It will soon be unexceptional that people will have access to information without needing a wire," says Lee Wright, CEO of anywhereyougo.com, a Texas-based developer of wireless Internet applications. "Today we take for granted things like faxes and Web sites. We’ll see a similar sort of rapid adoption of wireless access."

They’re not dreaming this stuff up — it’s already happening in Japan and in Europe, two places well ahead of the United States in adopting wireless Internet devices. In Finland, 78 percent of households have at least one mobile phone. In Japan, 20,000 people a day are signing up for wireless Web access. That is coming to the United States, probably in fits and starts, as handset makers and carriers and content providers struggle to find what works. So get used to turmoil. "The market is not really there yet, though we do know that it’s going to be big, if not huge," Katz says. "We just don’t know exactly when."

The stakes are high for companies in the burgeoning technology sector in Northern Virginia and elsewhere in the state. The move to wireless changes everything for tech companies that built themselves on the rise of the fixed-wire Internet. Content providers like AOL have to make new content. Hardware and software suppliers have to create new tools for new technology in a marketplace that is exceedingly difficult to predict. Virginia likes to tout its place as king of the Internet, but now there’s a new fight and the wireless Web might produce new royalty.

There are some big hurdles to clear before the world goes wireless. For one thing, current wireless transmissions can’t handle much data yet, mostly just text items such as e-mails or stock quotes. Nothing like the broadband capacity of the fixed-wire Internet. A problem in U.S. markets is that the big carriers use different transmission standards. AT&T uses Time Division Multiple Access, while GTE Wireless uses Code Division Multiple Access. Bell South/SBC Communications uses TDMA as well as Global System for Mobile Communications, the current European digital standard. The different standards evolved here largely because the Federal Communications Commission let carriers choose their own technology.

Then there is the issue of who pays for all these calls. The cellular industry is campaigning to switch to a "caller pays" system, used in many European nations. That could drive up usage by making cellular subscribers more willing to share their numbers.

There’s also a limited amount of spectrum space for wireless transmission, and it’s getting crowded out there. AT&T Wireless and Sprint PCS have both had problems handling capacity. Some customers have sued over poor service. The FCC, though, is floating the idea of letting companies trade spectrum space back and forth as needed, a strategy already in use in the fiber-optics market. Plus, the FCC is planning spectrum auctions that should help ease the shortage.

Look for the momentum toward wireless to build in the next six months as more and more companies start using it to e-mail data to mobile workers, says Mike Ritter, an area president for GTE Wireless. Then early next year, a faster transmission standard called "3G" — for third generation — is expected to hit the consumer market and allow for new features and applications. The first phase of 3G will offer data speeds three times as fast as a 56k modem, but making the switch is like changing a tire on a moving car. Sprint PCS announced in March that it was conducting trials of a 3G system in Kansas with Samsung Telecommunications America and Qualcomm, a leading maker of the chips that run cell phones. By 2003, 3G could be delivering up to two megabits of data per second — fast enough for new features such as mobile videoconferencing or the delivery of CD-quality music.

As the bold new wireless market looms, the telecommunications industry is being reshaped. Mergers among major carriers have created new nationwide wireless networks. A bigger network means better control over transmitting data, which is what subscribers with Web-enabled devices will want. It also lets carriers offer such services as instant messaging and market "one rate" plans to customers.

The biggest merger so far was finalized in March when the FCC OK’d the union of wireless properties held by Bell Atlantic and Britain-based Vodafone AirTouch into a new company called Verizon Wireless. Verizon will grow even bigger in early July if the FCC gives its OK to Bell’s merger with GTE, which would bring Verizon to 23 million subscribers and a network that reaches 90 percent of the U.S. population.

Also, the pending Bell Atlantic-GTE merger will affect a regional carrier in Virginia — Waynesboro-based CFW Communications is buying some of the assets of Bell Atlantic’s Prime Co., a Texas-based wireless provider, for $407 million. The purchase will triple CFW’s wireless subscribers to 140,000 and give it a potential customer base of 8.3 million. CFW is also merging with R&B Communications of Daleville; the new company will be based in Waynesboro.

A merger nearly as large as the Verizon deal came in April when BellSouth and SBC Communications announced plans to combine their wireless phone businesses, creating the nation’s second-largest carrier, with 16 million customers, and combining their regional assets into a nationwide network. The mergers aren’t necessarily bad for consumers. They should create competition and produce better pricing. A year ago, there were four carriers with nationwide networks. Today there are six.

Even companies that aren’t merging are getting bigger. AT&T in April sold a whopping $10.6 billion in new stock for its wireless holdings, the largest initial public offering in history. The company plans to spend the money to expand its mobile phone network and roll out new Web-enabled phones, along with launching a "fixed wireless" system that uses rooftop antennas to receive wireless phone service and Internet access. Carriers are on spending sprees as well. Verizon announced plans to spend $3 billion this year to upgrade its network. Sprint PCS spent nearly $700 million in the first quarter of this year to expand its network.

The wireless boom is also mobilizing content providers like Dulles-based America Online, which dubs its strategy "AOL Anywhere." Earlier this year AOL created AOL Wireless and moved to link its content and services to wireless devices through deals with Sprint PCS, Nokia and Motorola. Its AOL Mobile Messenger Service will offer wireless access to AOL e-mail and AOL Instant Messenger. The company’s Digital City feature has gone wireless too, in 60 U.S. cities, giving users quick mobile links to restaurants, movies and other entertainment.

AOL is big enough to attract a lot of partners and try out new strategies. That increases the chance the company will land on its feet when this fledgling market works out the bugs. "I think AOL is doing a very good job of keeping up," says Phil Benyola, an analyst with Raymond James Financial. "They have the muscle to get in front of all these wireless platforms and get their fingers in every pie. So whichever one becomes the standard, they’re already entrenched."

Vienna-based Teligent is building on the advantages that a wireless network has over wires by targeting business customers. Via a network of rooftop antennas and base stations linked to traditional broadband networks, Teligent bypasses existing local telephone networks to deliver broadband service to business customers. It’s not making money yet, but it’s growing fast — in the past two years it has set up networks in 40 U.S. markets and has partnerships in Europe, Asia and South America. Alex J. Mandl, Teligent chairman and CEO, says the move to wireless in the next few years will be a major step in the history of communications, especially for mobile wireless. "Absolutely it will change everything. Most mobile wireless now is voice, not digital."

Another wireless provider selling to business customers is Reston-based Nextel Communications, a national provider with 5 million subscribers. It added Internet access to its wireless package in April, giving customers the ability to link mobile workers to the corporate database. Its Direct Connect feature lets co-workers reach each other in the field by pressing a single button. Nextel is one of a handful of companies with a national network.

It’s worth remembering that a grand scheme backed by money is no guarantee of success. Consider Motorola-backed Iridium, the world’s first satellite-based phone system that began in November 1998. It can safely be described as a whopping failure. Its phones were clunky and expensive — up to $3,000 apiece — and calls could run as much as $7 a minute. It shut down in March and says it’s ready to let its $5 billion network of 66 satellites fall out of orbit and burn in the atmosphere. Other satellite-based phone providers like Globalstar are still afloat and claim they can serve markets not reached by cellular networks, but their turf is shrinking fast. The cell phone industry is simply overrunning it.

The fast growth of the cell phone market is what motivates many companies, who are anxious not to miss out on this next wave. "They see it growing just like voice did," says Hamilton of The Strategis Group. "We’re almost starting from zero again. Voice is now at over 90 million subscribers. If we can replicate that to any degree in the wireless Internet side, all of the sudden you have a whole new industry."

The enthusiasm for all things wireless, though, is sparked by the chance to do more than just match what the cell phone business has done. Predictions of spectacular growth — a billion wireless subscribers worldwide by 2003, for example — get tossed around all the time these days. It may turn out that the Next Big Thing is all about getting small.

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