Cordless Expansion At CES: 5.8GHz, Demographic-, Room-Specific Models

LAS VEGAS —Phone suppliers will cast trepidation aside and dive headlong into 5.8GHz digital and analog cordless phones here at next month's 2003 International CES.

Most major vendors will join VTech and Uniden in showing their first 5.8GHz models, including basic analog models and premium-priced DSS multi-handset units.

Style will also figure prominently in suppliers' CES introductions. A number of uniquely styled cordless product will be shown, especially accessory handsets to multi-handset systems. They'll be targeted at specific demographics, including teens and women, as well to different areas of the house.

Prominently styled introductions will not be limited to multi-handset systems, however. Several vendors will have uniquely styled 900MHz and 2.4GHz analog models aimed at key demographic segments.

Other show highlights will include:

• An expandable, two-line 2.4GHz DSS phone with a built-in modem and Bluetooth functionality for data networking with other Bluetooth-enabled device.
• A new phone brand that will come to market with 5.8GHz digital phones as well as 2.4GHz analog and digital product.
• An expansion of TT Systems' recently announced Sunbeam-branded line of entry-level phones.

Much interest will undoubtedly be centered on the new 5.8GHz technology, which made its modest debut in late 2002 with two models from Uniden and one from VTech. The remaining manufacturers in the market will leave the sidelines and have their answer this year despite some suppliers' concerns about the technological merits of the new frequency.

"It's the usual rush to proliferate technology through marketing," said Kerry Cooper, director of marketing, Southwestern Bell Freedom Phone. Despite his lament, Cooper indicated Southwestern would have a 5.8GHz announcement at CES.

ATLINKS (GE) marketing VP Eldon Chuck agreed, yet he indicated that ATLINKS would make a move into 5.8GHz in 2003. "The worry with 5.8GHz is that while it will initially be a price step-up from 2.4GHz, consumers may not see it as a performance step-up," Chuck said.

This, Chuck said, could lead vendors to depress prices on 5.8GHz products to keep the frequency competitive. That, in turn, would depress prices in the lower frequencies. The pain would be acute in the 2.4GHz category, which suffered significant price erosion this year.

Indeed, while the average sellthrough price of 900MHz phones has held relatively steady year-over-year, prices in the 2.4GHz market (analog and digital) have dropped significantly. The average selling price of about $148 during the January-October 2001 time period fell to $114 during the same period in 2002, according to the market research firm NPD Techworld.

"I do think the introduction of 5.8GHz was ill-timed," Chuck said. "For one, there is no widespread advantage to it versus the other frequencies. From our standpoint, 900MHz is still the best, frequency performance-wise."

Others, like Uniden's CEO Al Silverberg, insist that 5.8GHz is the right thing for the market at the right time. Technologically, the phones will not interfere with 802.11b home networks or crackle with static when someone uses a microwave, Silverberg said. 5.8GHz is also a strategic differentiator in a fiercely competitive market place.

"Retailers were asking us for new technology that they could sell for a premium," Silverberg said. "To succeed in this market, you have to be out early with new technology."

"The market needed something new," asserted Brad Pittmon, VTech's cordless product manager.

Whatever the technological merits, the frequency will take the positioning previously occupied by 2.4GHz DSS as the "early adopter" product, leaving 2.4GHz to the mass market. "We are now gearing our 2.4GHz products to women and family users as opposed to the tech savvy," Pittmon said.

This, too, is not without risk.

"I've been hearing that 2.4GHz DSS pricing will be at $79.99 with two handsets in the box," thanks to 5.8GHz, said Southwestern's Cooper. "It will just squeeze the distance between 2.4GHz and 900MHz."

ATLINKS Chuck added that despite downward price pressure, 900MHz "is by no means dead," and his company will continue to support the frequency with a number of new introductions in 2003 even as it moves into 5.8GHz.

The consensus among other manufacturers is that 900MHz analog will endure, if only to fulfill loss leader positions for retailers.