Color, Cameras, New Data Plans Seen As Wireless Sales Spur In '03

LAS VEGAS— The number of wireless phone users isn't rising at the hockey stick levels of a few years ago, but at least handset sales are on the rise.

Much of the sellthrough increase is attributable to replacement models (see table), and what's driving the urge to splurge on these new phones is a predominance of color, cameras, games and even a little music.

Most phones shipped in 2003 will have color screens, and many of the new models will have the ability to take, or at least display, photographs. Some will also be able to use multimedia messaging service (MMS), which typically allows text and audio to be attached to a digital photo and sent together.

Phones with camera attachments or built-in cameras started appearing in the U.S. in 2002, following a red-hot trend that started in Japan.

Color screens, however, aren't just about photos. Color makes everything look better, including games, cartoons and even wireless Web sites. Handset manufacturers and carriers alike expect that color itself will help spur a resurgence in phone sales in 2003.

One indication of that interest came just as the Christmas holiday buying spree was getting underway. Dataquest said third-quarter global phone sales increased 7.8 percent to about 104.3 million units—marking only the second time that a quarterly number has surpassed 100 million.

Bryan Prohm, a senior analyst with Dataquest, said it appears that the buying spree would continue through the fourth quarter of 2002 and beyond because "a wave of innovative mobile terminal models are expected to become widely available."

Another analyst, Ken Hyers of In-Stat/MDR, is a little less excited about what might or might not be the killer application for wireless data. But, he said, "If I had to look at one service that will take off (in 2003) among consumers, it is photo messaging and photo cameras in general."

Built-Ins Needed: Hyers tempers his enthusiasm because of the lack of handsets with built-in cameras. Until there are a large number of camera-phone models at a reasonable price, the market won't take off, especially among young people, he claimed.

Another In-Stat/MDR analyst, Neil Strother, expects slightly more than 8-million camera phones to be shipped worldwide in 2002—some with camera attachments—with the number reaching 20.5 million in 2003 and climbing to 71.7 million in 2006. That's out of an overall handset market that has hovered around 400 million in recent years.

In the United States, Strother estimated 135,000 camera phones were sold in 2002, but most were phones with camera attachments such as the Sony Ericsson T68i or Samsung's A500. The first phone with a built-in camera in the U.S. was the Sanyo SCP-5300, which Sprint PCS started selling in November at $399. More phones with built-in cameras are due in 2003, however (see story, Jan. 9, p. 122, and other stories on this page).

Much of the optimism about camera phones is based on the Japanese experience. J-Phone was a fairly minor carrier in Japan until it added camera phones two years ago. Its subscriber base then exploded, with half of its 14 million users owning camera phones and using its picture-messaging service.

Besides the typical vacation photos sent to jealous friends, the Japanese are finding innovative ways to use their camera phones. One of the latest crazes is to use camera phones as a kind of dating service, passing phones with photos around in a group.

Java Flows: The new color handsets also make gaming more fun. Most handsets built from now on will have either Java 2 Micro Edition (J2ME) or Qualcomm's BREW (Binary Runtime Environment for Wireless), which allow downloading content like games to handsets. Most phones sold in 2003 will have download capability, analysts said.

Color screens are a prerequisite for wireless games, Hyers said, although graphics and some forms of advanced messaging will also benefit.

"We're going to see a lot of innovation (in what handsets do) in 2003," the analyst said. "The handsets are going to improve the experience, and more people will start trying them out. But innovative pricing will also play a big role."

Data Plans: Wireless carriers predominately started out pricing wireless data by the kilobyte, something that is hard for consumers to understand. Downloaded games and ring tones, however, can be priced at flat dollar rates, which is much easier for consumers to understand. And now, with packet-data networks installed and higher datarates available, some analysts believe flat-rate pricing may be the future for wireless-data services.

Carriers are still experimenting with pricing plans, but Sprint PCS may have set a trend last fall when it started offering free unlimited data — including picture messaging — on price plans of $85 or more and unlimited data for $10 per month to subscribers of lower priced plans.

"That kind of pricing is going to drive usage," Hyers said. "When one carrier has unlimited data, others will be forced to do that. Sprint is playing to its strength with that pricing because it has extra capacity."

Sprint wasn't the first carrier to do so, however. T-Mobile sells unlimited data and Web browsing for purchasers of its new Danger Sidekick device. The $199 device, which has a built-in keyboard and a free camera attachment, is designed mostly for data but is also a phone. T-Mobile's plan allows 200 anytime voice minutes.

A more typical data-pricing plan is the one from AT&T Wireless, which provides 1MB of monthly data for subscribers who pay $42.99 a month for a voice plan plus $7.99 a month for its MMode package, which includes games, graphics and photo messaging.