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Wireless 2002 To See More Convergence

3/18/2002 02:00:00 AM Eastern


Handset suppliers will do their best to turn wireless phones into productivity and entertainment devices here at Wireless 2002, where they hope to perk up handset-replacement rates to offset a declining number of net-new subscribers.

Suppliers will unveil a greater selection of phones that run Java-based programs, expand the selection of phones with four-color displays to enhance gaming and messaging, unveil the first U.S. phones with built-in or optional add-on digital-still cameras, and unveil the first models with MMS (multimedia messaging services).

Suppliers will also expand the selection of phones that can share corporate and ISP e-mail addresses.

Bluetooth-equipped phones, add-on modules and headsets will also proliferate, as will the number of CDMA 1X phones equipped with gpsOne position-location technology.

Ever-smaller sizes and fashion, suppliers agree, in themselves won't accelerate wireless-handset sellthrough in the United States.

With that in mind, show attendees will find:

  • The first U.S.-market Java-equipped J2ME handsets from Ericsson, an expanded selection from Motorola and Kyocera and an expanded selection of Audiovox handsets that can be shipped with Java as needed. Phones using Java-based J2ME or BREW can run application programs that can be downloaded wirelessly. The programs could include games, streaming information services and productivity applications.

  • The first camera-phone from Sony Ericsson and its first add-on camera for use with other phones.

  • More CDMA 1X phones that lack packet-data capabilities to reduce prices and seed the market with phones that will expand a network's voice capacity. Kyocera will show its first and LG its second.

  • An expanded selection of phones with Enhanced Message Service (EMS) and the first models with MMS. Motorola and Ericsson will offer multiple EMS models, and Ericsson will show its first MMS models.

  • At least one smartphone, from Audiovox, based on the Microsoft Pocket PC 2002 OS. It was shown discreetly at CES in January.

  • An expanded selection of CDMA 1X/gpsOne phones from LG and Samsung and the first two from Kyocera.

  • More Bluetooth-equipped and -capable phones from Ericsson, a downsized Bluetooth headset from Ericsson, and the first Bluetooth headsets from Jabra and Plantronics. A Sony Ericsson Bluetooth car kit will join a Motorola model previously announced.

POP3 e-mail clients in more phones. Motorola will have another model, Ericsson will add one more, and LG will have its second. For its part, Handspring will demonstrate Treo Mail, a wireless e-mail service for its Treo 180 and 180g PDA phones. The service and client software will enable either model to share a Microsoft Outlook or POP3 e-mail address. (for details on Treo Mail, see story, p. 33)

  • PC-Card-side packet-data radiomodems using CDMA 1X or GPRS technologies. Ericsson will show a GPRS model, and AirPrime will show its first PC Card equipped with 1X and its first with 1xEV-DO.

  • More handsets with polyphonic ringtones, which reproduce multiple notes simultaneously to sound more like recorded music.

The phones and network services that support them will help turn around slowing handset sales growth in the United States but the full impact won't be felt until 2003, when the services become more widespread, analysts said.

Unit sell-through growth to consumers peaked at 36 percent in 2000 before falling to 14 in 2001, Strategis Group estimates show. Sell through will accelerate only modestly in 2002 to 15 percent before rising 23 percent in 2003, when sales of 2.5 and 3G handsets will kick in (see table), the company said.

"Handset sales will go back up because the replacement rate will go back up," said Strategis analyst Ozgur Aytar. "The market will be full of new devices."

The industry will have to depend on a rising replacement cycle to stimulate sales, she said, because new subscriber additions will decline every year for the remainder of the decade. They peaked in 2001 at 24 million, fell for the first time ever in 2001 to 20 million, will drop in 2002 to about 19 million, and slip in 2003 to 18 million. Kagan World Media (see chart) also forecasts a continuing decline because of already high penetration rates.

Strategis cited a 47 percent penetration rate at the end of 2001, but when people under ages 18 are excluded, penetration rates hit about 70 percent, Strategis said. Nonetheless, "there is still room for subscriber growth," said Ozgur, pointing to the youth segment as the "major underserved market."

Pete Skarzynski, Samsung's senior sales and marketing VP, said he believes the handset-sales upswing will likely begin in the second half. "We need GPRS and 1X and the slew of capabilities they make possible," he said. New phones with "unique designs, features and functions" will also contribute, he said.

To provide services to these phones, companies such as Jamdat will show licensed games for BREW- and J2ME-equipped phones. They include Yahtzee, Dungeons and Dragons, and Tiger Woods PGA Golf Tour. Lightsurf will show infrastructure equipment enabling Sprint to support the wireless transmission of digital images when it launches its CDMA 1x services commercially in mid year.

In 2002, In-Stat analyst Becky Diercks expects carriers to concentrate on messaging, including EMS and instant messaging, downloadable ringtones, and downloadable Java-based applications to entice consumer users and "get people used to simple applications."

One Sony Ericsson executive believes MMS could be available later this year, and Samsung's Skarzynski foresees streaming and downloaded video services toward the end of the year. The video would appear on the handset's display.

Diercks, on the other hand, believes streaming- and download-video services, including live traffic cams likely won't be implemented in a GPRS or CDMA 1X network because they're bandwidth hogs. But she expects carriers this year to support wireless transmission of digital images from camera-phones.

Although services like that will appeal to consumers, Diercks expects carriers to concentrate their new data services toward enterprises and SOHO users. "Carriers are shifting their data emphasis to business," she said. "Consumers were initially the focus with the mobile Web, but carriers didn't see a lot of traffic. So they're refocusing on the business segment, which has an easier time cost-justifying the expense." Businesses will focus on wireless access to corporate networks via notebook computers equipped with wireless modems. As currently priced, wireless-modem service "is too expensive to appeal to consumers," she said.

All told, In-Stat forecasts the number of business users of wireless data will grow from 6.6 million at the end of 2001 to more than 36 million in 2006. The growth will come despite a "current lull in enterprise adoption" resulting from the economy and the complexity of assessing of assessing wireless data services, In-Stat said. IT departments must assess geographic network coverage and reliability, security, type of device to use, applications, and whether to use an in-house software solution or depend on a wireless applications service provider (WASP), In-Stat said.

U.S. Handset Sellthrough (in millions)

Unit Sales Replacement Rate*
1999 53.0 (+61%) 45%
2000 71.0 (+36%) 51%
2001 80.9 (+14%) 45%
2002 93.0 (+15%) 47%
2003 114.0 (+23%) 55%
*As a percentage of handsets sold to end users. Consists of replacement sales and churn-induced sales, excludes used-phone sales.

Source: The Strategis Group, Washington D.C.

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