In the second part of this three-part series on hands-free communication, Todd Lebor takes a look at wireless connectivity. Much has been made over freeing our digital devices from the tangled web of cords that bind them. Technologies such as Bluetooth and Apple Computer's AirPort are here to save the day. But can they both prevail?

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By Todd N. Lebor (TMF TeeTime)
October 31, 2000

[This article has been updated since its original publication.]

Last week, I highlighted headsets as an opportunity to take advantage of the trend toward hands-free communication. This week, we look at wireless connectivity. Next Tuesday, in the third and final segment, I will address the fledgling market of voice recognition software.

Wireless Connectivity

Last Christmas, Apple Computer (Nasdaq: AAPL) marketed a wireless connection product called AirPort that promised Apple users the freedom to roam around their house with a laptop while remaining connected to the Internet. AirPort technology, which uses a technology known as 802.11, is good at what it was designed for -- wireless networking -- but not versatile enough to be a cellular standard.

Its primary competitive threat is Bluetooth. Both technologies are aimed at eliminating connection cables. While 802.11 is designed to be used for wireless local area networks (LAN), Bluetooth's short-range and low-cost is making it the de-facto standard for wireless connectivity.

Bluetooth, named for a 10^th century Viking king (click on Bluetooth Guide\Bluetooth Story) who united Denmark and Norway, uses radio waves to connect up to 7 electronic devices at speeds of 1.0 Mbps (megabits per second) within a range of 30 feet.

AirPort, on the other hand, offers connection for 10 devices, speeds up to 10.0 Mbps and a range of 150 feet. Looks like we have a winner. Bluetooth by a nose. Huh?

Bluetooth is cheaper, more versatile, uses less power, but most importantly, it is championed by nine "promoter companies" that represent the who's who in technology: 3 Com (Nasdaq: COMS), Ericsson (Nasdaq: ERICY), Intel (Nasdaq: INTC), IBM (NYSE: IBM), Lucent (NYSE: LU), Microsoft (Nasdaq: MSFT), Motorola (NYSE: MOT), Nokia (NYSE: NOK), and Toshiba. At last count, the Bluetooth SIG (Special Interest Group) was also backed by 1,883 "adopter/associate" member companies.

What good is this technology anyway?

Imagine downloading photographs from your Kodak (NYSE: EK) digital camera to your Hewlett Packard (NYSE: HWP) PC with the push of button. Bluetooth allows the transfer of data between devices of different manufacturers running different software. Not impressed? How about using the same phone at home, in the office, and on the road while maintaining three separate numbers? A Bluetooth-enabled phone could easily (in fact automatically) switch from network to network depending on which network is closest. And my personal favorite, the wireless headset. Along with speech recognition software (the topic of the third installment in this series), a wireless headset could control your "handset," creating a personal area network (PAN) that interacts with all things digital at the command of your voice. Eat your heart out K.I.T.T!

Currently, Bluetooth product growth is stymied by the-chicken-or-the-egg-syndrome. Bluetooth-enabled products need other Bluetooth-enabled products to talk to. This holiday season will be a good test for Bluetooth as we see the first of many new products come to market. With so many member companies backing its technology, product growth should be exponential once critical mass is reached.

Since Bluetooth is not proprietary to any one company, intellectual property rights (IPR) are nonexistent, and chipmakers are free to incorporate this technology without paying royalty fees. Therefore, chipset makers are integrating Bluetooth technology into their chips with visions of incremental sales and upgrades dancing in their heads. Bluetooth is to the chipmakers what Windows Me is to Microsoft.

Today, it is a non-essential product upgrade that increases revenues without much impact on expenses. Tomorrow, it may be a standard feature. Gartner Group/Dataquest predicted that 79% of digital handsets and more than 200 million PCs will incorporate Bluetooth technology by 2002. They project 1.0 billion Bluetooth-enabled devices by 2004.

Several of the promoter companies are ready to unleash the hounds. According to the Bluetooth SIG website, Ericsson is the first and only handset maker to market a Bluetooth-enabled phone. In fact, Ericsson has two cell phones using the Bluetooth 1.0 specifications and also offers a Bluetooth headset. Ericsson is also manufacturing a Bluetooth module that can be implemented in any kind of mobile communication device. This module turns an ordinary electronic device into a Bluetooth-enabled device.

Motorola is countering with a trio of Bluetooth devices (Timeport 270, Bluetooth Smart Module, and PC card) that provide consumers the capability for wireless dial-up networking, automatic synchronization, and ad hoc networking. It unveiled the Smart Module at the PCIA (Personal Communications Industry Association) GlobalXchange trade show in September and promised availability to consumers for this holiday shopping season.

Ericsson and Motorola are by no means the only players in this market, but they have been the quickest to act. Intel and Microsoft have development teams working in conjunction to develop a "road map" to ready the Windows operating system for Bluetooth by the first half of 2001. Lucent also has a "complete, low-power Bluetooth radio subsystem" in a single component waiting in the wings.

Bluetooth is not just for the big dogs. The obvious benefactors are companies like Nokia and 3Com that stand to gain from the new capabilities of their products, but the greatest rewards may be reaped by the companies not yet on the radar map.

A private company called Cerulic (named for the blue color obtained by dissolving indigo in sulphuric acid) plans to build Bluetooth networks in airport lounges, hotels, and conference locations offering the business traveler a wireless network to connect to. Cerulic is not alone in its pursuit of business travelers. Newark, New Jersey-based NomadNetworks recently signed an agreement to wire all TransWorld Airlines Ambassador Clubs with its proprietary Bluetooth product, BlueStreak.

Wind River Systems (Nasdaq: WIND), a provider of embedded software and services for smart devices, recently launched BlueThunder -- an integration of Ericsson's Bluetooth protocol stack and Wind River's VxWorks software. It promises to make it easier for original equipment manufacturers (OEMs) to create Bluetooth-enabled products.

Back to the stats: 200 million PCs, nearly 80% of handsets, and 1 billion devices. If your favorite tech stock does not have a Bluetooth strategy, punt.

A follow up to part one: A company highlighted in the first part of this three-part series, GN Netcom, launched the GN 9000 Bluetooth headset at the PCIA GlobalXchange trade show in September. GN Netcom is a wholly owned subsidiary of GN Great Nordic, the Danish telecom and data communications company. GN Netcom also recently announced the acquisition of Hello Direct (Nasdaq: HELO), a leading business-to-business supplier of headsets for end users in small office/home office environments. On a related note, Plantronics (NYSE: PLT) terminated its contract to supply headsets to Hello Direct due to the impending acquisition.

Tune in next week for a look at voice recognition software. Is it time to throw out that keyboard?