In the time that we've remade the Rule Maker criteria, I've invited readers to give their views on industries or companies of interest to them. Oliver Thylmann, aka "BizKiffer" signed on to give his view of the wireless Internet landscape from his native Europe -- a wireless market significantly more advanced than that of the U.S. I hope you enjoy it! Oh, and if you have any ideas, please send them my way! -- Bill Mann
COLOGNE, GERMANY -- If you listen to some pundits today, you will hear something that would have seemed impossible two years ago: "Wireless is dead." Others are saying, more plausibly, that we are just undergoing a major shift from voice to data, that the market is extremely uncertain as a result. While I doubt that past predictions that we will all be sending gigabytes of video around on wireless networks will come true, I can tell you why I believe we are at a very big shift, even though it is a lot less spectacular than people were anticipating two years ago. This is not a bad thing. In other words, I do not believe at all that the mobile communications industry is in trouble.
There are two drivers for change over the near term: More powerful networks and more powerful devices are coming. And I don't mean in three years. I mean now. These improvements portend a potential rebound among the leading companies in the sector. Let's break these trends down a little.
1. More powerful networks coming of age
While commercial high-speed networks have been "imminent" for several years, they are finally coming to a stage where they are actually useful for a full range of commercial applications. Remember when everyone was excited about WAP? How about the hype that i-mode was going to take over the world. It didn't happen partly because our networks were not developed enough to provide commercially acceptable rates of throughput. At last, this base problem is coming to an end.
In Europe, deployment of GPRS (General Packet Radio Service) has been going on for some time. To date, though, poor throughput rates have forced mobile networkers to be charged on a per-minute basis as well as on the amount of data sent. Such pricing issues and usage limitations have conspired to lower the rate of consumer adoption of mobile Internet services. For example, T-Mobile, the mobile communications arm of Deutsche Telekom (NYSE: DT) had special per-minute charges on top of the bandwidth charges for GPRS usage due to the fact that the GPRS buildout wasn't fully completed yet. The company presumably wanted to (and needed to control) how many people used the service as well as how long they stayed online. As throughput rates have improved, T-Mobile and others have been able to quit charging per-minute rates.
With this comes the fulfillment of the "always online" promise for mobile Internet connections, as opposed to the limited reach and scope of previous services. This new freedom enables consumers to do lots of fun stuff without worrying about by-the-minute charges. More importantly, improved networks are transferring much more data than before and more efficiently. All of these things correspond to higher adoption rates by consumers, and, it is expected, higher average revenue per user for the carriers.
In Japan, average revenue per user is already higher than in many other countries. NTT DoCoMo (NYSE: DCM) has already launched a 3G network with J-Phone, owned partially by Vodafone (NYSE: VOD), and will follow closely with a launch scheduled for June 30. While the technological advancement of the Japanese networks is important, just as crucial has been the vast number of customer services available, including e-mail service, ring tones, and screensavers. What is interesting, though, is that J-Phone is having a huge success with integrated cameras and the option to attach pictures taken from the phone to e-mails.
2. Better, more functional (and fun) devices
J-Phone customers have gone wild over the integrated camera feature in their phones. Connect, a German mobile telecom magazine, recently highlighted the experiences of a guy testing a Nokia (NYSE: NOK) 7650 prototype, including his raves about the fun he had sending around pictures of a colleague who had fallen asleep in a meeting. These types of reports, while they may seem more mirthful than useful, belie a certain truth: As soon as people see uses for the mobile Internet that attract them, they will want to get connected as well. Vodafone is already running an MMS service in Germany, which enables just that with the Sony Ericsson T68i -- surprisingly enough, a product dually produced by Sony (NYSE: SNE) and Ericsson (Nasdaq: ERICY) -- with an attached camera.
I recently tested NEC's (Nasdaq: NIPNY) 21i on the German i-mode network and it has a color screen and polyphonic ring tones. Those are also real distinct changes, something people will notice right away. My friends loved the color screen. It was so much easier to read and when I used Google to find an explanation, they were sold on it. When the phone rang (with the Muppets theme song, by the way, in full polyphony), the entire table said that these ring tones were worth paying for. Another wonderful item is that e-mails are delivered right to the phone, which is just superior to an SMS arriving over WAP alerting the user of a new e-mail, which I do with my T-Mobile subscription.
I was also fortunate enough to have a bit of firsthand experience with the O2 XDA. The device, built by HTC, is a Microsoft (Nasdaq: MSFT) PocketPC 2002 PhoneEdition device, wonderfully mixing phone capabilities with those of a personal digital assistant. This is a perfect thing for the corporate market and, though earlier generations of phone/PDA combinations have yet to catch on, just think about the added capability of "always online" Internet connections to the mix.
While Java itself is not as easy to use, downloadable games are going well in Germany and that will become more popular once Java phones are more common. There will be a lot of extra applications that will let people do extra things on their phone. The first application for the Nokia 7650 from a third party was just shown and it's a simple encryption tool that lets you put your passwords and pin codes on your phone in an encrypted manner. It's simple, but many could find it to be one of the things they need to let go of their PDA, at least part time.
Many phones now have GPRS capabilities and the price points for the low-end GPRS phones are dropping, which will drive adoption rates. Certainly, users need to gain experience, and the earlier overhyping may not help. I have friends who have flatly stated that they would not use the wireless Internet, but then reflected on their SMS usage and said that two years ago they wouldn't have thought about using it, either. Now they think it's the best invention since the telephone.
It takes time for these things to be adopted, but if you look at the integrated picture, there are some rather simple but effective changes coming right around the corner that will push the mobile technologies sector out of its growing pains.
The only thing we will still need to learn now is probably best said by Ricardo Semler, in his book Maverick:
"As I tell our people constantly: We've all learned how to answer email on Sundays, but none of us has learned to go to the movies on Monday afternoon. Until we learn that, we are email slaves harnessed to the wicked ways of the Profit and Loss Master."
The future devices might actually help there.
[You can find "BizKiffer" on our Handheld Computing discussion board. Only at Fool.com.]
Oliver Thylmann is a member of The Motley Fool community. At time of publishing he owned shares in Vodafone and Nokia. Oliver welcomes comments on this article at firstname.lastname@example.org, or visit his website.