January 29, 2001 Wireless Is Getting a Cool Reception in U.S. By SIMON ROMERO ------------------------------------------------------------------------------- - Related Articles ?Business Home ?Technology Home Audio ?AP Business Report, Updated Twice Each Hour GET QUOTES Look Up Symbol Enter Multiple Symbols Portfolio | Stock Markets | Mutual Funds | Bonds | Currencies | Bank Rates | Industries ------------------------------------------------------------------------------- - t is well documented that in the wireless revolution, the United States has fallen behind Europe and parts of Asia. But while the United States is unaccustomed to being a technology laggard, a closer look at the new uses for wireless phones overseas indicates that Americans may not be missing much. In South Korea, women can use their cell phones to calculate their ovulation cycles. In Britain, the user of a mobile phone can book restaurant reservations by laboriously linking to a Web site by typing on the phone's keypad (even though it would probably be faster to call the restaurant). And in Finland, arguably the most cell-phone-obsessed country in the world, consumers can use phones for such edge-of-the-envelope experiences as buying a soft drink from a vending machine. In the United States, instead of bemoaning the lack of such opportunities, a growing number of industry executives and analysts contend that consumers and communications companies can only benefit by letting someone else be the guinea pigs. So far, in Europe and Asia, there has been little evidence that many of the wireless services can actually make money for the companies that provide them, portending an industry shakeout comparable to America's dot-com meltdown of the last year. As European companies in particular begin reconsidering plans to develop the wireless Internet, American companies are in a position to sit and watch, allowing them to possibly avoid costly investments in network capabilities that customers may not want. And consumers may be able to sidestep buying unnecessary devices or signing contracts for services that may be short-lived. "You might say we acted like idiots in making such ambitious plans for the wireless Internet," Mart? Varsavsky, chairman of Jazztel, a telecommunications company with operations in Spain and Portugal, said in a phone interview. "Americans have the advantage of watching us struggle a bit while they watch us put the pieces of the wireless puzzle together." Overseas, there are signs of concern among European carriers, which spent nearly $100 billion last year in Germany, Britain and other countries to acquire radio spectrum space for the development of wireless networks capable of handling large amounts of Internet data. Earlier this month, Nokia, the Finnish maker of cell phones that is the market leader, warned of a slowdown in global demand for wireless handsets. Despite the problems overseas, many companies in the United States are exploring uses for wireless Internet access. Carriers like Sprint PCS offer a limited menu of watered- down Web services, like text-only information from Yahoo and CNN. Small companies like PacketVideo in San Diego are hoping that live video delivered to wireless devices can evolve into a popular service. And companies, like AvantGo of San Mateo, Calif., and Handspring of Mountain View, Calif., are developing services and devices for the mobile Internet that focus on hand-held computers instead of cell phones. "I resist the notion that we're falling behind in the U.S.," said Donald J. Listwin, chief executive of Openwave Systems, a company in Redwood City, Calif., that develops software for wireless companies in Japan, Europe and the United States. "Our entrepreneurial tendencies ensure that we will occupy the leading position in the wireless space." But wireless executives in the United States know that Americans are less likely to settle for watered- downed wireless Internet service because they are more accustomed to surfing the Web with PC's connected by phone lines or cables. That may explain why many industry officials in the United States seem comfortable watching the wireless Internet story unfold from afar. "Accessing the Internet on anything without a decent-sized monitor is like reading a book on Post-it notes," said Dori Merifield, a Web page designer in Santa Monica, Calif. "I'm not saying that wireless things aren't great; I'm addicted to my cell phone. But I couldn't imagine a visually appealing way to surf the Web on screens that are so small." This is not to say that the American communications industry is shying away from wireless Internet. On Friday, the Federal Communications Commission completed a six- week auction of licenses for newly allocated wireless radio-frequency spectrum in the United States, raising $16.86 billion. More than half of that amount was spent by Verizon Wireless, including more than $4 billion the company paid for two licenses for metropolitan New York. Verizon's price of more than $113 a person in the New York market was almost three times the average that European concerns spent last year in auctions in Germany and Britain. Verizon indicated that the price was justified by the potential of the New York market. But in Europe, with its concerns about the huge investment to build wireless networks and the huge debts facing many telecommunications companies, investors have grown disenchanted with wireless plans. Orange, Europe's second-largest wireless company, has substantially reduced the price for its initial stock offering set for Feb. 12, some 60 percent below what analysts had been expecting when the offering was first proposed last year. And the bonds of some large European and Asian communications companies have also become riskier investments. In the United States, by contrast, there has been a rally in the stocks of large wireless carriers, seeming vindication of the companies' efforts to sign up more customers for voice- dominated services, instead of making extravagant plans for next-generation networks. Since Jan. 1, shares in Sprint PCS have climbed nearly 42 percent, while AT&T Wireless stock is up more than 39 percent, Nextel Communications has risen about 28 percent and VoiceStream Wireless is up 19 percent. But consumers in the United States, which has the world's highest household penetration of phone lines, have not embraced the wireless phone in the way users in many other industrial nations have. Only 32 percent of America's population has cell phone service, according to figures from the International Telecommunication Union, compared with 45 percent in Japan, 46 percent in Britain, 54 percent in Italy, 59 percent in Sweden and 65 percent in Finland. One reason America has fallen behind in wireless communications technology is that carriers in the United States have not established a uniform national technology standard, as they have in Europe, where regulators and companies agreed to adopt a single format: the global system for mobile communications, or G.S.M. In America, where companies have been free to choose from a variety of formats, Verizon Wireless and Sprint PCS use a standard called code division multiple access, or C.D.M.A., while AT&T Wireless mainly employs time division multiple access, or T.D.M.A. Other companies, like Cingular Wireless, a venture between SBC Communications and BellSouth, use several different standards. The incompatibilities can make it hard for customers of one company to use their cell phones in other parts of the United States where the local network may not use the same technology as their home carrier. Even within the same market, if customers wants to change carriers, they must often acquire a new phone that operates under a different technical standard. This patchwork approach has meant that carriers in the United States do not enjoy the same economies of scale when purchasing network equipment or handsets as their counterparts do in Europe. Reed E. Hundt, a former chairman of the Federal Communications Commission, said that the dominance of the wired-phone industry in this country slowed the early growth of the nation's cellular industry. "The wireline industry put its thumbs on the scales of decision at several key stages," Mr. Hundt said. He cited the pressure by large local and long-distance companies in the 1980's to limit the growth of wireless carriers by seeking to ensure that cell-phone subscribers pay for the cost of incoming calls. This practice continues today, but is not common outside the United States. Mr. Hundt also noted that federal officials in the early 1980's thought demand for mobile phones would be weak, so they allowed duopolies to operate in large cities instead of having wider competition, which could have encouraged lower prices. "I think we're finally overcoming our early missteps," he said, "and moving toward having a truly competitive wireless industry.'` Large European and Japanese companies, seeking to expand beyond their domestic markets, are, meanwhile, playing a larger role in meeting the demand for wireless service in the United States. Vodafone P.L.C. of Britain acquired the American carrier AirTouch Communications in 1999 in a deal that formed the world's largest wireless communications company. Then Vodafone formed a venture with Bell Atlantic that eventually became Verizon Wireless, now the nation's largest wireless company. Following in Vodafone's footsteps is Deutsche Telekom of Germany, which is seeking regulatory approval to acquire the American carriers VoiceStream Communications, based in Bellevue, Wash., and Powertel, of West Point, Ga. VoiceStream and Powertel operate on G.S.M., the same technical format used by Deutsche Telekom and other European carriers. And in November, NTT DoCoMo, Japan's largest wireless company, agreed to acquire a minority stake in AT&T Wireless for almost $10 billion. The Japanese company hopes the deal will provide a way to sell its mobile Internet services in the United States. But even more so, the entrance of DoCoMo into the American market highlights how Japan has outpaced the United States in the development of the mobile Internet. Since DoCoMo introduced a wireless Internet service known as i- mode in February 1999, the company has signed more than 13 million users who pay, on average, more than $20 a month to link to the Web on cell phones. It is the world's most popular mobile Internet service. "The Americans are understandably dying to mimic the success of DoCoMo in Japan," said Seiji Sanda, chief executive of Japan Communications Inc., a reseller of cell phone service in Tokyo. Of course, some analysts have pointed out that most of DoCoMo's customers used the Internet for the first time via cell phones, instead of PC's, making their expectations of the Web different from those of Americans. About 55 percent of the population in the United States has conventional desktop Internet access, compared with about 25 percent in Japan. Another factor that may inhibit the spread of the wireless Internet in the United States, or that may at least lead it to evolve differently, is the fact that Americans spend less time on public transportation than Japanese and Europeans, meaning there is less of a market for services that help pass time. The question is what sort of wireless capabilities, besides standard voice calls, that Americans might actually want. In Europe, efforts to translate Internet content into a form that can be used on the tiny screens of cell phones have had a lackluster consumer response. More common are relatively simple services that allow users to send and receive short text messages on cell phones. And yet, some of the services have real utility. In Switzerland, air travelers can avoid standing in line for boarding passes by receiving a cell- phone text message from the airline with a code they can use to board a flight. In Germany, car rental companies allow customers to get cars without ever visiting a counter by interacting with the companies' Web sites via cell phones. Companies in America might decide to to focus on more utilitarian wireless services, rather than a more glamorous array of services that would be costly to provide and expensive for consumers to obtain. That is why wait-and-see approach to wireless may not be such a bad strategy, said Aaron Dobrinsky, chief executive of GoAmerica Communications, a company in Hackensack, N.J., that designs mobile Internet systems for wireless carriers and other kinds of companies. "We have the benefit," Mr. Dobrinsky said, "of looking at the battlefield from afar when forming our own strategies."