WIRELESS WORRIES
As 3G wireless technology approaches, Scott Leibs wonders why there isn't more excitement.
By Scott Leibs and Carla Rapoport

Will this be the technological Summer of Love? Telecom companies around Asia certainly hope so. Across Korea and Japan, companies are rolling out major marketing campaigns designed to educate and excite consumers and business people about the possibilities of 3G technology.

This "third generation" of wireless transmission can now reach speeds of 144 kbps, which is ten times faster than today's typical second-generation digital phone service. It's expected to eventually reach speeds of 3 mbps - more than twice as fast as most desktop Internet connections. These higher speeds are expected to pave the way for entirely new uses for cell phones, personal digital assistants (PDAs), pocket computers and other devices.

The lavish marketing budgets aside, however, it remains an open question as to whether the industry can rally excitement for a technology that may bring very little extra to the business of mobile communication. Most industry observers had predicted that the third generation of wireless technology would have been a fait accompli by now. In fact, NTT DoCoMo's heralded rollout last year fell flat, with just 89,000 users jumping on board, against a forecast of 150,000 by the end of March. Other Japanese and Korean telecom companies are only just launching their 3G services this spring and summer (see "Staying Alive," this issue). Hong Kong is now delaying until next year with the rest of Asia expected at the end of next year.

Some analysts believe that's a shame. Wireless transmissions that are fast enough to beam large volumes of data quickly to anywhere could, they say, transform many aspects of business life. According to Connie Hsu, manager for Asia Pacific of Pyramid Research, the global telecom research consultancy, "the 3G promise of being always on wherever and whenever will enable businesses to develop new revenue streams by creating new services. Companies will be allowed to expand beyond their traditional boundaries and explore new business models. The prospects are exciting."

Wrong Numbers

Maybe, but there are two problems stunting growth at the moment: price and purpose. Current prices for sending data over wireless networks are simply too high to attract much usage. The massive sums paid for spectrum have raised serious questions about the economic viability of many carriers. Despite those pressures, most analysts expect prices to fall sharply as carriers attempt to woo a mass audience. That is, if they can come up with reasons why consumers and businesses should buy the gadgets. Some early adapters, like US package handlers FedEx and United Parcel Service, for example, are actually ahead of the carriers in their ability to redesign or completely transform business processes around wireless technologies. But they are the exceptions. Most are either dabbling with the technology or waiting for the smoke to clear. Some, like US-based Celanese Chemicals, have adopted a fits-and-starts approach, sensing opportunity but proceeding cautiously.

Celanese began exploring wireless in early 2000, just as it was devising an e-business strategy, but decided to focus on wiring its desktops first. In 2001 it returned to wireless, developing a small pilot project for its sales reps that would allow them to use a PDA to retrieve information from the company's database. But that project required the involvement of several third parties, which was costly, and neither the services provided by telecom carriers nor the devices produced by PDA or portable-computer makers were adequate. So when the economy took a dip in 2001, the project was shelved again.

By last October, however, wireless transmission speeds had improved, service areas had expanded, the devices (in this case, the iPaq from Compaq Computer) had become more functional, and a key software vendor had incorporated wireless capabilities into its product, eliminating the need to buy a middle layer of software from another company. By January of this year, Celanese's North American sales force was toting handheld computers to sales calls, ones that allowed sales reps to access the company's web pages and check on order status, customer account information and more.

"Opening a laptop in front of a client is intimidating," says Bill Schmitt, director of business enablement for chemicals at Celanese. "But a handheld computer allows them to prepare for calls and answer customer questions very conveniently - plus, it's instant-on." As in most commodity businesses, Celanese relies on "dynamic pricing" that is unique to each customer and is determined by market conditions. The ability to reach into the transactional database for a real-time snapshot of a current customer relationship is extremely useful.

And because Celanese's early efforts are built around access to data, Schmitt is interested in what the higher transmission speeds will make possible. Despite this, he's not champing at the bit. "We're a global company interested in expanding in Europe and elsewhere," says Schmitt. "As such, we'd like to get away from these fragmented wireless technologies and see a standard emerge so that your devices work everywhere," he says.

Design Gaps

Schmitt would also like to see better devices. "Sometimes you still need a laptop," he says, "because it's still the only way to enter and view large amounts of data." Manufacturers of handheld devices are trying to make them suitable for data-intensive chores, but Schmitt says so far every design forces significant compromise. "We need a better form factor (hardware)," agrees Steve Jarvis, staff vice-president for e-commerce at Alaska Airlines.

The US company offers a number of services to customers who use wireless devices, and would like to do more, but Jarvis says that current PDAs and similar devices create limitations because they are optimized either for voice or data but not both. "In our case, we need convergence," says Jarvis. "We want customers to be able to make a voice request for information, but receive it as data so they can scroll through it or print it. No one wants to listen to flight information and have to write it down or remember it," he says. Jarvis says he's almost indifferent to the advent of 3G, because it won't automatically solve the catch-22 that is ensnaring high-speed wireless services. "If it triggers mass usage, then I'm all for it," he says. "But you need compelling content to drive mass usage, and you need mass usage to justify the creation of compelling content, so we have a stalemate."

Scott Leibs is a senior editor at CFO magazine in the US. Additional reporting by Carla Rapoport in Hong Kong.