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'OPERATOR, GET ME CYBERSPACE'

Phones that cruise the Net? They're coming

Computer-industry mavens struggling with the question of whether consumers would rather surf cyberspace by means of a personal computer or a Net cruiser might take time out to consider a far more ubiquitous information appliance that can't be beat for ease of use. It's the lowly telephone, found in some 500 million homes around the globe.

Not surprisingly, Nokia, Motorola, Philips Electronics, and other phonemakers are well aware of the device's potential as an information appliance. While the Network Computer is still little more than a twinkle in the eye of Oracle Chairman Lawrence J. Ellison, phonemakers are offering high-tech models gussied up with screens, modems, even credit-card readers. In Europe, cellular phones that double as roving Internet terminals will be in stores this summer.

It's the dawn of the ``smart phone,'' a sophisticated electronic device that can deliver E-mail, carry out home-shopping and banking transactions, summon information from the recesses of cyberspace, tell you who's calling before you answer, take messages, and, of course, carry plain old voice calls. All for about $250 to $300, vs. a minimum of $500 for Oracle Corp.'s Net Cruiser or $1,500 for a PC.

Best of all, no special training is required--smart phones look and work like regular phones. If you've figured out how to get a timetable of train departures with a push-button pad, you can figure out a smart phone. ``Smart phones are inevitable,'' says Phil Winterbottom, a computer scientist at Bell Laboratories, now a part of Lucent Technologies, the soon-to-be independent AT&T equipment subsidiary. ``The volumes are huge, so they can be manufactured cheaply, and you don't need to learn any new skills.''

Smart phones aren't the answer to everybody's Internet-cruising prayers, though. They aren't much more intelligent than a regular phone--they can't come anywhere near matching the capabilities of PCs or lesser types of computers when it comes to storing and manipulating data or surfing the Internet, for example. But the industry figures that for the next five years or so, most consumers will be more than happy with the capabilities and ease of use of a smart phone.

That assumption is already being put to the test in Garden City, N.Y. Philips gave away its Psuperscript100 screen phones to some 7,000 of the town's 9,000 households in early April. The Psuperscript100, introduced commercially in June, is a $350 phone with a built-in credit-card reader that provides access to home shopping and banking. It can also be used to tap into electronic phone directories, stock quotes, sports scores, and weather reports.

Philips figures the one application people will feel they can't live without, however, is a service carrying local information--the Little League schedule, what the supermarket has on special, the agenda for the next village board meeting. ``We discovered that local information is this hole in the middle of cyberspace,'' says Gerrit Schipper, president of Philips' Home Services unit. Philips worked with a Garden City newspaper to develop an easy-to-use online service. Philips plans to eventually have similar local offerings around the country and figures it can earn more from the fees it charges local businesses that sign up for the service than from sales of the smart phone.

Screen phones such as the Psuperscript100 may quickly be eclipsed, however, by an even smarter phone: a feature-crammed digital wireless handset such as Nokia Corp.'s 9000 Communicator. Slated to hit the European market in August, it's a palm-size cellular phone that flips open to become an organizer with a 6.8-inch by 2.5-inch screen and a tiny, but complete, keyboard. It can send and receive faxes and E-mail, surf the Internet, and tap into corporate and public databases. Problem is, it costs $2,000.

Such pricing may not last, but the wireless wave that the 9000 is riding will. As digital cellular networks spread around the world, wireless phoning will become both cheaper and more widespread. So will wireless cybercruising--using smart cellular phones or handheld personal digital assistants (PDAs). ``People love personal devices that go with them anywhere,'' says Greg E. Blonder, AT&T's director of customer expectations research. ``I am a big believer that everyone will eventually carry a wireless device.''

``VERY EMBRYONIC.'' Wireless smart phones are coming out in Europe first for good reason: An all-digital cellular network is already in place there. Most U.S. cellular networks are still analog and therefore inadequate for data calls. In Europe, specialized information services are cropping up that take advantage of digital wireless networks and the new smart phones. In the Netherlands, a cellular messaging service downloads data to drivers' mobile phones, warning them about the location of highway-patrol cars. One company in Finland will download headlines on topics chosen by its customers every morning to their cellular screen phones.

U.S. cellular networks will be ready for the smart phones by the end of next year. Then, most existing systems will have been upgraded to digital, and new personal communications systems (PCS) digital networks will be spreading across the country. When the digital nets are in place, Americans won't have to scrounge for the smart phones to use with them. Last September, Air Communications began selling a digital cellular smart phone that can send and receive E-mail and access Web pages. Air Communications is selling the device to cellular operators for $750. Cirrus Logic's Pacific Communications Sciences subsidiary, Mitsubishi Electric, and Motorola are planning similar phones for later this year.

Nobody is predicting an overnight mass market for such phones. Yankee Group, for example, estimates that only 4% of all cellular phones sold by 2000 will have true Net-surfing capabilities. ``This is still a very embryonic industry,'' warns James Caile, vice-president for marketing at Motorola's Cellular Subscriber Group. So Motorola won't be pushing its gadgets solely as I-way cruisers. ``It's our goal to make it first and foremost a good phone,'' he says.

Lower prices and the right services will be needed before these gadgets find a place in the information-appliance race. Northern Telecom Ltd. hopes to accomplish both by incorporating Sun Microsystems Inc.'s popular Java software into both wired and wireless smart phones that it says will sell for around $200 when they hit the market next year. Nortel is counting on Java-based services to help sell the phones. One possibility: a service that lets a real estate agent phone into a Web site to fetch the latest property listings while driving around with a client.

Wired smart phones may have a harder time finding a permanent niche. A phone--no matter how smart--may not be up to the competition from other easy-to-use consumer-electronic gadgets such as Web-surfing TVs that will start flooding into homes. ``I think you have more applications within your home than can be satisfied with a smart phone,'' says John Gerdelman, president of MCI Communications Corp.'s long-distance network. ``My personal feeling is that customers will buy them as a novelty, but they'll be quickly outstripped.''

Still, consumers who aren't convinced that it's worth their while to cruise the Net may provide a respectable market for smart phones. Both British Telecommunications PLC and AT&T have developed lab models of wristwatch phones with small screens that use speech recognition to activate dialing. Neither prototype is slated for commercial production, but either could be the ideal information appliance for consumers who just want a digital slave--to respond to their master's voices and dial numbers or do some electronic chores. Like good electric appliances, they might actually simplify life.

By Gail Edmondson in Paris and Catherine Arnst in New York, with bureau reports


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Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.
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