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It's the sort of supercool tech toy even Batman would envy -- the world's first streaming-video cell phone. Korean manufacturer Samsung hopes the palm-sized wonder will propel it to a commanding lead over rivals like Nokia, Toshiba, and Motorola, which are anywhere up to six months away from releasing their own versions of the futuristic gizmo.
Imagine the possibilities of a device that, not so long ago, existed only in the imaginations of science-fiction writers. If you attach a camera to the video-phone, you can point it at the Statue of Liberty and beam pictures to relatives anywhere in the world. Need advice about what to buy at the supermarket? Well, just scan the produce counter and ask your spouse at home which tomatoes look best.
With the capability to stream video at data-transfer rates of 144 kilobits per second -- more than twice as fast as most dial-up modems -- Samsung says its video-phone has the horses to produce respectable video, even with the creaky capabilities of current cell-phone networks. A recent Samsung demonstration of the phone, which was unveiled in late October, lent credence to the claim. Although it did miss some frames, it seemed to work just fine. Even Samsung, however, admits that performance may vary since it is dependent on the equipment, and the traffic levels, in a carrier's network.
IS SMALL BEAUTIFUL? By 2003, spending on cellular services is expected to total $36.9 billion, according to 2000 Multimedia Telecommunications Market Review and Forecast, from the MultiMedia Telecommunications & Telecommunications Industry Assn. But right now, the video portion of that revenue pie is exactly zero.
So there's a huge potential market for video phones. Right? Well, for the moment, make the answer to that question a definite maybe.
Given the glacial pace at which cell-phone users have taken to surfing the Web, some analysts caution that the omens might not be too auspicious for video-phones -- at least not in the short term. How many customers, they ask, will be prepared to shell out big bucks to view, say, a soap opera or other content lifted from the Web and displayed on a tiny phone screen?
The brains and muscle powering Samsung's video-phone come from Israeli startup GEO Interactive Media, whose software will be inside Nokia's rival model when it's released, probably around the middle of 2001. Sasson Darwish, president of GEO's U.S. operations, isn't worried about leaping into the marketplace ahead of rivals, who might well use those vital extra months to develop more advanced models. According to Samsung and GEO execs, upgrades will be available while other manufacturers are still scrambling to roll out their first video-phones. "The business models are being built now," says Dawish.
POCKET BROADCASTER. Market research has indicated that the public is interested in video-phones. During NTT DoCoMo's recent trials in Japan, potential customers delighted in downloading cartoons from the Web. And tests conducted in June by Sprint and GEO competitor PacketVideo also demonstrated that "consumers love the experience, even with narrowband," according to James Carol, PacketVideo's CEO and co-founder. "This market is developing -- and it's huge," Carol enthuses. San Diego-based PacketVideo and Samsung have discussed possible collaborations, he says.
Regardless of how market demand evolves, the Samsung video-phone is definitely a cool piece of work. Smaller than the palm of a typical adult hand, the flip phone comes equipped to receive both Internet videos and standard e-mail. With the camera attached to the video-phone, users can send videos to family and friends, colleagues or customers. Samsung officials say the phone could even be used for surveillance in conjunction with Web cams or other monitoring devices.
The gadget, which uses GEO's special video chip, streams video to and from GEO's servers. Samsung is confident it can sell a million units next year in its Korean home market alone, a projection the company regards as a sure indication that it has a major worldwide hit on its hands.
PHONE-FREAK APPEAL. Samsung hasn't announced pricing yet, but the big potential problem is that video-phones will cost way more than regular cell phones, says GartnerGroup senior analyst Sujata Ramnarayan. "I believe the consumer is still price-sensitive," he says. That means Samsung will need to appeal to the sort of high-end phone freaks who put a premium on cool.
But that crowd also values function -- and the existing second-generation
(2G) wireless systems "can't support video," says Peter Friedland, senior analyst with W.R. Hambrecht & Co. Third-generation (3G) networks that will be able to handle the high-bandwidth transfers necessary for clean video viewing are not due to come into use for months in Europe and Asia.
In the U.S., where Washington has been slow to stage spectrum auctions, 3G might not arrive for two years or more. Subpar video over current networks could cause customers to hang up on Samsung video-phones. "The video is really, really lousy. People give up after a few times," says Oded Peretz, CEO of Israeli wireless-video startup Celvibe Ltd. Peretz says video jammed over current networks remains so suspect that he doesn't expect to start selling his company's streaming-video applications until 3G networks are in place. Nokia, Toshiba, and Compaq, likewise, are waiting for 3G to get established outside the U.S. before mounting a big video-phone push.
TRAILBLAZER'S REWARD. All of these barriers might translate into weak sales for Samsung and other manufacturers. "It's a hot product, but I don't think it's going to have the biggest sales," says Strategis Group analyst Sylvia Panayi.
Should Samsung's early foray pay off, the company might build a strong video-phone reputation and healthy future sales in what may indeed evolve into a lucrative market. Samsung's reward for trailblazing could be the lion's share of such a market. But for now, this much of the picture remains clear: It's a big risk.
By Olga Kharif in New York Edited by Alex Salkever
Copyright 2000, by The McGraw-Hill Companies Inc. All rights reserved.
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