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Wireless


It was May 26, and 28-year-old Boston native Greg Robinson was listening to his beloved Red Sox battle their way back from a 2-1 deficit against the Oakland Athletics. But he wasn't using a conventional radio. He was listening to the game with a headset attached to a new multimedia phone from wireless company Sprint PCS (PCS). The next morning, he used the same pocket-size phone, made by Samsung (No. 11 on the Info Tech 100), to call up and watch video highlights of the game and then a news clip from cable-TV channel CNBC. Robinson pays $10 a month for unlimited video viewing and another $10 for radio. Now he can enjoy the Sox anywhere he wants, without lugging around a radio or laptop. "I'm surprised at how well it works," he says.

Phone Power

A new wave of innovative services is about to turn the cell-phone business upside down. During the past few years, the cell phone has become standard issue for many people. More than 160 million Americans, or 55% of the population, have one. That huge market has convinced media companies and software developers that it's time to get serious about developing new goodies for mobile phones.

In one early sign of what's to come, ABC (DIS) is offering video news clips for Sprint cell-phone subscribers. National Public Radio is delivering segments of Morning Edition and other shows to AT&T Wireless (AWE) customers. Yahoo! Inc. (YHOO) is working on ways to make as many as 100 channels of Internet radio service available to cell-phone users. And within months, Walt Disney Co. (DIS) plans to offer short, animated videos featuring Mickey and the gang.

"We're about to undergo a revolution in wireless," says Scott A. Ellison, head of wireless at researcher IDC (IDC). The new services being developed promise to be more than just fun and games. Newfangled capabilities have the potential to change industries and boost productivity. The cell phone will emerge as an alternative to carrying cash or credit cards because people will be able to make payments from their cell phone to scanners on cash registers and vending machines.

Tech developers are buzzing about grocery giant Kroger Co.'s (KR) plan to unveil a service later this year that lets shoppers instantly purchase their Wheaties from a store shelf by waving a cell phone equipped with an infrared port over the side of the box. Instead of going through a checkout line with a cashier, the customer could simply pass the phone over another scanner near the store's exit, confirming the goods have been paid for. And by next year, when faster networks are in place, cell-phone companies will offer four-way video calls on phones, making it easier for people to work while they're on the go.

Delivering these services will be a thorny task. Cell-phone companies don't have a great record when it comes to providing basic voice service, let alone rolling out new technology. Dropped calls and poor coverage are still an issue in many markets. And due to exorbitant costs, the rollout of high-speed 3G networks necessary to carry all this new content is taking a lot longer than people expected. T-Mobile's Nick Sears, vice-president of consumer product marketing, says the industry hasn't figured out how to distribute anything except short video highlights at a price people are willing to pay. "We have a long way to go before we get to nirvana. This won't happen overnight," says Craig J. Mathias, founder of wireless researcher Farpoint Group.

The obstacles are hardly insurmountable, though. The success of wireless TV and music in Korea shows that people are willing to spend money on advanced wireless services when they're delivered over phones with lots of memory and large, bright screens. And the technology that has made Korean wireless a success is coming to the U.S. By the end of 2005, Verizon Wireless (VZ) plans to cover most of the U.S. with its new fast network that approaches the speed of broadband connections at home. Rivals plan similar offerings.

Wireless services are starting to take off in the U.S. for good reason. Cell phones, cheaper and more powerful than just a few years ago, are developing at warp speed, just the way PCs have been for years. Already, cell phones have screens that display 65,000 colors, up from 256 just a few years ago. Thanks to speedier networks, faster computer chips, and better compression technology, video will flow over wireless networks at 20 frames a second by the end of this year, says Richard Siber, head of consultant Accenture's wireless practice. That's near the quality of standard TV's 30 frames a second.

Beyond Voice

The renaissance in cell-phone services also reflects financial necessity. After years of torrid revenue growth, a withering price war has offset the financial benefits of subscriber growth. Cell-phone companies pulled in $96 billion from voice services in 2003, up 3.2% from 2002, according to researcher In-Stat MDR. And the market is expected to grow just 1%, to $97 billion, this year. Data is a different story. The same research shows that revenue from wireless data services is expected to jump 50% this year, to $4.2 billion.

More powerful video capabilities are going to open up a new world of communications. People will shoot homemade movies in situations where they never would have bothered to lug a camcorder. If someone isn't sure whether their husband or wife should bother to take a look at the house the realtor just showed them, they can send a video of the property. Such changes are coming fast. Motorola Inc. (MOT) (No. 29 on the IT 100) will unveil a phone in the U.S. this fall that will let users record and store up to three minutes of video, blowing past the current limit of about 15 seconds.

The cell phone will bring big changes to the world of music, too. Say users are out at a restaurant or bar and hear an unfamiliar song that catches their attention. Soon, they'll be able to use their mobile phone to record a brief sample and send it to a wireless service to identify the artist and song. BusinessWeek has learned that AT&T Wireless and Cingular Wireless are in talks with New York software startup MusiKube to launch the service this summer.

Customer service also may get a boost. The online travel agency Orbitz automatically shoots text messages or voice mails to customers' cell phones with up-to-date information on their flights. If travelers want a report on the weather at their destination, Orbitz will zap that, too. "It takes the stress out of the situation," says Mark Wiktor, an asset management and investment consultant in Chicago who connects to Orbitz via AT&T Wireless.

The most radical change of all may be the rise of phones that can be tracked by the network. Satellite systems can pinpoint the location of today's phones to within a few hundred yards, opening up the opportunity for subscribers to get new kinds of services based on where they are. If a user gets lost on the way to a movie theater, the system will send directions to the phone and help order tickets. AT&T Wireless already offers such services to subscribers for $3 to $20 a month. Patricia H. Char, a Seattle attorney, uses the AT&T Wireless service to track her two teenage boys when they go rafting in the mountains -- or out with friends "until the wee hours," she says. "It's great."

Part phone, part computer, part TV, and part radio, the newest cell phones blur the divisions of technology. "It is truly the one device that people will never leave home without," says Jason Few, vice-president of marketing for Motorola's North American cell-phone unit. With the ability to watch video, listen to radio broadcasts, and buy soft drinks from their cell phone, people might never go back home.

By Roger O. Crockett in Chicago


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