Telecommunications: Wireless War Zone?

Next-generation wireless is finally underway in the United States, with the major players having launched their first stab at high-bandwidth communication. The software vendors are striking deals with carriers. The spiffy devices are on the shelves. And the participants are putting on a happy grin and hoping no one notices the sweat running down their face?or the knife they’re holding behind their back.

As long as everyone’s unsure whether the U.S. market can even profitably support advanced wireless data, no one’s eager to start a war on another front. But if the wireless data space starts to take off, things could change in a hurry.

Software vendors have watched the commodity state of the wired Internet result in booming sales for their Net-enabled products. Those vendors need merely create software for one end of the Internet pipe or the other (or both); the network itself is irrelevant. For software vendors this is a serious boon, as low connection costs rapidly expanded the number of users?even while it meant watching ISPs lowball each other out of existence.

The wireless carriers are well aware of what happened to their wired cousins, and they’re determined history won’t repeat. So the carriers are all eager to “add value” wherever possible, keeping themselves in the chain by providing integration; additional features (such as GPS location-based services and voice recognition systems); development tools (like Sun’s Java, Qualcomm’s Brew and others); and even offering downloadable games, screen savers and ring tones. And the software vendors aren’t complaining too loudly?yet. “We see that the carrier is an important piece of the value chain,” says Albert Chu, vice president of business development for mobile device software maker PalmSource. Chu notes that if the carriers want to control 10 apps, or even 50 apps, it will be up to his company to make its money by offering many other options?particularly more vertically oriented applications.

Given current minimal resistance, carrier control will probably be the norm for a while?especially when you consider that other wireless differentiators, such as support, network range and performance, didn’t exist on the wired side.

Joseph Owen, CTO at mobile infrastructure management vendor XcelleNet, thinks, however, that it can’t go on like this forever. “History would seem to indicate that [having two Internets] is futile,” he says, describing today’s scenario of the Internet and the wireless Internet. He says clashes, as enterprise requirements meet the consumer mentality and as PC software libertarianism runs up against the more restrictive cellular mind-set, are inevitable. The opposing views will need to be reconciled somehow, he says. “The wild card is, What will the enterprises put up with?”

Enterprises might not have as much bargaining leverage in the future as they do now, of course. Michael Doherty, senior wireless analyst at Ovum in Wakefield, Mass., says that an imminent wireless consolidation could help the carriers’ situation by reducing the number of options for corporate buyers.

That may be true, but the price-cutting and “pipe-only” competition has already begun. Verizon dropped prices on some of its wireless hardware in the hopes of luring customers. Several carriers offer “all you can eat” options for data-only services that in effect give laptop users access similar to what they’d have at home with a DSL or dial-up line?with minimal interference from the carrier. The momentum has started, and as the wired market shows, the hill can get steep?fast.

There may be a long, shallow slope before the drop-off, however, as the players work to build a market first. “We’re trying to create the pie,” says Jason Guesman, director of business marketing of Sprint’s PCS division. “We’ll duke it out later.”