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Bay Tech Beat:
With convergence, business as usual is gone

by peggy albright
January 21, 2002

Many members of the wireless industry, and its observers, are saying the industry will enter an era of technology convergence this year, and they're saying this in a manner that is notable for fundamental and important reasons. The talk is not hype or fantasy. It is grounded in the reality of near-term commercial deployment of next-generation networks, the competitive advantages wireless will get from data speeds those networks will provide and the associated availability of devices that combine wireless voice, computing and data communications functions.

When that convergence of communications capabilities occurs, the wireless industry's current business paradigm will change. Voice won't lose its place as the primary killer application, but the voice-centric business model will become a thing of the past as carriers become content providers and seek to recoup diminishing voice revenue with income from data services. Converged devices will grab attention, but these gadgets will come in as many configurations and form factors as there are market segments. Those market segments, by the way, have yet to establish themselves.

In other words, the business model is changing in real time as technology convergence occurs. Suffice it to say, it makes for a learn-as-you-go commercial environment.

So what should device manufacturers, content providers and carriers keep in mind as they try to bring their ideas and products to market in this changing marketplace? Following are a just few tips I gleaned from industry veterans appearing in various venues at the 2002 International Consumer Electronics Show in Las Vegas earlier this month.

Tip No.1: Work with carriers to make sure your products and services reflect their business objectives and meet the needs of their customers. You might want to avoid doing anything else, actually. "We, as a manufacturer, can only make those products that can be viable for carriers and will be supported by carriers," says Philip Christopher, president and CEO of Audiovox Communications Corp.

Tip No. 2: Figure out how to integrate technologies to enhance products that come to market, so that products keep pace with customers' changing uses for their devices. Devising methods of incorporating better batteries into product designs so that customers can get the most out of their devices is just one example of how this could be done, says Frank Boyer, vice president of procurement at Cingular Wireless. "I think there's a real opportunity for traditional consumer electronics manufacturers to work more closely with the wireless community to come up with real solutions," Boyer says.

Tip No. 3: Make sure your converged devices are good, particularly if you want customers in today's cash-strapped society to fork over big bucks for these complicated devices. "In a tight economy, buyers become more discriminating," Boyer warns. Christopher put it this way: "When a person buys that combination product, if that product is not as good as their regular phone, the customer will not be satisfied."

Tip No. 4: Keep a close watch on the inevitable battle for customers that's sure to play out between carriers and content providers. In the past year, many companies have looked to the NTT DoCoMo model of sharing revenue with third-party content providers as a mechanism for driving network usage and generating fees. That business model already has begun seeping into partnership deals. "What we've been asked to do has shifted in that direction," says Dan Sheeran, vice president of media systems marketing at RealNetworks Inc.

But carrier-content provider relationships won't have a one-size-fits-all formula. Just watch Sprint PCS, which plans to have a slew of new content services when it turns on its CDMA2000 1X network this summer. Charles Levine, president and CEO of Sprint PCS, says his company already uses a range of billing and fee methods and it is unlikely to narrow its approach. "I don't think there is a single pattern" for how to do these things, he says.

His comment could, in fact, describe the still-forming technology convergence business environment. There's no real pattern yet for working in this new arena, and until there is, it may be helpful to use all the tips you can get. [WIM]

Peggy Albright is West Coast bureau chief/technology editor at Wireless Week. She can be reached at palbright@cahners.com.