Questioning Authorities

May 1, 2002
© 2002 Intertec Publishing Corporation, a PRIMEDIA Company
By Glenn Bischoff






Faced with troubling questions about the nature of life, death and war,
people traveled from all over the ancient world to Greece to seek guidance
from the oracle at Delphi. Clear, definitive answers were rare and
interpretations were often subject to controversy. But the oracle was always
willing to extend another prophecy -- assuming more gold was offered, of
course. Fast forward a couple millennia, and good advice is still no easier
-- or cheaper -- to come by. Analyst studies, bar charts, consumer
demographics and broker ratings litter the wireless landscape, but when it's
common knowledge that they're commissioned by wireless companies, can they
be trusted? We posed a series of hot-button questions to notables across the
industry in the belief that the collision of so many different viewpoints
and agendas would make for a truly balanced look at all sides of the
arguments. Who's full of wisdom, and who's just full of it? That's for you
to decide.

What are the secrets of wireless data success?
Janice Roberts, general partner, Mayfield, a Silicon Valley venture capital
firm

There are two ways of looking at the world: from the local area network
looking out, and from the wide area looking in. I look at it from the wide
area in.

I introduced a wireless LAN in 1990 while at 3Com using infrared technology.
At the time, everyone was talking about wired replacement. Now it's more
about being an extension of the corporate network.

For a company, the edge of the network used to be the desktop. Then it moved
to the home as telecommuting took off. Now there is no edge because you've
got people using phones all over the place. What people really want is to be
able to move from the LAN to the WAN. How you manage the bandwidth is very
interesting. Mobility has created a blurring of the line between business
and home life.

A few years ago the big market was enterprise wireless. That has stalled as
the PDA market stalled. The PDA market stalled because the economy changed
and enterprise priorities changed. The world has become phone-centric, not
PDA-centric. People are much more into mobility now, which has been a major
thrust for venture capitalists.

Now the big push in the enterprise is 802.11. Mayfield has an 802.11 play in
MobileStar. We were a little early with that. Sky Dayton's timing was a lot
better. Now we're looking at security and management solutions for that
market. We're also looking at technologies in the location-based service
area.

When you're investing on behalf of a company like 3Com, the strategic
rationale is different. If you make money, it's a bonus. When you're at a
VC, there is no filter.

What's interesting now is that innovation and technology differentiation are
much more important. You really have to take a look at whether a company may
make it, and you have to have a timeframe. At 3Com and Palm, I was actually
doing and making things myself. Here, we're investing in companies and
working on boards of directors to advise senior management. CEOs bring us in
more to brainstorm. Although I really like the operating world, what's nice
here is that we're so externally focused.

As investors, we're interested in technologies that can enable new services.
I don't think we'd be interested in a straight service provider play. The
mobile virtual network operator push with a company like Virgin is
interesting because you can look at a lot of different applications that
carriers wouldn't deploy.

We can't ignore the rest of the world. The U.S. is very business-centric,
and that's one of the reasons the applications haven't rolled out. I would
be interested in things that appeal to the nontypical demographic.

There are also some cultural issues. People here are very e-mail-centric. If
you think about the U.K., people there are very tied to newspapers. Every
newspaper has an SMS service, so they're extending their reach. Every young
person in the U.K. "texts" their friends, whereas here they e-mail. Young
people want to communicate in every way without going to the desktop. I
haven't invested in a mobile entertainment play, but they are interesting.

The U.S. infrastructure should have one standard. That would resolve a lot
of issues. Being able to use one device anywhere in the world and having
great coverage would be great. The coverage is so bad here compared to other
parts of the globe -- here in Silicon Valley, it's embarrassing.

And I would probably do away with the auctions. The spectrum auction was
nuts.
-- As told to Vince Vittore

Where are you putting your money?
Michael Rolnick, partner, venture capital firm ComVentures

We like a lot of the 802.11 technology. The really sexy stuff is in the
public access 802.11 market. But our fundamental thesis is that the wireless
infrastructure is not there to provide advanced applications.

Everyone is still waiting for really broad adoption of data. In the last 12
months, we've entered the point where Fortune 100 enterprises are getting
interested, but they're not jumping just yet.

A lot of people have been waiting for this pop to happen, but it's going to
be this slow creep. In four or five years, we're going to be saying, "Where
did all this stuff come from?"

There are a lot of things being done when you move over to the device side
of the market, but from a venture perspective, it's a very hard place to
make money. Things like Palm and Blackberry units have been successful, but
they're not complete solutions. Danger Inc. seems to be the flavor of the
moment, but they have some business case issues. Would I like to have one of
those things? Yes. I'm just trying to figure out if anyone's going to make
money with this thing.

A lot of people also are saying SMS is going to be the killer app, but from
a venture perspective, there is no SMS company out there that allows
carriers to do something significantly different. The economics of SMS also
don't add up. Because AT&T has put the price point at $10 per month, it's
never going to get more expensive. I average about $60 per month for my
wireless bill, and to me, $10 more per month is significant. They're almost
better off focusing on making my voice minutes go up. The best example is to
look at what happened to WAP. Carriers realized that consumers thought it
was too much to spend and threw it out.

The first thing that needs to happen for data service to really take off is
that the infrastructure needs to be put in place. From a venture investing
perspective, it's tough to pinpoint the pain points that are common
throughout the industry. Try to compare Verizon with Sprint with
VoiceStream. They all have different agendas.
-- As told to Vince Vittore

William Quigley, managing director, venture capital firm Clearstone Venture
Partners

The cat's meow right now is quality of service. In the wired world, we have
ATM, which allows us to create permanent virtual circuits and provide
different levels of services. There is no equivalent in the wireless world.

At the enterprise level in the wired environment, there are large
differences in services depending on what you want to pay. In wireless, we
want to get to the point where a carrier can say, "We will give you greater
access to the network than those that are paying much less."

The challenge is that today, we don't even have sufficient service that
people are willing to pay a low price for. Right now, you can't get networks
to provide general, low-quality service to every one of your subscribers.
We're trying to figure out how the AT&Ts of the world will be able to charge
more.

There are a number of in-between steps. First you need smart antennas,
meaning three transmitters instead of two. And antennas that can swivel
depending on the time of day. On the customer premises side, you're probably
going to need maybe two antennas on each chip to ensure that as the waves
propagate through the air, you get two bites at the apple. It's not how well
you transmit the data, it's how well you capture it.

3G is clearly where you're going to get the most robust data rates and where
you can start differentiating. What we are trying to figure out is what are
the transitional networks that let us feel good about subscriber management.

In the meantime, we're paying a lot of attention to Korea, where you've got
3G rollout. We're going to see how user behavior changes with all that
bandwidth availability. We're watching Korea extremely closely and trying to
extrapolate that to the U.S. market.
-- As told to Vince Vittore

What do people want out of next-gen wireless apps?
Gordon Gould, chairman and founder, mobile entertainment provider Upoc

Wireless success hinges on understanding who consumers want to interact with
and how they want to share information. Broadcast-type models that just push
stuff out to the end user without providing them any context or continuity
with the rest of their lives are not going to be as well-received as those
that allow them to get information or content and communicate it with their
peer groups.

At the end of the day, phones are still communications devices and not
content platforms the way that television is. If you don't take into account
that phones are primarily designed to connect people and allow them to
communicate, you're trying to fit a square peg into a round hole.

The Watchman was never successful, and portable DVD players haven't been
particularly successful either. There's certainly a niche audience for them,
but it's not clear why anybody needs video delivered to their phone. But
multimedia messaging that incorporates video or animation will be very
popular. Advanced messaging is going to be a win unless the carriers
completely screw it up by making it exorbitantly expensive. The carriers are
really starting to get there -- and I'm optimistic -- but they're an
unpredictable lot.
-- As told to Chris Sewell

John Griebling, chief technology officer, broadband services provider Aerie
Networks

The mass market just wants something that's high-speed, easy to use, easy to
install and inexpensive. Anything wireless attempting to serve the
residential market that doesn't fit that equation isn't going to make it.
Also, wireless data services that are metered will have a very narrow appeal
and won't support killer apps because mass-market appeal requires unlimited
usage.

There's definitely strong emphasis on digital photography and having
wireless-enabled cameras that can take a picture and transmit it to someone
else. It's just like if you had an MP3 player that was wireless-enabled,
then you could download songs directly to your MP3 player and share songs
with your friends directly from your player to theirs.

Pretty soon, we'll be carrying around mobile wireless enabled cameras and
PDAs, but that demand is going to take time to materialize.
-- As told to Chris Sewell

Mark Kelley, chief technology officer, service provider Leap Wireless

If you force people to undergo a shift in their behavior, the obstacles you
have to overcome are huge. Applications that require people to solve
technological puzzles or do something in a way that's totally new for them
are not likely to be early successes. WAP-based services are a perfect
example. They've had some traction and I use them frequently, but I'm sort
of in the geek market, which is a fairly small one.

Extending things that people are already doing to a mobile mode like games,
images and music -- those are the sorts of things that clearly have an
attraction in the market. To that end, instant messaging, e-mail and short
messaging clearly will have legs going forward because it's just an
extension of your computer desktop.

It's going to be the people who are graduating from college now or slightly
younger who are really going to be driving the mobile industry. Internet and
mobile usage is just as much a part of a young adult's life as the phone and
fax is for people in business who are a bit older. In the youth market, a
paradigm shift is easier to swallow than it is for people in their 30s and
40s.
-- As told to Chris Sewell

Paul Master, chief technology officer, mobile communications developer
QuickSilver Technology

Regardless of what the device does, you always want to be connected --
period. That's something everyone expects of their devices. Once you're
hooked up, losing that connectivity is like cutting the umbilical cord.

But you never know what consumers will buy and what will turn out to be a
killer application. Who ever thought caller ID would turn out to be the
moneymaker that it is? The only people that are able to tell us is the
consumer, and traditionally the only way to find out is to toss up 100 ideas
and see which ones they bite at. There are no dumb ideas -- you just have to
figure out how to get them in front of a consumer and let consumers pick the
good ideas from the bad.
-- As told to Chris Sewell

What will really happen when the spectrum cap is lifted?
Mark Wilson, vice president of strategy, Ericsson

A lot of people talk about how lifting the spectrum caps will naturally lead
to consolidation, but there's another dynamic at play. As customer
acquisition costs rise, it might be less expensive to acquire customers via
merger than in the open market. Our models show we'll go from what used to
be 25% subscriber growth to 15%. That's a natural contributor to
consolidation.

In another scenario, releasing the spectrum cap -- coupled with some
aggressive pricing -- drastically increases wireless market penetration. If,
through consolidation or other scenarios, carriers acquire more spectrum,
economies of scale could allow them to bring on the next wave of
subscribers. That's essentially the way it worked in Western Europe --
wireless became a mass-market commodity.

If American carriers continue aggressively bundling long distance and other
things, people will spend more voice time on their mobile phones and use
their fixed lines more for broadband connection to the Internet. The average
minutes of use on mobile networks in the U.S. has skyrocketed in the last
couple of years. Those minutes are coming from somewhere.

Operators might experiment with different types of segmentation and
targeting, and some of them could choose a mobile virtual network operator
model. I could envision carriers having their own brand and their own
services but having an MVNO play if they want to target a specific segment.
That could lead to a lot of different types of services becoming available.
Even without MVNOs, lifting the spectrum cap could lead to an aggressive
rollout of new services. Carriers will start out with some fairly basic data
offerings,things that offer people stock quotes and e-mail and sports
scores. It will build from there.

There will be two catalysts in that next phase: mobile positioning and
multimedia messaging. When you combine the mobile Internet with services
based on subscribers' location, and you combine location with messaging and
customization, those are going to be the two big drivers leading to a more
substantial mobile experience. Then the revenue model shifts from being 100%
voice to more of a split between voice and data services. That could very
well lead to a moderation of the pricing decline.

There are skeptics out there who doubt these mobile data services will
actually take off. I'm one of the optimists.
-- As told to Ed Gubbins

John Marinho, vice president of offer management, Lucent Mobility Solutions

Lifting spectrum caps will allow wireless operators to roll out high-speed
data services more aggressively. One of the first market segments to be
tapped will be mobile professionals who need mobile access to information
that's sitting behind corporate firewalls. They have significant pent-up
demand and a very high willingness to pay.

But selling data services will require carriers to take a different approach
in how they go after market segments. When you're selling data solutions to
enterprises, you have to talk to the CIO as well as the side that's going to
derive the greatest benefit from the services -- the sales force and the
people who manage the mobile work force.

You've got to understand the nature of the organization you're selling to,
how they're positioned with their customers. It's a much more involved
approach than just selling phones in phone stores.

Speed will be a key differentiator. Today, CDMA 1X will support data rates
up to 144 kb/s. In the second half of 2002, commercial trials will take the
data rates even higher. Peak rates will be 2.3 Mb/s. That will completely
change the paradigm of how people use laptops and PDAs. The lifting of
spectrum caps will only accelerate that process.
-- As told to Ed Gubbins

Is there a killer app for the wireless enterprise?
Steve Krom, vice president of business development and marketing, Cingular
Wireless

The application that's driving wireless within the enterprise is access to
corporate e-mail. That is the app du jour. It is really the foot in the door
in terms of doing anything with the wireless enterprise, and it will drive
the enterprise market for the next couple of years.

There are really three categories of wireless enterprise applications. The
first is mobile office apps, and that's where you have e-mail and calendar
and intranet applications. Then you have the whole category of commercial
applications, like customer relationship management applications -- things
from companies such as PeopleSoft. Then there are the vertical or
corporation-specific applications that we would design customized just for a
particular type of customer.

The commercial applications category is the next phase, and it has the
potential to be bigger than the area of vertical industry applications
because they are proven, third-party applications.

There isn't really a challenge from corporations against creating a wireless
enterprise or a mobile office. Wireless has been legitimized in the
corporation as something that allows you to be more productive. However,
with the economic situation they way it is, any corporation using wireless
in the enterprise wants to see a quick return on investment, and we have to
show them how wireless will translate to a real operational cost savings.

With devices, customers will want to access the mobile office in a variety
of ways, by mobile phone, PDA, BlackBerry, etc. In the future, companies
will want to make sure that they can use all of their enterprise
applications across a multitude of wireless devices in the same fashion.
-- As told to Dan O'Shea

William "Butch" Winters, CEO, mobile enterprise infrastructure software
developer Neomar

I don't assume there's one killer app. Some of the simple segmenting we've
done is very similar to the approach used in the early days of the Internet.
The value prop is either in generating revenue or mitigating expense, and
you look at end users as employees, partners or customers.

In the revenue-generating employee segment, we see applications that are
driving toward increasing employee productivity. If I can make field-based
revenue-generating employees more productive, I can get more of that
revenue-generating activity out of them. On the customer side, we see
companies saying, "If we can have customers do business with us in different
venues, they're going to do more business with me more often."

We're big believers that the killer apps in the mobile enterprise space are
the same killer apps in the landline enterprise space. All of your
applications players that exist today are the ones that are going to be
mobilized.

We're relatively young in this market. If you map out business impact and
time, where we are right now is this mobilization ennoblement stage in which
existing business processes are getting a mobilization facelift. Over time
you'll probably see new types of business models emerge into potentially new
industry models. That gets into a much longer view of what wireless will
look like in 2005 to 2006.

The press -- and we in the industry -- must do a better job talking about
real things that can be done with the technology today.

There may be a little bit of a waiting game for next-gen devices and
next-gen networks, so the industry is not doing itself any favors in that
they're pre-announcing capabilities that don't exist today. For those of us
trying to build a business and make a living in the wireless space,
providing reasons for corporations to delay purchases is not a good thing.
-- As told to Toby Weber

Dale Gonzalez, vice president of wireless engineering, wireless platform
provider Air2Web

One way to describe the next killer app is wireless forms-based processing.
This is pointing to the disconnect between what people need from their
computers and how computers satisfy their needs. Computers are all about
individual discrete applications that perform various functions. Users are
all about things that they have to accomplish, which will almost always span
multiple applications.

Obviously, wireless devices can't possibly have full-blown apps, nor will
users be able to cut-and-paste and flip between one app and another. So if
you construct an infrastructure or application that imposes a task-based
framework on top of back-end apps that the customer is used to using, then
you'll have something that will mobilize users better.

Whenever you're automating an enterprise, mobile users inside a process flow
are the nightmare. Ninety-five percent of the time your sales force isn't at
their computers, which is the point of automation. So what you have is a
semi-automated process, then people are writing things on notecards, then
automating them again.

But wireless devices provide an opportunity to create seamless task flows
through an organization in ways we could never do before. All of sudden you
have this seamless web of tasks that hop from person to person and that span
multiple back-end systems and applications.

Wireless chat also has promise. I did think of this, but rejected it. I
thought,these phones already have a built-in chat channel: It's called
"calling."

I completely overlooked visceral differences in having a threaded, textual
conversation with someone. I overlooked that most people can multitask chat
with other things and the tolerance for gaps in the conversation. I
overlooked the anonymity in chat and the ability to involve multiple
parties.

It would not surprise me if an enterprise outgrowth of chat, some form of
groupware, fell out of the wireless space and let people communicate while
incorporating the non-human in the call. If you presume something like a
slightly larger device with an integral camera, you could have a
communications tool that makes an appropriate use of a broadband network in
an extremely powerful way.
-- As told to Toby Weber

Who should set standards for 3G?
Walt Tamminen, manager of CDMA standards, Nokia

The best way to produce standards for 3G is to have an equal partnership
between the vendors and the operators. Both sides have certain capabilities
that you need to have to produce a good solution.

For instance, operators know what their customers are going to need and the
services that are going to be most popular. Vendors, on the other hand, have
a much better handle on what is realistic from a technical perspective. That's important because nice-to-have services are often different than what
is technically feasible. It's why vendors write most technical standards.

The biggest challenge in creating a standard is the competitive nature of
the companies involved in the process. They all have existing technologies
or networks they think are the best, and their own ideas on how the standard
should look. Vendors also want to make sure their intellectual property
becomes part of the standard.

Different companies also have varying degrees of influence. To a point, the
process looks a lot like what goes on in Washington: Relationships are
important. Operators will support their vendors, and vendors will cater to
their operators. It's not always fair. Sometimes you come out ahead.
Sometimes you don't.

You have to find a way to balance all of that. It's not easy. In fact, we're
never able to keep to a schedule because of all the discussion, which can
get pretty contentious at times. That's not necessarily a bad thing. Generally speaking, open discussion improves the overall result.

But there is a downside to an open environment. Often, compromise is the
only way to get anything done, and compromise doesn't always result in the
best possible standard.

There is no ideal way of going about this. It's not black and white. That's
why standards development is an ongoing process. In a perfect world, you
would come up with a single standard that would stand for all time. But that
would limit our ability to bring in new technologies, services, markets and
ideas. So there's no end point. And there probably shouldn't be.
-- As told to Glenn Bischoff

Bill Clift, chief technology officer, Cingular Wireless
Standards development is like flying an airplane: You need a pilot and a
co-pilot. And operators should be the pilots, with vendors taking the role
of co-pilot.

The reason is simple: 3G needs to be readily commercialized, and vendors
tend to lean toward technologies that are most easily implemented. Vendors
will argue that they know what's technologically feasible, that they're more
cutting-edge. But operators have to drive this because they're the ones who
have to sell the services. It worked just the opposite when GPRS was
deployed in Europe, and what got rolled out was not nearly as marketable as
it could have been.

Vendors are too separated from the customer to know what they need. They do
market research just like the operators, but the difference is that they
don't talk to the customers every day as the operators do. Vendors also have
a tendency to protect the intellectual property they own. They want to see
that property become part of the standard, so they can license it and
collect royalty fees.

That's not to say vendors should be subservient. You have to get their input
because of their technical expertise. You have to find a way to work with
them.

It's also a political process. At times it resembles the behind-the-scenes
activity at the United Nations. Actually, it looks more like the
figure-skating fiasco at the Olympics: If you support my approach in this
particular standards process, I'll support yours later on.

There's another way in which it resembles the political process. Because of
the very technical and specialized knowledge that's required, those that
serve on standards bodies do so for several years at a time, sometimes for
as long as a decade. They understand the core of the technology to a depth
that most people can't grasp.

Because the process moves slowly, they go to one meeting after another.
These meetings tend to move around a lot in an attempt to accommodate
everyone, so they often spend a lot of time in these meetings talking about
the next exotic location they're going to and not as much time talking about
the relative merits of the technologies being presented. They sometimes
forget that we're all for-profit companies.
-- As told to Glenn Bischoff

Gerry Flynn, director of advanced technology strategy, Verizon Wireless

Standards development is an interesting phenomenon on a variety of levels.
It has to be a collaborative effort, but that's not always easy to execute
because operators and vendors look at things very differently.

Vendors are interested in market share and selling new models that are going
to generate more revenue. Operators, on the other hand, tend to focus on
protecting and recovering their investments, so they prefer their networks
to evolve.
-- As told to Glenn Bischoff

Dean Prochaska, director of industry standards, Sprint PCS

Standards development has to be a cooperative effort, even a joint effort
between vendors and operators. Both sides have to really communicate.

There's no question that operators are closer to the marketplace and can
provide better guidance as to what customers want in terms of services. But
it's technology that will provide the capability to make those services
reality, so it is imperative that operators are able to work closely with
their vendors.

It's not always easy. In fact, it can get pretty contentious. There are a
lot of reasons a vendor will push a particular technology. For instance,
vendors are very competitive when it comes to making sure their intellectual
property is included in a standard, because it can lead to revenue
generation later on.

Of course, protecting revenue streams is important for any company,
including vendors. Shortly after launching Sprint PCS, we led the effort to
create an interoperability standard. At the time, operators that bought
radio equipment would also have to buy that vendor's switch. We knew it
would give us greater leverage in contract negotiations if we could break
those components apart. The vendors didn't react well to our proposal at
first, but they eventually went along with it. The result was the adoption
of the Interoperability Specification standard.

Manufacturers have a tendency to listen to their customers. And the
operators are their customers.
-- As told to Glenn Bischoff


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