SAN FRANCISCO—Can television save the cell phone industry?
Yes it can, say executives gathering here for the CTIA Wireless I.T. & Entertainment 2004 show, one of the industry's largest. In two years, technology prognosticators say, about 70 percent of cell phones will have built-in digital television receivers. By then, phones will have enough memory and processing power to handle a whole new set of services—making it possible to create a TiVo-like video recorder that fits in a pocket.
"TV in a handset is a whole new paradigm," said Bill Krenik, manager of wireless advanced architectures at Texas Instruments. "The whole face of TV is likely to change. On your living room TV, prime time is at night. Prime time on a mobile phone might very well be commutes."
Some of the biggest names in Hollywood and television are generating content for cell phones. Media giant News Corp. is experimenting with "Mobisodes," which are episodes of shows whittled down in size and scope to work best on cell phones, according to Lucy Hood, senior vice president at News Corp.
The Walt Disney Internet Group has expanded its own mobile content distribution business to include videos and other mobile contents based on non-Disney-owned brand champs Trivial Pursuits and National Lampoon, WDIG Executive Vice President Larry Shapiro said here Sunday. "These are big brands that wouldn't necessary use start-ups doing the same thing we're now doing," said WDIG Executive Vice President Larry Shapiro.
But carriers have been slow to jump in, preferring to wait instead until they have built fast enough networks to make watching television on a phone palatable. There are to date just two U.S. carriers offering live television on phones, AT&T Wireless and Sprint. On Monday, Sprint said it added programming from the Cartoon Network and Adult Swim cable channels to its TV offering.
The wireless-television buzz highlights the somewhat precarious state carriers are in as their representatives gather here over the next few days. Though they generate revenues in the billions of dollars, carriers have been forced by hypercompetition to dramatically lower prices on voice calls and virtually give away handsets that cost them hundreds of dollars each. "I don't think we're even done with the race to the bottom," said one source familiar with carriers' plans. Meanwhile, network usage is soaring, raising day-to-day operating costs.
With voice calling all but a commodity nowadays, and handset sales no longer a reliable source of revenue, carriers are committing as never before to data services to make up for lost revenue. This attitude has sparked a hectic push to find new, killer applications for phones, a quest that will be in full display at the CTIA Wireless show. Major new services to be highlighted at the confab include wireless broadband, mobile music, multiplayer gaming, photo sharing from camera phones, Wi-Fi hot spots and geotracking services for finding lost children.
Tryout for new Treo
Among the most notable devices to be unveiled this week is the Treo 650, an update to PalmOne's smart-phone family. The gadget will have a high-resolution screen and a higher-end processor, according to sources.
With the release, PalmOne is looking to increase its leadership over Hewlett-Packard and others in the gradually shrinking handheld market. It also has set the pace for the emerging smart-phone industry by successfully combining phone and organizer capabilities, something rivals such as Nokia have yet to match.
While carriers strain, handset makers are also experiencing their own problems—most notably Nokia, which comes to the Bay Area a little hobbled and wearied.
The world's No. 1 cell phone maker still reigns, with 36 percent share of the handset market, more than twice that of its closest rival Motorola. And Nokia still has the power to shake up the market.
The company is expected to introduce a new way for carriers to sell downloadable software, which will compete with Qualcomm's BREW, or Binary Runtime Environment for Wireless, technology. A Qualcomm representative had no immediate comment Friday.
Still, Nokia is keeping a relatively low profile at the CTIA show. It's not unveiling any new phones, something that's all but required from a phone maker at a cellular show.
Another of Nokia's biggest rivals in the cell phone market, Microsoft, plans to announce its now offering a new business-class cell phone service for interacting better with calendar, contact and address book listing on a corporate network. The technology, which Verizon Wireless is debuting and is calling Enterprise Product Information Management (EPIM), is an enhancement for Pocket Outlook, a version of Microsoft's messaging program for cell phones using Microsoft Exchange Server 2003. EPIM features will work on two Verizon phones so far, the Samsung i600 and i700, Verizon Wireless said.
Microsoft sells an operating system for advanced wireless handsets that competes with the Symbian OS, distributed by the company of the same name. Nokia partly owns Symbian. While the Symbian operating system dominates the small but growing market for next-generation phones, Microsoft is said to be moving in on that territory. The software giant said during its earnings call Thursday that it expects sales of its smart phone this quarter to exceed sales for all of last year.
Citing financial disclosure rules, a Nokia representative said, "We're not going to comment on what third parties say about our company."
Calling on TV
This year's favorite is live television, which got a huge boost earlier this week when Texas Instruments introduced digital television chips for cell phones. The chipmaker predicts that seven of every 10 phones in the world will have them in the next two or three years.
Meanwhile, carriers AT&T Wireless and Sprint have already launched television services and are likely to augment them at the conference. While it closely guards its subscriber tallies, Sprint's television service is said to have a surprisingly strong total of 150,000 subscribers. The service costs about $10 a month and up to $5 extra for premium channels CNNtoGo, Fox Sports and E Entertainment.
"The voice side of the business is saturated, and average revenue per user is going down," said Jeremy Scheffel, senior marketing manager for Sybase, which plans to unveil new mobile browsing technology and messaging features for carriers. "Right now, everybody is looking for applications that create reasons to stay on their networks. The more killer applications they offer, the better."
Delivering television to handsets requires a lot of bandwidth, so it was an unthinkable prospect two years ago, when a cell phone network plodded along at 19.6 kilobits per second. But that's changed significantly. The nation's top carriers have all since upped the speeds of their networks. Some, like Nextel Communications, now come close to cable broadband speeds.
Cell phone carriers still face a hard fight in convincing America's 170 million cell phone subscribers to not just make calls on their phones but also download movie trailers or watch the shows NBC develops specifically for the cell phone's small screen.
Cingular Wireless, for one, "isn't getting enough traction from new services to replace voice revenue declines," said Albert Lin, a wireless analyst at American Technology Research. Verizon Wireless is averaging about 9 million downloads from its data services a month, one of the best performances in the industry. But those downloads, along with broadband subscriptions, account for only about 4.5 percent of overall revenue, rather than the company's target of 15 percent.
"Operators are in a situation where voice revenue is declining; in Europe some operators have halved their prices in the last 12 months," said Steen Thygesen director of platform solutions for Forum Nokia. "Data is very, very, very important right now and for the long term."