The cellular telephone industry’s 2005 convention, held this past March, reflects an era in which cell phones are redefined as mini TVs, video game players and music devices. “We’re seeing wireless become the third screen,” said Jeff Kagan, an independent telecom analyst. “Wireless has been around for about 20 years, and it’s mostly been about voice. Right about now is when wireless is expanding into new business areas.”
More than 30,000 people from around the world attended the three-day gathering at the Morial Convention Center in New Orleans, organized by CTIA-The Wireless Association (formerly the Cellular & Telecommunications Industry Association). “I would say this year is the multimedia year,” said Paul Jacobs, chief executive of technology giant Qualcomm. Qualcomm showcased its MediaFlo technology, which will broadcast video on cell phones.
The shift toward video, 3-D video games and music on cell phones is the result of cellular companies deploying new networks capable of transmitting data at higher speeds. Carriers also hope to make more money by offering subscribers extra features. “What’s happening in the industry in general is that in the voice part of the business, the revenues per user are going down. So now that you can offer all of these data services, whether they’re images, or position location, or games or ring tones, the operators are starting to see growth in that part of their business. They want to use these services to drive revenue,” Jacobs said.
More than 180 million Americans subscribe to cell phone service. In 2004, they spent more than 1 trillion minutes on their devices, one-third more than in 2003. Yet, according to CTIA, the average monthly wireless bill grew by only 1.5 percent, to $50.64.
Gearing Up for 3G
Major U.S. carriers have announced plans for 3G, or third-generation, high-speed wireless data networks, which will allow subscribers to watch video clips, download music and play digital-quality video games. Verizon Wireless, the leader in 3G, now offers high-speed service to more than 70 million subscribers. Cingular Wireless and Sprint have announced plans to expand their 3G capabilities this year.
Verizon and 20th Century Fox revealed plans for a series of one-minute videos for cell phones based on “The Simple Life” TV series. Cingular plans to launch features, such as interviews and games, based on the film “Star Wars: Episode III: Revenge of the Sith” and other films in the “Star Wars” series. Major League Baseball announced a deal with MobiTV to offer video of games. America Online announced that it is developing a streaming music service that will deliver FM-radio-quality music to cell phones.
Cell phone makers introduced new multimedia phones. Sprint showed off its fifth multimedia phone, one that plays MP3 files and has a 1.3 megapixel camera and camcorder built in. Samsung has a high-speed multimedia phone, the p777, which plays MP3 music files and features up to an hour of video-recording capabilities. Kyocera Wireless displayed four handsets along with accessories, such as a game pad for wireless play of video games.
More nonwireless companies are starting to offer cell phone service through agreements with the large wireless carriers. Bad Boy Entertainment, the company of hip-hop performer and producer Sean “P. Diddy” Combs, plans to offer cell phone service to the singer’s fans. “In a minute, cell phones are going to allow people to listen to my songs, buy my clothes and learn about my politics,” Combs said.
ESPN also has plans to start a cell phone service, ESPN Mobile, early next year, providing specialized sports content to sports fans. ESPN will become a mobile-video-network operator (MVNO), leasing transport from Sprint, working with phone manufacturers on the capabilities of the handset and handling the billing and customer-service acquisition. ESPN’s own cell phone service with Sprint debuted on Verizon’s VCast service in January. ESPN sat out the first phase of the new platform. But the newer Evolution Data Only (EVDO) technology, which Verizon is using and which Sprint will use, provides video at 15 frames per second, relatively close to TV’s 24 frames per second. “We believe we can program very high video using that network,” says Manish Jha, senior vice president of ESPN Mobile.
Jorge Fuenzalida, East Region director of InCode, a wireless technology consultancy in San Diego, said, “We’re seeing a preponderance of mobile-virtual network operators. Folks like ESPN, Disney and EarthLink are basically companies that have other products to sell, entertainment or content or Internet service. They now want to get into wireless.”
Mergers and acquisitions are also changing the landscape of the industry. Late last year, Sprint agreed to buy rival wireless carrier Nextel Communications. Cingular’s purchase of AT&T Wireless was completed last fall. Fuenzalida said that while there are fewer major carriers, there is still plenty of competition to keep prices down. “We believe you’re not going to see prices going in the wrong direction,” he said. “We still see very competitive prices in the marketplace.”
By Kathryn Balint