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The Future's in the Phone

The Future's in the Phone

We first began following David Steinberg two years ago (WBT, Vol. 1, issue 3) when he launched InPhonic with former Apple and Pepsi CEO, John Sculley. Today, with a long list of acquisitions, partners, and successes in providing communication software and services to businesses, David gives his views on the future of wireless technology.

It's no longer catchy marketing. Wireless is everywhere...and it's here to stay. Luckily it's evolved from the bulky, overpriced cellular phones of years past into tightly packaged devices with multiple, complex functionalities that complement nearly every lifestyle. Today, businesspeople are accessing their e-mail, placing orders, and logging on to the company network from the road; young professionals aren't tethered to their wired-line desktop computers and are opting for sleek multifunction wireless PDAs; grandparents are receiving photos and video clips captured with cellphones thousands of miles away; and teens nationwide are choosing the next "American Idol" by text messaging their votes. Wireless technology has become ingrained in all walks of American life, in just the last few years.

But with all of the novel and sundry data applications that are being embraced by the enterprise and the consumer, the reality is that the wireless world today is still all about voice. Three years ago the industry was certain that wireless data services and extreme applications would be the new frontier in wireless. The world was ready and waiting to ride the 3G wave of high-speed Internet access from wireless phones. However, the soft economy and the ongoing turmoil in the tech sector has made it clear how overzealous most forecasts of the revenue potential of wireless data were at the start of this decade. Consequently, the U.S. wireless industry has refocused on refining less costly 2.5G technology such as GPRS and 1xRTT, while bolstering quality of service. Despite the big - and largely unprofitable - push toward 3G that we've seen in Europe and Asia, the U.S. has instead seen the proliferation of Wi-Fi hotspot technology - 802.11 and all its variants - to address the demand for wireless Internet access in the absence of cost-effective 3G deployment.

When Will the U.S. Fully Adopt Wireless Data Services in Addition to Voice?
While wireless data is gaining momentum, especially in enterprise applications, wireless voice will ultimately remain the "be-all and end-all" for wireless. Wireless data has for the most part been an incremental revenue stream and may never match the subscriber rates or ARPU of wireless voice service. Wireless penetration in the U.S. hovers just above 50% of the population, and most of these users remain "single-point" users who deploy only one application: voice.

Wireless voice will continue to retain its dominance within the mobile landscape as carriers continue to improve quality of service and coverage. Carriers are funneling large portions of their budgets into improving the quality of their networks. Incorporating new solutions like advanced repeaters and smart antenna technologies are helping them close coverage gaps without requiring massive tower buildouts for expanded capacity. In addition, handsets are increasing in capability even as they continue to shrink in both size and cost to end users, making cellphones more accessible to the nearly 50% of the population who still don't carry one.

What's Going to Fuel the Wireless Market?
Wireless services companies that focus first on voice and judiciously integrate data services into their existing service offerings will thrive in the wireless market. The next explosion in the wireless market is less likely to come from a "killer" data application and more likely to come from an acceleration of the nascent trend toward homes and small businesses abandoning landline service in favor of wireless service. In addition to the remaining 50% of the U.S. population that have not yet adopted wireless service, an increasing number of multi-cellphone households will fuel growth for voice-centric companies, which will still have the opportunity to expand their product offerings with data services for their customers.

Today, e-mail and instant messaging are the premier data applications poised to move the wireless market. Integrating such a widely-accepted "wired" application allows users to make a comfortable, natural progression toward accessing data services wirelessly. In turn, users who grow accustomed to accessing e-mail from a wireless device won't have a long evolutionary leap to more sophisticated functions like photo sharing or multimedia messaging.

As wireless technology and communications continue to evolve, we will see the market transition from wireless voice to basic wireless data access, to more integrated voice and data applications. Just as wireless phones were once cutting-edge and have now become mainstream, so too will picture messaging, location-based services, and mobile commerce applications move from hype to reality. But the central device and service will still be the cellphone.

More Stories By David A. Steinberg

David A. Steinberg is CEO and founder of InPhonic. Prior to founding InPhonic, David was chairman, president, and CEO of Sterling Cellular, Inc., a distributor of wireless products, which he founded in November 1993. In January 2002, he was appointed to the board of the National Chamber Foundation, an independent, nonprofit, public policy think tank affiliated with the U.S. Chamber of Commerce. In June 2002, he was named the Greater Washington Ernst & Young Entrepreneur of the Year in the communications category. David holds a B.S. from Washington & Jefferson College.

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