July 27, 1999

Rush Is On in Europe for Wireless Data Services


HELSINKI, Finland -- After 24 years as lead singer for the Leningrad Cowboys, Finland's most popular home-grown rock band, Mato Valtonen figured it was time for something new.

Soile Kallio/Lehtikuva, for The New York Times
Mato Valtonen saw his fellow Finns' penchant for sending messages on cell phones and founded a business sending jokes and horoscopes. Now he is planning to start a kind of Web site, for a new class of phones.
Noticing that Finnish teenagers were perpetually tapping out messages on their cellular phones, Valtonen set up a business last year that transmits jokes and horoscopes for about 30 cents apiece. He was soon drawing thousands of requests a day so he added a half-dozen other quirky services, including a dictionary that translates words into 10 different languages and wireless chat rooms that attracted about 7,000 visitors on a recent Friday night.

In the next few months, he plans to start what amounts to a wireless Internet site, using a new class of phones that have highly simplified Web browsers. Based on a slimmed-down, text-only Web format, the site will offer bus schedules, restaurant listings, stores and games. If all goes as he hopes, people will eventually make restaurant reservations and hair appointments -- and pay his company, Wapit Ltd., a few pennies every time they do it.

"We just think up ideas and see whether they catch on," Valtonen said. "But I'm convinced that companies will see this as an important opportunity."

Improbable as it may seem, Valtonen is part of a very serious rush across Europe into wireless data services that is keeping the Continent, along with Japan, well ahead of the slower-moving United States. Teenagers in Italy already use their cell phones to tap out millions of short messages every day. Germany's top-selling tabloid, Bild, offers scores of news and sports bulletins through short messages. Here in Finland, it is possible to tap out an order for a taxi or a take-out pizza.

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And now, with the impending start of wireless Web transmission, European cellular carriers are gearing up for a huge increase in the speed and ease of transmitting wireless data. As a result, the gap could widen further.

Indeed, history may be repeating itself. In the early 1990s, European wireless companies jumped ahead of their American counterparts by adopting a single technical standard for digital cellular. As a result, digital phones with built-in paging and message functions arrived years earlier in Europe than in the United States. They also worked anywhere in Europe, long before American phones worked throughout the United States.

"Europe has always been about one or two years ahead of the United States in wireless technology, and they still are," said Herschel Shostek, an industry analyst in Wheaton, Md.

Beginning this fall, cellular phone carriers from Scandinavia through Germany and down to Italy plan to start the text-only wireless Web sites for mobile phones. And next year, most European carriers plan to offer a technology called general packet radio service, or GPRS, which will allow people with newly equipped wireless phones to transmit data fast enough to browse the Internet in full color.

Beyond offering speed, the new service is designed to let customers stay connected all day long. Many companies plan to charge only for the data customers send or receive instead of for each minute they are connected.

European governments are also setting the stage for even faster, "third generation" wireless networks. Most plan to hand out or auction off new radio licenses for so-called wideband networks that will be able to carry videoconferences.

Finland, where wireless phones now outnumber traditional ones, has already issued its new licenses; Germany, Britain and other European countries plan to do so next year.

No one, however, is quite sure what kinds of features customers will actually want.

And the third-generation systems will not be ready in Europe for at least two years, slightly behind Japan's timetable.

U.S. carriers are pushing wireless data as well. But Americans, who first got digital phones only a few years ago, have barely begun to use them for two-way data transfer and messaging.

Just as the absence of a common standard delayed the ability of Americans to use their phones anywhere in the country, it is slowing down the rollout of more-advanced services. AT&T and other wireless carriers are pushing a third-generation technology called EDGE. Other big players, including Sprint and Bell Atlantic, are pushing a rival approach called wideband CDMA, or code division multiple access.

The conflicting standards "have slowed things down considerably," said Mark Lowenstein, an analyst at the Yankee Group, a research firm in Boston.

"A lot of the technology is coming out of Silicon Valley, but in terms of actually using it, the early adopters are in Europe," Lowenstein said. "They have a much bigger base of digital users, they have one harmonious technology and particular countries are doing more to market new services."

The United States also faces a more difficult chore in getting from here to there. The American carriers do not have a middle-term technology comparable to GPRS in Europe, and the third-generation services are not expected to reach the market for a few years. Moreover, the Federal Communications Commission is insisting that carriers use existing radio frequencies, which are likely to become overloaded if customers transmit video and graphics on top of voice conversations.

Paradoxically, much of the inspiration for new wireless data services comes straight from the United States. Yahoo Inc. is setting up wireless Internet gateways in Germany., a small California company, developed the simplified browsers and servers -- known as wireless access protocol, or WAP -- that European wireless carriers are now embracing. Meanwhile, the Microsoft Corp. is locked in a fierce competition with a European consortium called Symbian over establishing a global standard for personal digital assistants -- hand-held devices -- that would use these wireless networks.

Most of the big cell phone manufacturers are rolling out Web-ready phones designed for GSM, or global system for mobile communication, the dominant second-generation wireless standard in Europe. Nokia of Finland, which will probably be first to the market, plans to start selling its version in August. The Nokia phone is about the same size as an ordinary cell phone. It offers no graphics or pictures, but it has a small screen to display text.

In Germany, Mannesmann AG, the country's largest mobile phone operator, has signed contracts with the main television networks to deliver news, sports and weather over a wireless network. Handelsblatt, Germany's biggest financial newspaper, will provide business news and stock-market information. Customers will also be able to reserve airline tickets with Lufthansa and train seats with Deutsche Bahn, the national railway.

"We are not interested in niche markets," said Dirk Wierzbitzki, director of product marketing at Mannesmann's mobile telephone unit in Dusseldorf. "We see this as a mass-market business."

An exuberant talker who sprinkles his sentences with American phrases like "killer app" and "Internet value chain," Wierzbitzki has reason to be bullish. Mannesmann customers already tap out 100 million messages a month, and the volume is climbing 20 percent a month.

"Europe is definitely ahead" in the use of cell phones as an interactive device, said Fabiola Arredondo, managing director for Yahoo Europe, which recently teamed up with Mannesmann.

For Wierzbitzki, the next big shift will come with the start of GPRS next year.

The service, which will require new handsets, has a theoretical top speed of about 114,000 bits of data per second. Since the airwaves will inevitably be bogged down by congestion, the real speeds may be significantly slower. Even so, they would be far higher than those of Europe's current cell phones, which have a top speed of 9,600 bits per second -- the top speed of most American cell phones, too.

But perhaps more important is the way it will work. The system is designed to charge customers based on the amount of data transmitted rather than by the minute. That can be a major change from customers who can pay, say, $1 a minute during business hours.

"Always connected, always on line -- that's our vision," Wierzbitzki said. Though Mannesmann has not yet announced a pricing plan, Wierzbitzki envisions deals along the lines of 10 megabytes for about $10. For an ordinary consumer using the wireless Web format, that would amount to almost unlimited browsing and e-mail for a month.

But that is not the only point of these systems. The idea is sell "mobility services" -- traffic and shopping information, banking, full-time access to e-mail. "You need to forget about traditional Web surfing," said Ilkka Raiskinen, vice president for business development at Nokia Mobile Phones. "If you're walking around Helsinki, you don't want to browse the Web. You want to know where a restaurant is, where you can buy clothes and how do you get there."

Mannesmann already has a separate subsidiary, Autocom, that provides navigation aids through wireless networks. Executives are now looking at services that would warn drivers about traffic jams and recommend other routes, as well as automatic SOS buttons that would call for help if an accident occurs.

"There is a huge pent-up demand for data over wireless phones, but the barriers have always been reliability, speed and cost," said Anders Thulin, a consultant at McKinsey & Company in Stockholm. "All those barriers are reduced now."

Even the most enthusiastic wireless bulls caution that the third generation networks to deliver all this stuff fast and efficiently are still several years away. Though carriers have agreed on the design of the system, the advanced technology is by no means ready for prime time.

Still, Raiskinen of Nokia predicted that at least 10 percent of wireless phones will be Internet-ready by the end of next year. He cautioned that speed itself will not usher in overnight change.

"The success will be based more on content," he said. "It's not a revolution. This is very much about evolution."

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