Cyberposium 2000 - The Wireless Internet?

by Martha Lagace, Staff Writer, HBS Working Knowledge

Ask the experts about the next big thing for Internet business and except, perhaps, for "Broadband" you'll hear one word repeated more than any other: "Wireless."

But if wireless is the next big thing for the Net, where do the opportunities lay? Is it a retention tool, a chance for Internet companies to extend their brands? Or does it bring about a whole new way of doing Internet business, of bringing information and services to the customer?

The answer is a little bit of both, according to leaders of several prominent companies who participated in the Cyberposium panel "The Wireless Internet: Emerging Winners, Solutions and Transformations."

"If you come from normal businesses you look at it like an extension of the business," said Harel Kodesh, who leads Microsoft's efforts to develop information appliances based on the Windows CE operating system. But, he added, "I'm personally more interested and more excited about how you take the wireless phenomenon and actually build the things around it."

"From an e-commerce perspective, it's a little bit of both," said Warren Adams (HBS MBA '95), formerly director of the wireless initiative of Amazon.com and now a managing partner of the venture capital firm Vineyard Ventures. With new applications, he said, there's an opportunity "to have more mind-share of your customers, their time when they're not at their computer."

But complicated roadblocks remain in front of the wireless advance, panelists agreed. Among the important issues they must continue to grapple with in the future, they said, are security lapses; smoothing relationships with carriers, carving an appropriate role for advertising, and successfully integrating voice and display applications so that wireless users can enjoy the best of both worlds. A "reality check" posed by moderator Mark Zohar, a research director of Forrester Research, also challenged panelists to consider the impressive penetration of I-Mode services in Japan and suggest reasons why the USA is lagging behind.

The notion of security is obviously a big question mark for many potential corporate users of wireless devices. One of the constraints on future penetration of wireless devices for business use, said Kodesh, is that CIOs are frightened by the fact that the present devices cannot guarantee security.

"We have had many, many discussions with them about this topic," Kodesh acknowledged. "We tell the CIO, 'Look, you can have the wireless device in your office, and everybody who has a little Symphony PC adaptor card will be able to see your code. So we're going to encrypt your code, and although other people will be able to see the code, they will not be able to make out the rest of what's going on."

CIOs, he admitted, did not find comfort in this solution. Wireless companies, he said, need to solve the security problem and perhaps build devices and install a system of privileges that are slightly different from those in the consumer space.

"So the question is, how do you make the wireless enterprise as efficient as the wire-line enterprise, which is very efficient?" Kodesh asked. "Everybody [in companies] today has Internet lines; everybody today has the ability to get all information at extremely high bandwidth. We have to make sure that Information Technology departments have the same potential in other devices."

For Felix Lin, the founder and chairman of AvantGo.com, the goal is to create technology solutions so customers don't even have worry about the security issue at all. He said it is important to design an application for the corporate intranet that could run trouble-free on any wireless device, be it a PDQ phone or a Nokia phone or a PDA. In such an ideal scenario, he said, "You wouldn't have to learn a new operating system, new tools, new infrastructure, new management tools, user carrier paradigms, and security paradigms."

Carriers do a lot more than just transmit messages, agreed the panelists. The terrain is constantly in flux from an e-commerce perspective, according to Adams, because, as he explained, in some cases the carriers are paying their suppliers of content and commerce, whereas in others it's the reverse. Mike Mulica, senior vice president of Phone.com, a provider of software to enable delivery of Internet services via wireless phones, stated his company's stance on carriers thus: "It's the center of the universe."

"The wireless carriers are absolutely critical to us," concurred Lin of AvantGo, "because they're part of the infrastructure. You've got to have a good relationship with carriers so you can deliver the content out to the consumer."

Carriers would also do well to tend to their own relationships with content providers and service providers — which, he pointed out — remain the main impetus for revenue sources in wireless. "When [carriers] bring the content provider to the platform, people will use the platform," Lin added. "Unless you focus on meeting the needs of the content provider, or if you make it hard for the content provider to get their content out to the consumer, they can't play the game. And you wind up with nothing."

Hadi Partovi of Tellme Networks, which aims to provide voice access to Internet information, said that wireless is a medium not unlike the Internet, television and radio where advertising can either subsidize the cost of products or even make them cost-free. But wireless is a bit different because the advertising needs to appeal to the person who is actually holding the device in their hand. Lin said the most forward-thinking content providers have to deliver content that is already effectively ads.

"What they do is give you an offer that you can use immediately," Lin explained. "You can consider that an ad or you can consider that a real product. When you look at a device like a phone or a PDA, the amount of screen is really limited."

The companies that generate the greatest revenue, Lin said, are the ones that will facilitate transactions through wireless devices and the ones that encourage people to make transactions through such devices. "If that happens to mean that we grab someone's attention when you're walking into a record store and we know what types of music you like to listen to and we can put an offer in front of you....

"I think the notion of sheer banner ads is going to go away," he said. "There's going to be this blurring of the question of: is it an ad, is it an offer, is it the real content?"

The next revolution in wireless, said panelists, will be the integration of voice and display technologies. Obviously, one is sometimes better than the other: as Partovi pointed out — to great mirth from the audience — he's discovered that it's sometimes not a good idea to drive while glancing at one's Palm Pilot. But devices that can handle mixed applications for both voice and display would be very helpful in giving driving directions when you need them, for example. Although he said that voice applications currently have the greatest "reach" as far as his company is concerned, he also acknowledged that mixed applications are a great frontier.

For Lin of AvantGo, it's important to admit that displays can only get so small before they become useless. "And voice is the opposite," he said. "You really don't need anything in your hand or in front of you to actually work with voice. We believe that in the PDA space there will always be a need for a device where you can actually read visual information and navigate through a lot of content."

Yet there are many issues with voice, he said. People get frustrated when they have to remember six menu items before they can choose one. And navigating through a web page via voice: nightmare. He predicted the inauguration of some device in the not-too-distant future that would be similar to a Palm Pilot but with information about addresses and contacts: if you wanted to call somebody, he mused, "it would be great if you had a one-touch dial."

To Zohar's question of whether I-mode devices leave the USA in the dust, Kodesh of Microsoft had this to say:

"The fact that people in Japan are using I-Mode is the result of two things," he told the audience. "The Japanese are willing to try things that, in the US, people would be very sheepish about. The second thing is that the Japanese have one large carrier that says, ‘This is what we're going to do.' So it's a great environment to start a service and actually sell the service: It's a very homogeneous market."

Europe, he said, is a close contender to Japan because while there aren't a great many carriers, countries do tend to have one large infrastructure that makes it easy for users to move among carriers. "Overall, Europe is a fairly organized market," Kodesh pointed out.

"In the US it's complete chaos," he said. "The amount of phone handsets in terms of the percentage is not comparable to what you have in Europe. So it will take a while before you see an I-Mode-type service in terms of penetration." He added that, in his opinion, it would not be too hard to create an I-Mode-type service in the USA without involving a carrier. Such a product could come about in the USA within the next three years, he predicted.

Despite the vast room for improvement in solving all these issues, panelists agreed, no one should discount the vast business potential in the wireless market.

As Microsoft's Kodesh put it, in response to a question about what the wireless world will see in six months' time: "What you're going to see this year is nothing! Everybody is trying to figure out what wireless Internet is going to be. The fact that today you have wireless Internet side by side with voice internet on the phone means that this is only the beginning."