Wireless Industry Growth Depends on Rich Data Services

SAN FRANCISCO—The sale of data services is going to drive the growth and profitability of the wireless telecommunications industry as voice services continue to come under increasing price pressure, said Paul Jacobs, president of Qualcomm Corp.s wireless and Internet Group.

“Our industry is going through a fundamental change” because it is moving from selling voice service that has been commoditized to selling data services that provide added value and differentiation to operators offerings, Jacobs said in his CTIA Wireless show keynote here on Tuesday.

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“This change is rippling all through the industry” and will continue to gather momentum, he said. Wireless carriers are adding as many new services as they can, including ring tones, games, e-mail and instant “press to call” services, he noted.

Many wireless phone operators, especially those in Asia, are making plenty of money, but data services is what is going to keep them going, Jacobs said. “Voice is still a very important service, but data is going to be the thing that drives an operators service … at a time when voice revenues are under pressure, he said.

Jacobs predicted that data services will generate as much as 25 percent of wireless operators revenues by 2008.

The challenge for Qualcomm will be to continue to develop the handset technology to support ever more sophisticated functions because the future drivers of handset sales growth are going to be 3-D gaming and multimedia. The wireless handset, next to the television and the PC, will be the “third screen” that you can always take with you, Jacobs said.

As the capabilities of these phones continue to increase, it will eventually be “game over” for the dedicated handheld gaming devices “because handheld phones are going to serve the market in a way that gaming devices dont,” Jacobs predicted.

Handsets will also have to be designed to allow users to channel surf because “this is how they consume video—they sit in front of the TV and surf through channels,” he said.

But phone designers will also have to improve video quality to encourage this level of use, as well as providing timely alerts “to let you know that something of great interest is happening in the world around you,” he said.

“Cost per bit is a key business constraint,” Jacobs said. The industry will have to “drive down the cost of getting multimedia to the handset at a price point that we think consumers are going to be willing to adopt,” Jacobs said.

“You cant give people a service where as they are watching more, you are charging them more money,” he said. That will only stifle growth.

Next page: Wireless games BREW-ing.

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Qualcomm is also supporting the development of wireless games and rich content with the BREW (Binary Runtime Environment for Wireless) development language. Jacobs said developers have earned more than $200 million from the sale of BREW-based applications. There are currently 37 commercial operators in 24 countries offering BREW-based applications.

Frank Casanova, senior director of Apple Computer Inc.s QuickTime product marketing, demonstrated at the show QuickTime 6.5.2, which the company released this week.

Casanova cited recent market research that indicated QuickTime is running nearly neck and neck with Windows Media Player. QuickTime currently has 36.8 percent of the market, while Windows has 38.2 percent of the market.

Real Player is in third place with 24.9 percent of the market. However, Casanova contends that Real Player hasnt been growing in the market. QuickTime 6.5 could be the version that moves ahead of the Microsoft product, he said.

This new version allows developers to create mobile multimedia applications for the 3GPP (3rd Generation Partnership Project) and 3GPP2 multimedia standard. It is also designed to support high-speed streaming and fast access to MPEG-4 audio and video content with skip protection and no buffering delays.

Major mobile messaging service providers including NTT DoCoMo Inc., Sprint Corp. and Verizon Wireless are using QuickTime to manage all of their multimedia messaging, Casanova said.

Another 25 wireless operators worldwide are currently conducting QuickTime content delivery trials, and Apple is in discussions with nearly 30 more about using QuickTime to manage wireless multimedia content, Casanova said.

Apple will continue to upgrade QuickTime to support high-definition video quality and wireless video quality that will “scale from 3G to high-definition” quality, Casanova said.

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