Transcript of "World-Wide Wireless State (Ch. 6).doc"
An Update on Wireless Communications and Mobile Commerce
A recent Forrester Research survey showed that 40 percent of the Fortune 2,500
businesses in the U.S. have equipped or are equipping their workforces with wireless tools.
Another 30 percent are considering using wireless systems.
Third-generation, or 3G, wireless networks, which promise fast mobile Internet
connectivity, real-time video, and streaming audio, will invade Europe and Asia by next year. In
the interim, European carriers are upgrading to packet-based networks, giving wireless Internet
users faster and “always-on” access – the type of performance that has helped Japan’s NTT
DoCoMo lure nearly 18 million subscribers with its i-mode service.
Up to this point, marketers have tried to sell consumers on the idea that mobile commerce
means using your cell phone to buy a can of Coke from a vending machine or to call real-time
stock orders into a wireless visor. The hype has led to disappointments for consumers who were
promised the wireless Web. What they received instead was text on four-line, black-and-white
screens or shopping menus that require extraordinary patience.
Further, a collection of competing and slow wireless network standards and a devotion to
desktop Internet access has hampered U.S. adoption of the mobile Internet. Researchers state that
development of wireless networks and mobile commerce in the U.S. lags behind development in
Europe and Japan by two years, and 3G networks will not appear in the U.S. until 2004.
Meanwhile, Finnish motorists are using Web-enabled phones to buy gas and Japanese subscribers
are paying to download Pokemon cartoon screen savers for their mobile phones.
However, the real value of mobile commerce lies in business applications. Domestic
U.S. mobile commerce (m-commerce) – that is, consumers making purchases with mobile
devices – is expected to generate $600 million in revenue by 2003, according to researchers. That
is a tiny fraction of overall online spending, which researchers expect to top $78 billion during
2003. Companies are turning to wireless systems to boost productivity, cut operating costs,
improve competitive advantage, and cultivate customer loyalty. About 50 software companies,
ranging from startups to IBM, Oracle, and Microsoft are beginning to market “wireless
application gateway” software, which will basically offer client companies cohesive, ready-to-
use, wireless technology.
Examples of Mobile Commerce
Federal Express executives say that in some areas, the company increased productivity
30 percent in the early 1980s when it launched its Digital Assisted Dispatch System. FedEx was
able to more efficiently route pick up and deliveries, keeping couriers on the road. Coupled with
the SuperTracker, a handheld device that communicates location, shipping, and other information
about deliveries to customers and FedEx, the company was able to pick up and deliver packages
in real time after 1986. One of the immediate benefits was that the wireless system eliminated
the need to write down numerous addresses per day, saving time and money.
Office Depot teamed with Aether Systems to develop a way to track the retailer’s vehicle
fleet and to capture customer signatures via a Palm- or Pocket PC-based handheld from Symbol
Technologies. Office Depot cannot charge a customer until a signed bill is logged in the system.
With the mobile device, the signature and bill are shipped to the Web and delivered, in real time,
back to the customer. The system has rapidly improved Office Depot’s cash flow.
Networkcar is taking advantage of legacy technology and warehoused information and
transporting them to a wireless world. The newly launched company sells a plug-in device that
connects to computer diagnostic ports that are standard-issue in cars made after 1996. The device
beams vital signs to a dealer, who can remotely diagnose or spot trouble. The advantage is that
dealerships can achieve competitive advantage by maintaining a closer bond with their customers.
Kemet Electronics is the nation’s largest manufacturer of tantalum capacitors (small
heat- and corrosive-resistant components that regulate electricity in devices such as radios and
DVD players). The firm made a deal with IBM’s pervasive computing division to deploy a
wireless network that allows its sales force to access Lotus-based e-mail, calendar, scheduling,
and other corporate information through PDAs, pagers, and cell phones. The system has
increased the effectiveness and efficiency of Kemet’s salespeople.
California utility firm, Sempra Energy, is equipping its engineers with wearable
computers. The engineers currently return to an office to enter information about heating,
ventilation, and air conditioning units run by big users such as hotels. The wearable computers
allow engineers to transmit and receive data and to make necessary equipment adjustments
without leaving customer sites. The company says the devices will save a “ton of money.”
iMetrikus is an online medical treatment provider that is planning on taking their
monitoring services mobile during 2001. The company allows doctors and patients online access
to medical records. Patients can report any medical problems and update their health-care
provider on what type and quantity of drugs they are taking. This is information that physicians
routinely monitor. One iMetrikus client, age 62, checks his blood-sugar level as many as eight
times per day, regularly uploading results onto the Web so his health-care provider can monitor
his status. When he is on the road, which is often, he ducks into cybercafes when possible or
stops at public libraries to obtain some free Internet time. He complains about the trouble he has
maintaining a virtual link to his physician when he is on the road – a link that grows more
tenuous the deeper he goes into back roads. But he sees hope in wireless. As a Verizon cellular
subscriber, he says he had a decent connection throughout most of his travels, although reception
was spotty in parts of Canada.
Every night in the warehouses of McKessonHBOC, the nation’s largest drug wholesaler,
product pickers walk an average of 10 miles through labyrinths of shelves. In a single shift, each
picker tracks down as many as 4,000 products, using computers that the pickers strap to their
wrists. Receiving data over a wireless network, the wrist computers display detailed order
information. If there are several products on a list, the computers map the quickest route to find
them. Pickers then pull the items from the shelves and scan product bar codes with devices worn
on their fingers like rings, allowing their computers to verify that the correct items have been
selected. On occasion, the computers ask pickers questions such as, “How many boxes are left in
the bin?” Pickers type in answers and their computers send out inventory updates.
This is one of many ways that companies are using wireless technology to solve a
fundamental problem: finding their own products. Wireless devices such as wearable computers
and tags that send homing signals are helping companies keep track of assets, from small
warehouse items to truckloads of parts traversing international ports. Wireless technology saves
companies millions of dollars by providing reliable inventory numbers, improving order
fulfillment, reducing in-transit theft, and by accurately tracking goods as they move through the
supply chain. (The warehouse industry estimates that shipping the wrong product and processing
the return costs an average of $100).
Soon, companies will have reliable access to their entire inventory – no matter where the
goods are located in the shipping and storage process. However, creating a wireless warehouse is
not cheap. McKesson spent about $52 million to arm about 1,300 warehouse pickers with
wearable computers and to equip 31 distribution centers with wireless local area networks. The
system, though, has paid for itself quickly and many times over. McKesson, which did $36.7
billion in sales during 2000, saw an 8 percent gain in productivity, an 80 percent drop in incorrect
items shipped, and a 50 percent drop in product shortages. The company no longer does physical
counts of stock and has increased its inventory accuracy to 99.5 percent.
The U.S. military has one of the largest supply chains in the world. Of the 40,000
containers of munitions and supplies shipped by the Department of Defense (DoD) to the Middle
East during the Gulf War, 25,000 were opened prematurely simply to determine the contents.
This confusion resulted in a huge amount of money wasted. Today, the DoD uses Savi
Technology’s technology to attach homing devices to its goods. Savi’s technology can read all
variety of data-collection devices, from bar codes to global positioning (GPS) units, to track
containers of munitions and supplies shipped around the world. For example, a soldier in the
field with a handheld reader can point it at a container and know exactly what is inside.
Savi uses a wireless technology called radio frequency identification (RFID). RFID uses
electronic tags that emit or reflect signals from nearby readers that are part of a wireless network.
The tags range in size from a matchstick to a brick, can store as much as 128K worth of data, and
are used to track relatively stationary goods such as library books as well as more mobile
inventory such as roving animals and expensive hospital equipment. When used with cargo, the
tags are attached to pallets and containers and can be used to identify a container’s contents and
shipping history, including where it has been, who has handled it, and where it needs to go.
RFID tags are read b wireless readers installed at “choke points” along the supply chain,
at ports, warehouses, airport runways, etc. The readers employed by the DoD, for example, beam
data over a local network to a site server, which feeds military systems that enable authorized
users to log on to a Website and check where everything is at any given time.
Singapore Airlines, one of the world’s largest air cargo carriers, has equipped its
distribution hub at Singapore Changi Airport with a wireless LAN and RFID. The hub, an
enormous multi-level building, routes thousands of heavy cargo containers imported and exported
each day. Scanners mounted along conveyor belts read passing RFID tags embedded into the
containers, recording each shipment’s location and contents, creating data that can then be
accessed online. The company is aiming for 100 percent accuracy of shipments routed through
Security is another benefit of wireless tracking. One major computer company uses
Savi technology to secure goods in containers sealed with electronic locks. The locks, fastened
on the inside of a container, can be controlled only by RFID signals beamed from readers
positioned within 300 feet of the containers. Authorized personnel can operate the locks online.
They can also determine who has opened a container, when it was opened, and where. The Savi
technology has helped prevent theft from containing shipments worth as much as several million
Wireless technology is generating increased cash flow for Trinity Development and
Construction Services, a construction management firm. Late in 2000, the company began
using wireless Windows CE-based handheld computers and software that extend Trinity’s billing
system out to its job sites.
For example, now, when $300,000 of materials arrive at the site of a state highway
project, a worker enters the shipment details into the handheld, transmits them to the billing
system at headquarters, and generates a bill for reimbursement by the Ohio Department of
Transportation in the same day. This allows the state to pay Trinity weeks before Trinity must
pay its supplier. And because the money gets there in time, 3 percent of Trinity’s revenue that
used to go to interest payments now contributes to the bottom line. Also, Trinity can often pay its
suppliers so quickly that it earns a 2.5 percent early-payment discount.
At Northeast Utilities, wireless networks are helping the company tackle damage that
could interrupt service or harm the environment in its western New England territory. When
storms cause power transformers to leak, workers hurry out to the sites to assess damage and to
begin collecting data required by regulators. But because these workers now have laptops in their
trucks that connect wirelessly to headquarters, information begins flowing immediately to the
managers, government regulators, and cleanup crews who need it most. Also, if the storm knocks
out power, another wireless application lets managers in any location see on their cell phones
where power restoration crews are most needed.
General Motors’ in-car wireless service, OnStar, has fallen behind schedule on
consumer adoption, and drivers are annoyed by limited services and poor voice-recognition
features. GM has made OnStar standard equipment in about 20 percent of the vehicles it
produces (all upscale models), and provides free basic telematics services such as notifying the
authorities if an air bag is deployed. An undisclosed proportion of subscribers also is paying
$200 per year for the premium plan that includes “concierge” services provided by human
operators, such as making dinner reservations.
The problem for OnStar is that it is behind where GM hoped to have it by now. For
example, GM promised to deploy the OnStar Virtual Advisor, its wireless-Web service, in 2000
but barely has begun rolling out the service during the first quarter of 2001, and at this point only
in the Northeast. Also, a demonstration of OnStar’s state-of-the-art voice-based Web-access
system in November 2000, underscored GM’s continuing difficulty with the noise-polluted
environment of a vehicle interior.
However, OnStar remains ahead of rival telematics applications. Ford Motor developed
the first telematics system several years ago, but mysteriously, never followed up on that effort.
Ford got back around to a serious telematics effort only in 2000, establishing a joint venture with
Qualcomm called Wingcast. The team does not expect to have anything rivaling OnStar until
sometime in 2002. DaimlerChrysler has not disclosed any telematics plans despite that fact that
corporate cousins Freightliner and Mercedes-Benz are among the leaders using the technology.
And Japanese automakers have taken a wait-and-see attitude. Toyota and Honda actually have to
borrow the first telematics systems for their Lexus and Acura luxury brands from OnStar.
GM sees OnStar for the fees the system generates and for how it expands the company’s
relationships with customers into everyday, on-the-road dialogue. New applications that OnStar
will begin deploying in 2001 include remote diagnostics that track conditions from tire pressure
to how much oxygen the engine is getting and providing “air time” for other brand marketers for
Web-based, location-specific advertising.
But while Detroit and Japan struggle to realize the early promise of wireless services in
cars and SUVs, new automotive telematics applications are proliferating in other industries.
Progressive Casualty Insurance, for example, recently finished a 30-month trial of its
telematics network, called Autograph, which feeds information to the company about how far and
when participating drivers operate their cars. By verifying the low-usage claims of policyholders
who otherwise could not escape pigeonholes of insurability, the test reduced premiums by as
much as 25 percent for most of the several hundred volunteer drivers. And what about Big
Brother? “People do not have to have this,” says a company spokesperson. “It’s about choosing
a way that more accurately reflects your driving habits.” While Progressive has not decided
whether to expand use of the technology, it could give the company an advantage in the
hypercompetitive car-insurance market.
Theft-prevention businesses are making moves in telematics as well. Beginning in
February 2001, for $995, a security-conscious car owner can install a new system that serves as a
wireless pinpointing beacon to police if the car is stolen. While existing radio-frequency-based
systems can take precious minutes to transmit a location to police, the new device, developed by
InterTrak Tracking Services works so fast that it gives officers a decent chance to find the
thieves. Once the police have the car in view, they can let the company know and the company
will stop the engine.
Trucking companies have been using telematics applications for several years. Thanks to
a system that pieces trucks and their routes together like a nationwide puzzle and keeps track of
vehicles in real time, drivers for Schneider National already know what their next load will be
before they drop the load they are carrying. And now Freightliner, a leading cab manufacturer
plans later in 2001 to begin installing a telematics system that integrates radio, CD player, an
LED screen, voice-recognition capabilities, and access to the wireless Web, on a rig’s dashboard.
The system will boost drivers’ efficiency and safety, Freightliner says, by providing weather,
traffic, load-related information, and e-mail – which drivers can access without having to take
their eyes off the highway or hands off the wheel.
Terms to Know
AMPS: Advanced Mobile Phone Service. An analog cellular radio standard and the foundation
of the U.S. cellular industry. AMPS represents the first generation of wireless networks.
Bluetooth: A short-range wireless technology that promises to eliminate the spaghetti of cables
behind your desktop computer, the wires to your stereo speakers, and just about any other short-
distance wiring not needed to carry electricity. Many companies are advancing this technology as
a means for “ad hoc” networking, where two or more wireless devices can communicate with
each other anywhere.
CDMA: Code Division Multiple Access. A digital modulation technique used mainly with
personal communications devices such as mobile phones. CDMA digitizes the conversation and
tags it with a special frequency code. The data are then scattered across the frequency band. The
receiving device is instructed to decipher only the data corresponding to a particular code to
reconstruct the signal.
GSM: Global System for Mobile Communications. This set of standards is widely used in
Europe for cellular communications. Along with CDMA and TDMA, it represents the second
generation of wireless networks.
GPRS: General Packet Radio Service. A way to boost wireless data transmission over GSM
networks. GPRS boasts theoretical speeds as high as 171.2 Kbps -–about 10 times as fast as
current digital networks. Unlike existing digital wireless Internet connections, no dial-up modem
connection is necessary, meaning users can enjoy an “always on” experience similar to that of a
cable modem. European carriers are upgrading their networks to this 2.5G (second generation
and a half) technology to satisfy demand for faster wireless data services.
i-mode: Japanese phone company NTT DoCoMo’s wireless network technology transmits data
at 9,600 bps. DoCoMo charges users based on the amount of data transmitted, not time spent
online, which has helped lure some 17 million subscribers during the last two years. While i-
mode technically competes with the wireless application protocol (WAP), industry observers see
the two technologies converging.
TDMA: Time Division Multiple Access. A method of digitizing wireless communications
transmission allowing a large number of users to access a single radio-frequency channel without
interference. Each user is given a unique time slot within each channel.
3G: Third Generation. A series of standards that will turbo-charge wireless data links. Soon,
European and Asian wireless carriers will be updating their networks to handle super-fast data
transfers and connections to the Internet, enabling real-time video and audio streaming to mobile
devices. This technology is not cheap, however, and some observers say the cost of deploying
such networks will delay adoption in the United States, where wireless technologies have not
caught on as quickly as they have in other parts of the world.
WAP: Wireless Application Protocol. A set of wireless standards that strips Webpages of all
but graphics for display on small screens, such as mobile phones. European prototypes of this
technology were widely panned because of slow transmission speeds and the difficulty of
inputting Web and e-mail addresses using a 12-digit phone pad. WAP backers say these
problems will be solved with better wireless networks and more intuitive devices.
World-Wide Status of Wireless Communications and Mobile Commerce
Population: 127 million
Per capita income: $21,972
Cellular phone subscribers: 69 million (55%)
Land lines: 62 million (49%)
Internet users: 32 million (25%)
Estimated mobile-commerce users: 7.1 million (5.6%)
Estimated mobile-commerce revenue: $1.2 billion
Key wireless platforms: i-mode, 3G
Leading mobile services: Ringing tones, cartoon characters, messaging, banking, stock
trading, and news
Outlook: Low Internet usage means mobile devices provide the only Internet access
many people have. Always-on i-mode packet network means no per-minute
charges. Fees added to phone bills simplify service orders.
Key Players: NTT DoCoMo, DDI Cellular, J-Phone, banks, securities firms, airlines,
Numerous content providers
What’s Next: Rich media services such as video and music; business applications such
As messaging to fleet drivers; location-based services
Population: 1.3 billion
Per capita income: $3,800
Cellular phone subscribers: 63 million (5%)
Land lines: 131 million (10%)
Internet users: 24 million (1.9%)
Estimated mobile-commerce users: 0.3 million (0.2%)
Estimated mobile-commerce revenue: $22 million
Key wireless platforms: GSM/GPRS, CDMA, WAP
Leading mobile services: messaging
Outlook: Still playing catchup
Key Players: Unicom, China Mobile Group
What’s Next: 3G services, mobile purchasing, i-mode services
Population: 7.1 million
Per capita income: $23,000
Cellular phone subscribers: 5.6 million (79%)
Land lines: 3.9 million (55%)
Internet users: 2.2 million (31%)
Estimated mobile-commerce users: 0.2 million (2.8%)
Estimated mobile-commerce revenue: $44 million
Key wireless platforms: GSM/GPRS, CDMA, WAP
Leading mobile services: messaging, banking, stock trading, off-track betting
Outlook: a leader in wireless commerce
Key Players: PCCW, Hutchison, Sunday, SmarTone, banks
What’s Next: 3G services, mobile purchasing, i-mode services
Population: 47 million
Per capita income: $2,518
Cellular phone subscribers: 32 million (68%)
Land lines: 23 million (49%)
Internet users: 20 million (42%)
Estimated mobile-commerce users: 1 million (2%)
Estimated mobile-commerce revenue: $164 million
Key wireless platforms: CDMA, GSM, 3G
Leading mobile services: Downloadable sounds and graphics
Outlook: A concerted push by government, manufacturers, and cellular operators is
making South Korea an international wireless leader.
Target customers: young consumers
Key Players: SK Telecom, Korea Telecom, Samsung
What’s Next: Location-based services, 3G rich media, especially music downloads
Population: 5.2 million
Per capita income: $19,807
Cellular phone subscribers: 4.3 million (83%)
Land lines: 2.8 million (54%)
Internet users: 2.5 million (48%)
Estimated mobile-commerce users: 0.2 million (4%)
Estimated mobile-commerce revenue: $43.2 million
Key wireless platforms: GSM/GPRS, WAP
Leading mobile services: Banking, messaging, sounds and graphics, small purchases
Outlook: Continued high mobile usage and user sophistication
Target customers: young consumers
Key Players: Sonera, eQ Securities
What’s Next: Rich media services, including sound and video
Population: 59 million
Per capita income: $20,447
Cellular phone subscribers: 31 million (52%)
Land lines: 34 million (57%)
Internet users: 18 million (30%)
Estimated mobile-commerce users: 1 million (1.7%)
Estimated mobile-commerce revenue: $171.5 million
Key wireless platforms: GSM/GPRS, WAP, 3G
Leading mobile services: Banking, stock trading, messaging
Outlook: Carriers must recover huge investment in 3G spectrum, leading to focus on
practical commercial services
Target customers: People with specific needs such as online banking
Key Players: BT Cellnet, Orange, banks
What’s Next: Targeted applications such as downloadable sports video clips
Population: 281 million
Per capita income: $31,880
Cellular phone subscribers: 115 million (41%)
Land lines: 186 million (66%)
Internet users: 135 million (48%)
Estimated mobile-commerce users: 4.7 million (1.7%)
Estimated mobile-commerce revenue: $728 million
Key wireless platforms: The United States is still a hodgepodge of competing wireless
standards. Carriers are split between CDMA and GSM networks. WAP is
struggling. Wireless PDAs offer promising forays into wireless Internet access
Leading mobile services: Wireless e-mail, product-tracking, enterprise applications,
Outlook: Web-clipping services and small screens are not igniting consumers’ passion.
The highest cellular penetration is among business users, and smarter carriers
and applications vendors are aiming for enterprise m-commerce tools.
Key Players: Sprint PCS, Verizon. AT&T Wireless, and Nextel control large digital
Networks. They must battle Yahoo! and Microsoft, which control applications,
content, and subscribers. Application developers such as Omnisky (wireless
Web access) and Aether Systems (enterprise data services) are creating their
What’s Next: Wireless access to enterprise data for supply chain management, sales
force applications, and business-to-business transactions.
Population: 796 million
Per capita income: unknown
Cellular phone subscribers: 10 million (1.3%)
Land lines: 20 million (2.6%)
Internet users: 3.2 million (.4%)
Estimated mobile-commerce users: 100,000
Estimated mobile-commerce revenue: $3.9 million
Key wireless platforms: WAP
Leading mobile services: messaging
Outlook: Limited bandwidth and poor security will curb rapid growth in the one country,
South Africa, where m-commerce might have a future.
Key Players: Carriers MTN and Vodacom (primarily South Africa)
What’s Next: By 2005, 15% of South Africa’s population will be using some form of
m-commerce. The rest of the continent will have only 700,000 users by 2005.
Population: 169 million
Per capita income: $5,810
Cellular phone subscribers: 24 million (14%)
Land lines: 29 million (17%)
Internet users: 11 million (7%)
Estimated mobile-commerce users: 100,000 (.05%)
Estimated mobile-commerce revenue: $7.6 million
Key wireless platforms: CDMA networks debuted in March, 2000, but handsets are still
too expensive for most Brazilians. The country will soon sell 2.5G licenses,
which will enable the high-speed, packetized networks for advanced business
Leading mobile services: Wireless banking. Runaway inflation and currency crises have
made Brazilians obsessive about checking bank accounts, so banks are pushing
information and transactions on a mobile platform.
Outlook: Mobile should become a popular alternative to costly computers and per-
minute ISP fees. Yet outdated government licenses allow carriers to charge only
for voice services. Until they can charge transaction fees or per-packet fees,
most will not bother to roll out m-commerce services.
Key Players: Telefonica Cellular, ATL, and Telemig. Big banks such as UniBanko and
ITAU will continue to push new technologies because they are the premier
consumer brands in Brazil.
What’s Next: Business services are about two years away.