Remember the Internet back in 1994?
Slow modems. Crude Web sites. Little e-commerce. No streaming audio, MP3 music files or movie clips.
In retrospect, it's easy to see that the Internet was an embryonic network, but one whose potential was about to explode. And that's exactly how many observers feel about today's wireless phone networks.
Cell phone usage got dramatic publicity in the wake of the Sept. 11 terrorist attacks, as the news media cited dozens of cases in which people trapped in the World Trade Center towers or on hijacked airplanes were able to phone loved ones.
Such reports only heightened the sense that cell phones are arriving as a mass-market technology, opening up new avenues for communications and commerce.
"There's no question it's going to take off," said Peter Firstbrook, a senior research analyst at Stamford, Conn.-based META Group, a technology research firm. "But right now we're still struggling with a lot of technology that still has to be rolled out."
Even before the events of Sept. 11, the audience of users had grown spectacularly. The Yankee Group, a Boston-based research and consulting firm, expects that about 130 million Americans will own cell phones by the end of this year -- up nearly 20 percent from last year and up 50 percent from two years ago.
Several reports suggested that cell phone purchases leapt still further after the Sept. 11 attacks. But analysts said that the boost of perhaps 2 million customers amounts to little more than a brief acceleration of the ongoing growth in cell phone sales.
"People are very sensitive to issues of security and staying in touch, and cell phones certainly help you do that," said Martyn Roetter, vice president and director of Arthur D. Little's Communications, Information Technology and Electronics Group.
America's emergence as a wireless nation is being driven by ever-lower prices for both service and phones. No longer just a business technology, cell phones have successfully made the transition to the consumer market, especially with free minutes at so-called non-peak calling times.
"When are consumers calling their friends and relatives? In the evenings and on weekends," said Roger Entner, Yankee Group program manager.
By year's end, the number of cell phone owners will equal nearly half of all U.S. citizens. Cell phones are already present in about six in 10 households. It's a very large and affluent market, but the lack of technology to support advanced applications indicates that voice calls will remain the primary selling point for wireless phones in the near term.
In fact, the falling price and growing adoption of wireless phones has some analysts predicting that the devices will soon overtake traditional telephones, known in the industry as "wireline" or "landline" phones. A recent survey of mobile industry professionals found that 86 percent expect that wireless phones will overtake traditional telephones in the next decade.
"We're in the middle of a transition from wireline to wireless. More minutes are migrating to the wireless networks every day," said Jeff Kagan, a telecommunications industry analyst.
"It's a change in behavior. It takes time. But ultimately, over the course of the next several years, you're going to see a growing percentage of users opting for wireless as their main phone," Kagan said.
The first effects are being seen in long-distance usage, as consumers increasingly opt to use their wireless phones to make long-distance calls they once placed with traditional phones.
Even so, the wireless industry might have trouble keeping up the growth rate that it has shown thus far. Many of the best prospects for becoming cell phone customers have already subscribed. A substantial portion of those that remain either aren't interested in the technology or, as with many teen-agers and college students, can't pass the credit checks needed to sign a subscription contract.
To turn those people into customers, analysts said that the wireless industry needs to create new products -- such as large-sized phones for senior citizens or prepaid services for teen-agers.
In some cases, that might mean making products that are simpler and easier to use. It's a worthy goal, but one that could pose a major challenge to an industry used to cramming dozens of features into products in an effort to make them more popular.
That strategy has proved successful in luring the "power users" who hunger after the latest innovation. But it has also been intimidating to other customers, who have been bewildered by the sheer complexity of their wireless devices or who have simply avoided purchasing them altogether.
Meanwhile, the adoption of wireless Internet services has been proceeding much more slowly, thanks to high costs and poor technological performance. But IDC Research of Framingham, Mass., sees that trend changing.
"Business users will lead the way in wireless adoption, as they are usually the early adopters and are willing to pay for services and applications they see valuable," said Charul Vyas, senior research analyst with IDC's Wireless and Mobile Communications program.
The company forecasts that the number of business wireless Internet users will grow from 2.6 million in 2000 to more than 49 million in 2005.
For that growth to happen, wireless service companies will have to roll out more of the next-generation technology they have planned. Such advances in the wireless networks would permit faster Internet data transfers and even wireless video transfers.
Some analysts say that regulatory changes are needed to help speed that day along. "Consumer demand is quickly overtaking the wireless infrastructure," said Travis Larson, a spokesman for the Cellular Telecommunications Industry Association in Washington, which supports a lifting of federal caps on the wireless spectrum that carriers can own.
Firstbrook, the META Group analyst, said mobile computing and instant messaging will drive business and consumer interest in the years ahead as people get more familiar with the potential of wireless technology.
"It's like the early days of the Web," he said. "There's so much more we could be doing here."
Distributed by the Los Angeles Times-Washington Post News Service
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