Less talk, more data

Cell phones evolve toward text, photos, entertainment

Jeff Smith, Rocky Mountain News

Published December 11, 2006 at midnight

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Cell phones used to be all about voice.

Today, the big growth area is data - messaging text and photos, watching video, downloading games and music, navigating.

To illustrate the dramatic transformation, wireless data accounted for $200 million of revenue in 2000. This year, it is projected to hit $11.3 billion.

"And it's just going to get bigger and bigger," said Joe Farren, spokesman for CTIA, the Cellular Telecommunications Industry Association. "What was a cell phone is now a multifunctional lifestyle tool. You essentially have the power and function of a desktop computer in the palm of your hand."

Linda Barrabee, an analyst with The Yankee Group, said last week during a conference call with reporters that carriers are looking to data - especially mobile entertainment services - to offset the decline in voice revenues per subscriber.

"It's a great time to be marketing wireless," said Jeni Bell, Cingular's director of marketing for the Rocky Mountain region. "There's so many fun gadgets."

But views vary as to which services and gadgets will become big revenue hits and which will be just passing fads or flops.

Text messaging has been hot for several years now - with about two-thirds of teens regularly using it, and about a quarter of adults. But messaging services, with the exception of picture messaging, are beginning to plateau.

So carriers - which have been upgrading to higher-speed networks - are looking for growth to come from emerging entertainment or "infotainment" applications, such as music, video and gaming.

Sprint, for example, has gotten good traction with its music store - generating 8 million downloads in its first year alone.

The problem is that such entertainment applications are dependent on a consumer to invest in a multimedia phone, so the category "is still largely relegated to early adopters," Barrabee said.

For example, only about 3 percent of cell-phone subscribers are actively engaged in watching TV on their phone. Mobile music and video also is in an early stage of development, with the younger demographic really driving the usage at this point.

Seamus McAteer, senior analyst at M:Metrics, said the "sweet spot" remains 18- to 24-year-olds - post-teen, college-age young adults. But marketing efforts can have an impact in attracting older consumers as well.

In general, the older segment of the population is looking for applications that help them with productivity, Barrabee said, such as e-mail services.

Barrabee said Yankee Group surveys have shown that more than 50 percent of consumers are willing to pay more for useful applications - but not a lot more.

Currently, she said, there is a "disconnect" between what consumers say they are willing to spend and the prices of the services.

"Carriers have to do more to deliver more value," she said.

There also is the question of whether the cell phone of the future will become even more packed with features - as it is becoming in many cases - or whether devices will be tailored to specific applications.

British-based Juniper Research analysts have said that most consumers are "turned off" by technology for technology's sake and want services tailored to their needs at a price structure that they can understand and afford.

Many of today's multimedia phones come with 200-page manuals that can be overwhelming to consumers, who may not understand or need all the features.

That's what Martin Cooper, often called the father of the cell phone, said last month when he spoke at a technology conference in Denver. He said the mobile phone of the future must be simpler to use, and he predicted it will be tailored to individual lifestyles.

He promoted in part a company he and his wife co-founded called -Jitterbug, which developed a simple-to-use cell phone primarily for the senior citizen market. The cell phone has huge numbers and clearly labeled functions.

At the other end of the age spectrum, Disney Mobile offers a service that enables parents to control when their child uses the phone and whom they call.

Bell of Cingular said she thinks consumers will see a lot of different things in the future, including more phones packed with applications, such as Cingular's new, slim Blackjack smart phone made by Samsung.

She noted camera phones are getting better in their picture and video quality, and she predicted one of the popular applications in the future will be people sharing videos from one cell phone to another.

"Now that we have technical ability to get everything on one device, I think we'll continue to see more of that," she said. But, Bell added, "That's not to say we don't have (market) segments" that carriers will target.

By the numbers

Data services is the fastest- growing trend in wireless communications. Among the trends:

$25 billion: Projected revenue for 2010

160 million: The number of subscribers expected to use data services in five years, 80 million more than now

64.8 billion: The number of text messages sent in the first six months of 2006, almost double the number in the same period of 2005

Sources: Yankee Group; IDC

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