Wireless data market still up in the air? Promise lures investment in equipment although revenues remain small

Electronic News, July 27, 1992 by Andrew Collier, Dan Cray

Promise Lures Investment in Equipment Although Revenues Remain Small

NEW YORK--Roaming around the Democratic National Convention, journalist Peter Eisner beckoned colleagues to test-drive software he developed for transmitting stories by radio. Plugging an Ericsson GE Mobile Communications Mobidem wireless modem into his notebook computer, Mr. Eisner tapped into a base station specially installed by wireless data provider RAM Mobile Data and sent his story to a colleague on the convention floor.

While Mr. Eisner's demonstration drew praise from potential clients, it masked a prevailing belief that wireless data, while attention-getting, remains an elusive market.

There may be 10 million potential wireless data customers in the U.S. today, including everyone from laptop lovers to roving in-house technicians, but there are currently only some 35,000 paying customers for such public packet networks, and another 15,000 users who send data over circuit-switched cellular lines, estimates Gartner Group analyst Joe Baylock. Those figures exclude users of the Ardis Network, a Motorola/IBM joint venture that was confined to IBM's employees until two years ago, when the two companies decided to go public with the service.

Revenues from wireless data services are quite small. Combining both portable and vehicle-based systems, those revenues are expected to reach $145 million this year, growing to $192 million in 1993 and $303 million in 1994, according to Ira Brodsky of Datacomm Research in Wilmette, Ill.

The figures become much more cloudy when assessing wireless modem markets. Dismaying as this may be, they haven't discouraged service providers from investing huge sums in new networks, and modem companies from convincing notebook and palmtop manufacturers to design portable modems into their machines on the assumption that the market will grow sharply.

RAM Mobile Data, a partnership between RAM Broadcasting and BellSouth, aims to cover 100 cities by year-end. Along with the Mobidem modem, the RAM system uses the Mobitex mobile data network technology developed by Ericsson to provide nationwide access by packet switching. In March, RAM said it would buy 10,000 Mobidem units beginning in April, 1992.

"We see that consumer market carrying us for a couple of years, but the next generation we're going to see are the Sony's, and that's where you're going to see the profit," said Bill Frezza, director of marketing and business development at Ericsson. "We believe this is a million-plus (annual units shipped) business in the long run."

Aside from its 15,000 IBM users, Ardis has added another 15,000 outside users and plans to reach a total of 35,000 by the year-end. Ardis service is currently available in 400 cities.

More significant than its move to add customers is Ardis' recent announcement that it would license its protocol to outside manufacturers, but firms examining the Ardis protocol have run into a stiff license agreement from Motorola. Terms include a request that Motorola not be excluded from products developed using the Ardis patent, and any foreign companies licensing the protocol must guarantee that Motorola can sell equipment to an Ardis-based service, according to Jeff Morris, vice president of marketing for Motorola's Mobile Data division.

Also, confronting criticism that the Ardis system, at 4.8Kbps, lacks capacity for busier urban areas, Ardis is updating its system to 19.2 Kbps. That requires changing controllers in the service's 1,300 base stations.

Another potential power house in wireless data services in Celluplan II, a 10-company consortium, led by IBM with the backing of all but one of the regional Bell operating companies, which is developing an open protocol for data transmission over cellular telephone channels expected to enter service sometime next year.

The conflicting services, which also include paging systems and the expensive method of transmitting data over circuit-switched cellular channels, have left the equipment suppliers scrambling to keep up with the myriad protocols demanded by each.

"All the hardware guys want to be promiscuous, while the service guys want commitment," said Gartner's Mr. Baylock.

Thus far, the two biggest vendors in wireless modems are Ericsson, with its Mobidem, and Motorola, with the 405i, introduced last year. Others, including Rockwell International and AT&T Microelectronics, are actively investigating the market.

Conspicuously absent from the fray are the traditional, wireline modem vendors, such as Hayes. "We just don't have anything to say about that now," commented a Hayes spokesman.

As the most firmly established vendor, Motorola has won a significant number of design wins with its 405i, an internal modem containing the Motorola 56156 digital signal processor (the latter device hasn't been made commercially available). They include Poquet Computer, NCR's 3125 Pen computer, Tandy's Grid Systems and IBM (the PC-Radio), and industry reports suggest AT&T is about to select the 405i for its Safari notebook computer. Motorola has produced three versions of the 405i--800MHz, 950 MHz and 450MHz.