Wireless services saw an increase in business last year.
ATLANTA – Having eclipsed the long-distance sector in revenue and quickly closing in on the local-phone business, the U.S. wireless industry is becoming the most important part of the telecommunications industry.
But wireless executives and experts at a trade show said this week that the sector is only slowly beginning to realize its power and hasn’t quite nailed down the formula to consistent, rising profits.
Amid the bevy of new gadgets, phones and services that typically dominate the talk at the Cellular Telecommunications and Internet Association’s Wireless 2004 show, the industry ruminated on its place in the world and where it’s headed.
Experts and officials agreed that the sector was re-energized by camera phones, faster data networks and industry consolidation after a couple of slack years. But they also said that the industry has to improve the usability and quality of its products and services.
“We need to make this big leap to the next level, not just 10 to 15 percent growth year over year,” said Arthur Kurtze, a partner at Cap Gemini Ernst & Young and former Sprint PCS chief operating officer. “We need to do a big leap.”
Another concern is whether the wireless industry will come in for greater regulation as it becomes a bigger part of the telecommunications industry. But the nation’s top regulator said he didn’t see that happening.
“Let the government be available for the most acute problems, the most significant problems for which there are no clear solutions,” said Michael Powell, chairman of the Federal Communications Commission.
He commended the industry for producing “dividends” for consumers and serving as a model for light regulations.
In 2003, U.S. wireless services’ revenue totaled $89 billion, up from $78 billion in 2002, according to the Telecommunications Industry Association.
By comparison, the long-distance business saw revenue fall to $78 billion from $85 billion and the local-phone business declined to $118 billion from $121 billion.
The concern is that even with that healthy revenue growth, many wireless carriers aren’t returning positive profits consistently. Most of the money they make comes from an intensely competitive phone business where prices drop every year.
Also, data services for the most part have not added meaningful profits, with the exception of text messages and cellphone ring tones.
But the future looks promising, experts and industry officials said.
The industry sold 520 million phones last year, up 20.5 percent from 2002, according to Gartner Inc. About 50 million of the phones sold had cameras in them, up 174 percent, according to In-Stat/MDR, another research firm.
While most users with camera phones aren’t jamming the cellphone networks with pictures of themselves, industry executives expect a big growth spurt as more people buy the devices and post pictures on mobile Web logs, or moblogs.
“There are more digital cameras being sold through phones than through digital cameras,” said Per-Arne Sandstrom, LM Ericsson AB’s executive vice president and co-chief executive. “It’s a fantastic product.”
His company has set up a moblog – http://experience.ericsson.com/moblog/ – where users can post pictures from the wireless show.
This year, virtually every major cellphone maker has unveiled camera phones that can take pictures with resolutions of 1 megapixel or greater. That’s considered a significant quality benchmark.
Wireless companies are also aggressively courting music and other media companies to partner with them on selling downloaded songs, ring tones and even video.
While those services have so far been tiny, experts say, they are poised to take off as devices become more sophisticated, networks faster and customers more receptive.
“Everything has fallen into place to make money at this,” said Mark Lowenstein, an industry consultant.
Some of the wireless industry’s growth and profits will come at the expense of traditional telephony and Internet usage. More consumers are expected to cut their home phone lines or make more calls on a cellphone.
That movement should be helped by Verizon Wireless’ announcement that it would extend a high-speed wireless network that runs at about two-thirds the speed of digital subscriber lines to 75 million Americans by the end of the year. Much of the rest of the country will get the service in 2005.
The nation’s largest cellular provider signed contracts worth $525 million and $167 million with Lucent Technologies Inc. and Nortel Networks Corp. respectively.
Other notable announcements from the show:
AT&T Wireless Services Inc. said it would press on with a high-speed network in four cities by the end of the year before Cingular Wireless finishes its purchase of the company.
The new networks will be in Seattle and San Francisco and two other cities, AT&T Wireless said. The company had previously said those two others are Dallas and San Diego, but it wouldn’t confirm that on Monday. AT&T Wireless has been operating a test network with Ericsson equipment in Dallas.
Richardson, Texas-based Spatial Wireless Inc. said it has entered a deal for Alcatel to resell its telephone switching equipment.
Nokia Oyj said LG Electronics will license its Series 60 cellphone software for use in its high-end smart phones.
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(c) 2004, The Dallas Morning News.
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