Sellers Wish Public Would Pick Up on ‘Smart’ Phone

As Silicon Valley celebrates the debut of an inexpensive personal computer to access electronic information, the phone industry is struggling to win acceptance for an even cheaper and simpler device for going online: the “smart” phone.

Smart phones, which sport a small display panel, special navigational controls and a traditional 12-button keypad, have been available for more than a year for less than $300. But the telephone industry--which has had a mixed record of selling phone products, ranging from call forwarding to caller ID--hasn’t found many takers, even though the devices are among the cheapest and easiest ways to gain limited access to cyberspace.

“Right now people don’t wake up in the morning and say, ‘Boy, I need one of these screen phones,’ ” said Joe Payne, vice president of marketing for U.S. Order Inc., a Herndon, Va., company that is marketing a smart phone product called Intelifone. “A lot of education needs to take place.”

Smart phones, which let users exchange e-mail, do home banking and shopping, check stock prices and perform advanced telephone call management, are among a host of electronic devices vying to become the information appliance of the next decade.

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The phones are not only intended to challenge the traditional personal computer, but also the network computer, now being promoted by Sun Microsystems and Oracle Corp. as cheaper and easier to use than a PC, as well as new $350 TV-top boxes being marketed by Sony Corp. and Philips Corp. as an easier way to surf the Internet.

At stake is a potentially huge market for equipment sales and electronic information services that will total $1 billion by 1998, predicts Research First Consulting Inc. The Atlanta firm forecasts that new calling services designed for smart phones will generate more than $500 million in additional phone company revenue. They include a new deluxe call waiting identification service that is already being offered in more than a dozen states and permits callers to use many of the advanced call management features many businesses now enjoy.

For example, deluxe call waiting ID teamed with a smart phone enables you to see the name and number of the person calling and allows you to dispose of the call, even if you’re on the phone. You could, for instance, send the incoming call to voice mail, put it on hold or end your current conversation and pick up the new call, all by pressing icons on the display panel of the smart phone (rather than having to remember complex codes).

Similarly, the display panel makes it much easier to navigate voicemail menus, pay bills or get updated information such as weather reports and stock prices.

“Everyone is caught up in the Internet craze, but for a lot of people a computer is overkill . . . [when] all they want to do is check a stock price or find out if school is closed” because of inclement weather, said Sam Cassetta, chairman of SmartServe Online, a Stamford, Conn., company that sells information services to smart-phone users for prices starting at $9.95 a month. “People want a quick and easy way to get information.”

That was the motivation that drove regional phone company BellSouth Corp., telephone equipment maker Northern Telecom and the Bellcore research lab in 1988 to develop a new standard--known as analog display service interface, or ADSI--that enables the telephone network to send both voice and text information to a telephone equipped with a display.

ADSI makes smart phones powerful communications devices by using their screens to display information. Instead of contending with voicemail instructions that require callers to remember the correct digits to press, ADSI lets callers navigate such menus using a visual display.

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Convinced that phones that think for themselves could prove a huge hit with consumers befuddled by more complex personal computers, some of the electronic industry’s biggest names have signed up to promote the technology.

Smart-phone manufacturers include Philips Homes Services Inc., a unit of the Dutch consumer electronics giant Philips; Northern Telecom; U.S. Order; and start-ups such as InfoGear Technology Corp. of Redwood City, Calif.

In addition, a number of firms, such as Smart Serve Online, are helping promote the technology by offering daily horoscopes, stock quotes, local weather reports, school closings and other information services.

But poor marketing by the firms’ phone company partners, as well as the smart phone’s ergonomic shortcomings, have rendered the devices a less-than-ideal Information Age solution. With its paperback-book-size screen and tiny keyboard, the phones aren’t very good at managing e-mail, navigating the Net or doing complex electronic banking chores.

In 1995, according to the Yankee Group, just 250,000 smart phone units were sold. And although the Boston-based market research firm initially predicted that 1 million smart phones would be in use by the end of 1996, it recently lowered that forecast to 700,000 by year’s end.

One stumbling block has been the initially high prices--as much as $900 when the phones first hit the market two years ago, said Garrit Schipper, president of Philips Home Services.

But now that prices have declined to less than $300, some experts see flaws in the fundamental concept of promoting smart phones as an information appliance.

“Banks and others have been trying to push information appliances for years without success,” said Mark Stalhman, president of New Media Associates, a New York consulting firm. The problem, he contends, is that manufacturers can’t sufficiently dumb down the inherently complex task of information management without producing a compromised product.

“We have this dilemma,” Stalhman said: “We want to accomplish computer-like capability in a device that is built to perform simple tasks.” But short of developing a robot that understands voice commands, Stalhman said, he doesn’t think the goal is achievable.

Added David Weisman, an analyst at Forrester Research in Boston: “Screen phones are nice but they are not that useful. The kind of people who are interested in e-mail and electronic home banking are already on line on the Internet.”

Indeed, American consumers have a long history of rejecting products that offer more bells and whistles than useful features, and the telecommunications landscape is littered with ill-fated attempts to modify the telephone.

In 1983, for example, Zenith Corp. yanked its 2-year-old TV-telephone from shelves after selling fewer than 1 million of the units, which let users field calls using their TV and a remote control. Meanwhile, New York’s Citibank and other financial institutions had almost no success persuading customers to bank by phone until the personal computer market took off in the last three years.

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It hasn’t helped that smart-phone skeptics include some telephone companies, which believe the devices are still too expensive and complex for widespread public acceptance.

Although BellSouth and Nynex Corp. have aggressively upgraded their networks to take advantage of some of the advanced calling features offered by the smart phone, others, such as Bell Atlantic and Pacific Bell, are taking a wait-and-see attitude.

“The screen phone technology has been rather expensive and [so] we are not deploying it universally,” said Marlene Muller, product manager for Bell Atlantic. “It’s a new technology, and sometimes it takes a while for customers to get [excited] about new technology.”