Wireless May Come First as Internet Path

The prospect that high-capacity access to the Internet will be available soon via wireless devices is exciting techies in Silicon Valley and investors on Wall Street and overseas.

Stocks of cellular telephone makers Motorola, Nokia of Finland and L.M. Ericsson of Sweden are selling at or near new highs because of expectations for the future value of wireless systems.

Those expectations also are behind the mammoth takeover attempt in which Britain’s Vodafone AirTouch, the cellular phone company that owns AirTouch Communications, is offering $144 billion in stock for Mannesmann, a German telecommunications giant.

But more than stock market fever is involved. There is technological substance behind the outlook for wireless Internet.

Cisco Systems, the San Jose-based provider of Internet network routers and connectors, is working with Broadcom, the Irvine-based semiconductor maker, to develop a wireless Internet system that won’t be impeded by the line-of-sight difficulties that buildings and mountains normally present to microwave communications.

“We’ll have a demonstration of the technology in the first half of next year,” says Henry Nicholas III, president and co-founder of Broadcom, who hopes to see sales of the new systems to businesses and homes within 18 months. The Cisco wireless technology now envisioned would deliver the Internet to fixed locations--offices and homes--not yet to mobile phones.

Major media companies are taking the prospects for wireless Internet seriously. Bertelsmann, the $16-billion-revenue German company that is the European partner of America Online, plans to distribute music and books over AOL wireless Internet within three years.

Cost is a big factor behind the enthusiasm. A wireless system to deliver video, data and voice traffic over the Internet theoretically can be set up at less cost than proposed systems using television cables or more powerful DSL (digital subscriber line) telephone wires.

Timing is another factor. If wireless becomes a widely used Internet medium, Cisco and many companies joining with it in a wireless alliance--Motorola, Nokia, Ericsson, Japan’s Toshiba, South Korea’s Samsung and others--would grab a lead on AT&T; and the telephone companies that are investing heavily in cable and DSL.

At the very least, success of wireless will give Bertelsmann and other media companies a choice of alternatives for distributing their content.

MCI WorldCom, the giant supplier of wireless telephony that is in the process of acquiring Sprint, would be a major beneficiary.

Wireless Internet may well be the preferred form overseas, Nicholas points out, because cable and even wired telephone systems are less extensively developed than in the United States. Bertelsmann’s wireless vision underlines that point.

Yet the race is not merely to the swift. Within three years, SBC Communications, the San Antonio-based owner of Pacific Bell, Ameritech and Southwestern Bell, will complete a 13-state system of broadband Internet for homes and businesses.

Other phone companies have similar timetables. SBC, Bell Atlantic and AT&T; also have substantial wireless telecommunications operations that can be developed to offer Internet access.

The technologies of the Internet and of devices to access it and content to send over it are all developing rapidly, says Douglas Brackbill, president of Visto Corp. “Cisco’s developments are welcome because they hasten the day when more extensive services will be available on the Internet,” Brackbill says.

Visto offers businesspeople access to their personal files, calendars and video conferences over the Internet. The company, based in Mountain View, Calif., has 1 million subscribers and has attracted $32 million in venture capital from General Electric, Compaq Computer and other backers.

The global giant Bertelsmann, which owns Random House publishers; Bantam Books; and BMG Entertainment, one of the world’s largest music publishers, illustrates strikingly the imminent potential of the Internet for media content.

Bertelsmann, a private company based in Gutersloh in northwestern Germany, is already a major player online. It owns 40% of the online bookseller barnesandnoble.com. It operates an online media store in five European countries and owns the largest book clubs in the world, with 1.5 million members in China alone.

But Bertelsmann has prepared for much more online activity as high-capacity, or “broadband,” Internet becomes widely available. The company has put the entire libraries of Random House titles and those of other publishers and all of its music into digital form.

Bertelsmann will be capable of sending whole books or compact discs-full of music directly to customers. “Distribution on the Internet can be global and local at the same time,” says Thomas Middelhoff, Bertelsmann’s 46-year-old chief executive.

Thus the Internet promises to combine the communications capability of the telephone with the content capability of the television. It shapes up as a total environment--one that, incidentally, bypasses today’s shopping malls.

Middelhoff is particularly interested in the possibilities for music because “it is a global product” that easily crosses national boundaries.

“The broadband Internet will have a tremendous impact on music,” Middelhoff says. His company would like to increase its presence in the world music business by acquiring other companies, Middelhoff declares--although few music companies are available at reasonable prices these days.

But Middelhoff says that Bertelsmann is not at all interested in acquiring cable properties or telephone companies or other firms that own the channels of Internet distribution.

With that stance, Middelhoff is predicting that there will be no single dominant channel for delivering access to the Internet. Many channels--wireless, wired and cable--will be open to providers of content such as Bertelsmann.

And the developments of wireless Internet capabilities by Cisco and its allies among mobile phone makers around the world support that vision of multiple ways to the Internet future.

The developments suggest that wireless Internet could be the first and least costly Internet path. Whether that proves ultimately to be true, investors the world over are excited.

In the midst of a revolution as massive as the Internet, everyone is excited.

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James Flanigan can be reached by e-mail at jim.flanigan@latimes.com.