They Won't Take No for Answer

By James S. Granelli

Nov. 6, 2004 12 AM PT

Times Staff Writer

When it comes to cellular phones that can do all kinds of tricks -- browse the Internet, create video clips, get a fix on a location by global satellite system, listen to the radio and watch television -- Americans seem to have a few hang-ups.

About all they want to do with their phones, at least so far, are the basics: send and receive calls and, perhaps, check their e-mail.

“There’s no killer app that carries the weight of voice or maybe e-mail or messaging,” said analyst Charles S. Golvin at Forrester Research Inc. in Cambridge, Mass.

Yet that isn’t stopping a host of companies from trying to turn cellphones into what Intel Corp. Executive Vice President Sean Maloney calls “mobile computers.”

“We’re beginning to see almost a merging” of the cellphone and the laptop, said Maloney, who uses his Blackberry or Treo handset not only to call the office but also to tap into his company’s computer networks and keep up with the latest rugby scores.

The reason for all the elaborate offerings is simple: Carriers such as Cingular Wireless and Verizon Wireless -- along with software developers and parts suppliers such as Intel -- are looking for the next big income generator as revenue growth from voice calls flattens.

“They want to stand on as many legs as possible,” said analyst Roger Entner of Boston research firm Yankee Group.

The key issue for the industry is: Will the effort be for naught in the U.S., where there appears to be some kind of cultural resistance to souped-up cellphones?

Sales of ring-tone downloads, for instance, are expected to total more than $3 billion worldwide this year. But the U.S. accounts for just a fraction of that market -- about $158 million.

Some companies “obviously believe that new services are the holy grail,” columnist Rhonda Wickham wrote recently in the trade report Wireless Week, after a slew of new bells and whistles for cellphones were introduced at an industry event in San Francisco. “However, the original and genuine holy grail was voice and then later e-mail via wireless data networks. Nothing has come close.”

For their part, carriers say they aren’t worried about the lack of enthusiasm displayed in the U.S. for all the extras. They see what’s happening elsewhere in the world -- especially in places such as Japan and South Korea, where people love their camera-video phones -- and believe that they can duplicate that success here.

At this point, though, carriers aren’t exactly sure what will catch the public’s fancy beyond e-mailing and, increasingly, instant messaging. So they’re throwing everything against the wall to see what sticks.

Many business travelers prefer hand-held devices such as the Blackberry from Research in Motion Ltd. and the Treo from PalmOne Inc. Originally designed as digital organizers, the oversize devices have expanded to add cellular phone service and Internet capabilities. They include keyboards, large screens, megapixel digital cameras, video, stereo sound and a host of desktop features such as calculators and address books. They also boast diversions such as solitaire.

At the same time, wireless carriers are putting many hand-held functions -- even foldable keyboards -- on supercharged cellphones to let users browse the Internet; make and send video, photos and text messages; check e-mail; download games; and use various instant-messaging programs.

In the end, some market watchers have become convinced that no single function will become the next big thing. Rather, different services will appeal to different people, and carriers will have to target each market.

“What may be a killer app for you may not be a killer app for me,” Golvin of Forrester Research said.

Meanwhile, the industry is encouraged by reports like one from Yankee Group, which predicts that total U.S. revenue from all cellphone data content -- basically everything except voice calls -- should jump fivefold by 2008 to $15.6 billion from $2.75 billion.

Voice calls should bring in $104 billion for the industry in 2004, but they’re forecast to grow a comparatively small 9.6% over the next four years to $114 billion as competition among carriers and from land lines, Internet phone service and other new technologies holds prices down.

“The question is if data revenue will keep overall revenue growing,” said Yankee Group researcher Adam Zawel.

Of course, some growth areas are being more openly embraced than others.

Pornography is poised to drive more cellphone customers, especially teenagers, to dial into the Internet and download adult television and video clips.

And that creates anxiety among company executives, who are well aware of America’s moral values.

“This is poison for the industry,” said Steve Largent, president of the Cellular Telecommunications and Internet Assn., who is helping spearhead a consortium to fight pornography.

Zawel estimates that adult content such as porn and gambling will provide carriers with $1 billion in annual revenue worldwide by 2008, though the U.S. portion of that is projected to be only $90 million.

Boston Communications Group Inc. in Woburn, Mass., is developing a program aimed at letting parents block porn on children’s cellphones that are part of family shared-time plans.

In Britain, Vodafone recently instituted a restrictive opt-in policy to combat porn content that is already plentiful in Europe. The continent’s largest cellphone company, which also owns 45% of Verizon Wireless, blocks all adult content until a subscriber can prove he or she is at least 18 years old.

“That’s more restrictive than the online world of personal computers,” Zawel said. “On the other hand, by being very strict about age requirements, Vodafone now can expect that regulators will give them the opportunity to make money” in this area.

(BEGIN TEXT OF INFOBOX)

Always on

Mobile phone companies are packing handsets with new features as they search for ways to keep customers.

Percentage of users whose phones had special services or features:

Text messaging

2004: 63

2003: 27

Picture messaging

2004: 12

2003: 2

Instant messaging

2004: 33