Firms dialing up more gadgets

Cell phone companies seeking customers, more revenue

? Everything is tight in the cell phone industry.

The market is nearly saturated. Talk is cheap, literally: Someone is always stealing customers by offering more minutes for less money. Wireless carriers would like to consolidate, but the industry is entangled in debt and shackled to incompatible network systems.

So how are cell phone companies trying to fight the squeeze? By squeezing more stuff onto cell phones.

Digital pictures, instant messaging, Web access, e-mail, downloads of cutesy icons, elaborate ring tones and tons of video games anything that lets people save time or kill time, as some in the industry put it, is being crammed onto phones in hopes that consumers will pay for it.

Whether it will work or turn out to be the next big money-draining bust for the industry remains to be seen.

“The idea is, ‘Let’s see what we can throw on the wall and see what sticks,'” said Ken Hyers, senior wireless analyst for Cahners In-Stat. “Carriers are trying desperately to figure out a way to prop up sagging revenue.”

Verizon Wireless is hoping for a bounce from its new “Get It Now” service, which lets people download dozens of ring tones and video games directly over the air.

The downloads start at 99 cents and suck up airtime. Playing the games doesn’t use any minutes. But Verizon hopes that users someday will want to play games head-to-head over the network against friends, which would sap airtime.

Other new cell phones have camera attachments that let users take digital pictures and send them to other phones or e-mail addresses. Overland Park-based Sprint PCS, which recently surprised analysts by announcing its customer base actually shrunk, now plans to sell models with the camera already included.

Mindful that messaging and photo services on cell phones have proven highly popular among youths in Asia and Europe, Sprint is trying to show Americans through ads and brochures all the cool things their phones can do, spokesman Dan Wilinsky said.

Perks may be costly

UBS Warburg analyst Uberto Ferrari believes telecom companies should worry about a future in which too many customers just want to make cheap phone calls and disdain full packages of data services.

Ferrari compares that scenario to the one gripping another expensive field to operate in, the airline industry, where just about the only players turning a profit are discount carriers. Full-service airlines that offer meals and other costly perks can’t charge much of a premium for them because of intense competition, creating a money-losing model.

“Too many bread rolls and your returns head south,” as Ferrari wrote in a recent research note.

Similarly, if new mobile phone services fail to truly excite the populace, wireless carriers that are spending billions upgrading their networks to make such options possible will remain pressured to keep prices low to compete with discount voice-only plans.

For now, many numbers don’t look good.

Only 8 percent of cellular customers are definitely interested in using their phone or another device to get wireless Internet access, according to a July survey by Solomon Wolff Associates, a New Jersey-based market research firm. The figure was 18 percent in January 2001.

New developments

That increases the pressure on people working behind the scenes to develop new mobile-phone applications.

Engineers at Qualcomm Inc., which invented one of the main cellular transmission standards, have bet heavily on a technology they developed called BREW, which enables new wireless services like Verizon’s Get It Now package to be programmed and delivered.

Jason Kenagy, senior director of product management, says cell phone users in Japan already are using location-based programs that can map their position and addresses they’re seeking. Another BREW application popular in South Korea fuels an online dating/chat service called Skylove.

Kenagy predicts improvements soon in the use of pictures to enliven SMS short message service the quick text messages that can be written and sent on wireless phones. He called that a “low-hanging fruit” for American wireless carriers because digital photography is already popular.

Simple needs

But wireless companies still are far from winning over people like Jen Carson of Woodbridge, Va.

Carson, 29, used to have a Sprint PCS wireless phone and enjoyed being able to check e-mail on it while waiting to pick up her daughter at school. Since she makes nearly all of her mobile calls during business hours, she decided she needed more daytime minutes.

When Sprint couldn’t offer a plan she wanted at a price she was willing to pay, Carson jumped to Verizon. Her new phone is a low-end model without e-mail but she’s fine with that.

“It’s all about minutes for me,” Carson said. “Who gives me the best deal for my minutes?”

She was briefly jealous when some friends excitedly showed her new phones that could take and send photos. But “they got over it after the first day,” Carson said. “The pictures aren’t so good.”