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Analysts Criticize 3G, Wireless Web for Consumers

While wireless device manufacturers tout the benefits of the wireless Web to consumers, their primary target should be businesses, a wireless analyst said in a new report.

Paul Mulligan, senior analyst at eMarketer in New York, said that while the Internet was first commercialized by engaging consumers and then businesses, the wireless Web will be driven by businesses.

“In business, things are much more targeted and done out of necessity. Businesspeople are in the airport and in the field, and a lot of those applications [targeted to them] will take off,” Mulligan said.

He pointed to a Wirthlin Worldwide focus group of executives from Fortune 1,000 companies, in which 84 percent of the executives said their companies' needs for wireless services will grow significantly. Seventy-one percent of sales personnel at the companies said their firms need Web-enabled phones and personal digital assistants.

Businesses will recognize the value of an internal wireless system much more than consumers, who may balk at fees and not see the need for services.

“Mobile data services may be a luxury item for consumers, but for companies, these services are fast becoming an essential tool,” Mulligan said.

Mulligan and other analysts are particularly skeptical about consumer acceptance and future availability of third-generation wireless services, which promise greater bandwidth to deliver streaming audio and video content, as well as high-speed Internet access. The technologies are not in place, are expensive and do not have a proven consumer demand, they say. “We don't even know what the market is going to be yet,” Mulligan said.

Consumers may not use the services and will not appreciate that they must be a certain distance away from the 3G station in order for it to work, Mulligan said, adding that wireless companies may be investing million of dollars in the technology unnecessarily. Licensing costs alone for five operators in the United Kingdom were $22 billion, he said.

Only a few of the current and planned 3G and wireless Internet services will be used by consumers in the future, according to analysts at Alexander Resources in Dallas. In its recent survey of 1,000 business and residential consumers who examined 32 current and planned services, including travel information, identifying current locations, e-mail, m-commerce, and audio and video clips, Alexander Resources found that only four services would have the most immediate and widest market acceptance.

People were most interested in messaging, finding locations and addresses, identifying current location in relation to surroundings, and product/service descriptions and pricing. These services require lower bandwidth and are available now.

“A lot of the services that require higher bandwidth would be accepted in the marketplace, but further down the road and not as broad acceptance as these [the four services],” said Jerry Kaufman, president of Alexander Resources. “For marketers, this tells them which services to focus on: the four, as opposed to multimedia and m-commerce. If you're developing multimedia ad content, you're going to have to wait a long time before there is widespread acceptance,” he said.

In addition, Alexander Resources found that 44 percent of the 32 planned and current services would require significant consumer education and marketing exposure to be successful.

Despite the hype of the wireless Internet and 3G services, wireless providers have not yet offered consumers compelling reasons to go online via cell phones and mobile devices, according to Mulligan. “Clumsy hardware, limited content, slow connections and high costs are just some of the drawbacks customers are complaining about,” he said.

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