Infrastructure
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6/11/2004
01:32 PM
Carl Zetie
Carl Zetie
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Idealism, Optimism, And Cynicism In The Mobile Market

Advancing mobile and wireless communications isn't without pain, Carl Zetie notes, nor a certain number of lightbulbs.

In a recent column I described how technology optimists create the future, but that the price of being an optimist is that you have to be willing to fail. A conversation prompted by that column set me to thinking about some of the most famous failures in the mobile and wireless market, and what can be learned from them.

Not all failures are the noble kind that come from sincere belief in a worthwhile, yet flawed, product--in other words, from an excess of idealism. Sometimes, failure is the product of greed, arrogance, or just plain underestimating the intelligence of the buying public. Unfortunately, during the dot-com boom and the wireless bubble, we saw all too many examples of the latter. Both kinds of failure carry important warnings about what is to come as signs of growth re-appear in the world of wireless and mobile.

Excess Of Idealism
Probably the best-known recent example of failure due to an excess of idealism is the Apple Newton. The Newton was an innovative, even visionary, idea. Apple designers and engineers foresaw the potential for a personal-information device that individuals would carry with them, and they realized that the need wasn't being met by the "organizers" of the day. Unfortunately, Newton was ahead of its time: neither the market nor the technology was truly ready. The Newton also wasn't helped by some crucial design errors. In an excess of idealism, Newton's designers decided that handwriting recognition was critical to the user experience, and committed to an all-or-nothing strategy of accepting the user's natural writing. (Ironically, the kind of keyboard that the Newton sought to replace wouldn't look out of place to today's BlackBerry user, and far exceeds the usability of the phone keypads commonly used for text messaging.) Because of this critical choice, Apple set itself a bar for acceptability that the technology of the day simply couldn't live up to. In fact, the handwriting recognition fell so far short of expectations, it quickly became the subject of a widely circulated E-mail joke in the then-popular lightbulb format:

Q: How many Apple Newtons does it take to change a lightbulb?
A: Foux! There to eat lemons, axe gravy soup.

Pretty soon, far more people were familiar with the Newton joke than had ever handled the Newton itself, and at that point its future was doomed. Not much later, along came the Palm and achieved the success that the Newton had missed. Palm's designers realized that handwriting recognition didn't need to be perfect, it just needed to be good enough, and that users would be willing to compromise a little on their writing if the rest of the experience was compelling. Instead of technical virtuosity, Palm focused on ease of use and ease of synchronization in a small, light, stylish package. The rest is history.

Failure Of Optimism
One of the great failures of excess optimism was wireless stock trading. Back in 2000 in the midst of the bubble, level-headed financial firms convinced themselves that millions of us were so impatient to trade in and out of our mutual funds that we'd pay $30 a month or more for the ability to do so on a phone or PDA at any time of the trading day. Never mind that any serious trader who really needed to trade so urgently and frequently would probably be sitting at a desk surrounded by information screens. Ignore the fact that any smart individual investor who was concerned about sudden stock movements should know that they should just set up a limit order and get on with their life, not wait for an urgent call from their broker or alert on their phone (unless, of course, they are Martha Stewart).

Decision makers on Wall Street and in Silicon Valley seemed to reason that they loved the service, so why wouldn't we all? Encouraged by the excitement of journalists and even some analysts, Charles Schwab & Co. said that it expected half of its trading to be conducted over wireless devices by now! I was one of the few voices of skepticism: in 2000 I had commented that "Once you get outside Wall Street and Silicon Valley, it's hard to find people excited about trading stocks while riding the bus to work," but I was in a lonely minority. By early 2002, the pioneer vendors providing the middleware and related services (such as w-Technologies) had sunk without a trace, and wireless trading services were being discontinued or scaled back.

Although not as noble as Newton's failure, and easy to ridicule at this distance in time, in fairness it should be said that failure of wireless stock trading was really a failure of optimism. Executives projected their own circumstances and desires onto a wider public that simply didn't value the service the way the executives did. Of course, this is a fatal mistake in marketing any product or service, but one that was repeated frequently in the wireless bubble.

Driven By Cynicism
My last example of failure is one that is redeemed neither by optimism nor idealism, but driven by cynicism. The technology was one that many Americans may never have heard of, namely telepoint. This was a short-lived mobile phone system that debuted in 1989 in the United Kingdom and was quickly dubbed, to the chagrin of the marketing people, "the poor man's mobile phone". Four companies launched telepoint services: BT and Mercury, the two major phone service providers in the United Kingdom at that time, with Phonepoint and Callpoint, respectively, and Rabbit and Zonephone, two startups. As cell phones were still new and very expensive to use at that time, these companies came up with the idea for a cheap version of a wireless phone. Unfortunately, it didn't work everywhere--you had to be standing within a few feet of a special beacon (identified by a plaque several feet up a wall) so that the low-power phone, which used a technology similar to today's cordless handsets, could communicate with the beacon transmitter.

The beacons were initially only available in the center of London, not anywhere remote where you would really appreciate a mobile phone. What's more, you could only make outgoing calls, even when you were in beacon range. And you couldn't actually move while making a call, because you'd quickly step out of range of the beacon. In other words, this invention cleverly combined most of the drawbacks of using a phone booth with a significant fraction of the expense of a conventional mobile phone in one large, clumsy handset, while costing millions of British pounds in investment to install the beacon infrastructure.

Meanwhile, the costs of a real mobile phone were rapidly falling. To the surprise of almost nobody but their investors, the service didn't last very long and is now barely remembered, even in Britain. It was a technology that its own backers knew was inferior to alternatives, and would never themselves consider using, but they seemed to think that other, unidentified people would pay for it.

The telepoint technology itself is now forgotten in Britain (derivatives live on in a couple of Asian cities), but its lessons shouldn't be: Don't underestimate the power of Moore's Law (that data density will double approximately every 18 months) to rapidly lower costs. Don't underestimate the importance of the network effect. And never underestimate the intelligence of the target market.

Carl Zetie is an analyst with Forrester Research.


To discuss this column with other readers, please visit the Talk Shop.

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