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Digital Matters – Issue 36

“Today, we face a genuine threat — the wireless-technology gap.”

Here’s how wireless technology works for me: I’m in a cab, coming back from an airport. I call to check my phone messages and to order a pizza for my kids. The process should be easy. It isn’t. I have to call four times to check the messages, twice to order the pizza. My digital PCS phone keeps cutting out. Welcome to workaday wireless technology in America.

Here’s how the process works in Finland: A guy in Helsinki downloads money electronically from his bank account to his Nokia cell-phone. He calls his girlfriend and tells her that he’ll meet her at a mall in 30 minutes. On the way to the mall, he stops at a gas station and pays for gas and a can of Pepsi (from a vending machine) by wireless electronic-funds transfer (EFT). He arrives at the mall, where he uses his cell-phone’s wireless-Web service to find out about a sweater sale at the mall’s Benetton store. He goes to the store and buys himself two lightweight sweaters at 20% off the regular price. He then meets his girlfriend, and they go to a movie. They pay for their movie tickets by wireless EFT.

Here’s how it works in Japan: A businessman finishes a meeting and decides to walk to his hotel. He’s hungry after a long day, so he fires up his cell-phone and taps the Zagat.com icon on its screen. Zagat.com determines his location using GPS technology and immediately offers a list of dining options (rank-ordered by proximity, personal preference, or quality), which are displayed on the cell-phone’s screen. He decides that he wants bistro food. He chooses the highest-rated bistro that is located nearest to him. His cell-phone automatically dials that bistro’s telephone number. He discovers that the restaurant can seat him in 10 minutes, and it can reserve a nice table by a window for him. After he’s done eating, he uses his cell-phone to fill out a brief electronic questionnaire from Zagat about the restaurant. He returns the questionnaire electronically, giving the bistro high marks.

Forty years ago, the United States rallied over a national emergency: the gap between our nuclear-missile technology and that of the Soviet Union. The issue turned out to be a phony one. Today, we face a genuine threat — the wireless-technology gap. This crisis is no phony one. Most Americans blithely assume that the United States is ahead of the rest of the world technologically. In some respects, that assumption is true. But when it comes to wireless-Web communications, the exact opposite is true.

In reality, wireless services in the United States lag far behind wireless services offered in Europe and in Asia. The widely held belief is that this situation will eventually right itself — that U.S. wireless technology will soon be every bit as good as European or Asian wireless technology is. Here’s a news flash: That belief is painfully wrong. The United States is likely to lag far behind European and Asian wireless technology for at least three years — or more.

Here’s why: The key to having strong wireless service is a uniform standard for digital communications. Setting that standard is the job of the International Telecommunications Union (ITU), an arm of the United Nations. It should come as no surprise that the ITU has been unable to get UN member nations to agree to a worldwide uniform standard. As a result, there’s a dog’s breakfast of technical platforms for wireless communications around the globe.

Frustrated by a lack of international consensus, the European Union in the 1980s mandated one standard (called the Global System for Mobile Communications, or GSM) for every country within its borders. Japan mandated another standard (called Personal Digital Cellular). The U.S. Federal Communications Commission, in response to intensive lobbying efforts by various corporate interests, adopted several standards.

The ITU is now trying to correct this nightmare by creating what the “Economist” calls a “family of standards” for so-called third-generation wireless technology. The hope is that third-generation wireless technology will be able to “harmonize” all of the various “second-generation” standards, while at the same time providing much more bandwidth, which makes possible a fully functional, extremely high-speed wireless Web.

If you’re waiting for global harmonization, don’t get your hopes up. The likeliest outcome is that third-generation wireless technology will be running in Europe and in Asia long before that happens in the United States. Aside from the problem of competing technical standards, the United States struggles under the weight of a regional (as opposed to a national) licensing system, which adds layers of complexity to any technological-harmonization effort.

As a result, a fully functional wireless Web is years away for U.S. consumers. That wait, in turn, discourages application-service providers from developing products of the kind that will soon be standard features of wireless communications in Europe and in Asia. The hope is that an Oracle or a Microsoft or a Sun Microsystems will come up with a kind of magical solution — a “black box” that will allow content providers to write one set of code that can then be translated (by the black box) to work with all of the various competing wireless platforms in the United States. But let’s be honest: Magic solutions rarely, if ever, work.

A likelier outcome is that the wireless-technology gap will widen. And the consequences of a widening wireless gap are more than just technological. Larger issues include the competition for talent, the race for new technologies, and the future itself.

Imagine for a moment that you work for Zagat.com. Your job is to help your company own the “wireless space” for travel-and-entertainment guides. Zagat.com is a natural partner for cell-phone companies everywhere. Where do you go first?

In the case of the restaurant-guide company, Japan’s largest Internet-service provider, NTT DoCoMo, approached Zagat.com to cut a deal. Zagat provided its content and its new wireless-Web software to NTT, knowing that it only had to write one set of code for the cell-phone platform for NTT. In the United States, where Zagat.com provides content for PDAs and not for cell-phones, the company is attempting to write roughly 19 different sets of code to get the same content and software onto everybody’s PalmPilot.

Zagat.com’s next move will be into Europe for the same reason that it moved into Japan: It will only have to write one set of code for its wireless-Web service to work properly on everyone’s cell-phone. It could take years before third-generation wireless technology enables similarly easy access to the wireless market in the United States. As a kicker, Zagat guides (in book form) were part of its NTT deal. Sales of Zagat guides are already way up in Japan. If the trend of wireless guides begetting increased book sales replicates itself in Europe, which market do you think will get more of Zagat.com’s attention? It won’t be the U.S. market.

Now, combine Zagat.com’s experiences with those of thousands of other service companies, and think about the implications. Say you’re interested in advertising and in marketing. You know that the echo-boom generation makes the Web the future of marketing. You also know that the echo boomers’ next step is to adopt wireless technology. You want to be on marketing’s cutting edge.

What do you do? Go to Scandinavia — because that’s where the future of marketing communications is happening right now. Think about that guy in the mall in Finland. Because of GPS, you know exactly where he is. Because he’s given you permission, you know more or less what he’s interested in buying, both for himself and for his girlfriend. As he walks through a mall, you can alert him, via wireless Web, to two or three special deals that are available at stores that he happens to be walking past — at that moment. If he buys something at one of those stores, your company gets a small percentage of the transaction.

You are marketing in real time. You are no longer an assistant account executive on the Bell Atlantic account. And everything that you learn about real-time marketing will make you smarter about the future of marketing, more knowledgeable about the effectiveness of new media, and more valuable to advertising and marketing agencies around the world. Your colleagues who went to work at American agencies won’t have anything like your experience when wireless technology becomes fully functional everywhere — in, say, five years. You’ll be ahead of them by leaps and bounds.

Now, apply that experience to any number of business categories. Banks and financial-service companies that understand the dynamics of wireless-Web financial trading and wireless-Web banking will be much more attractive to consumers than banks and financial-service companies that don’t understand those dynamics. Companies of all kinds that compete in this wireless-Web environment will be much smarter, much faster, and much more competitive than companies that avoid the wireless-Web revolution.

Most important, those companies will display discipline and accountability in an entirely new way. Everyone who has wireless-Web access on a PDA or a cell-phone is suddenly a restaurant critic, a theater critic, a travel writer, a product assessor — someone who has the option of voting on your business every hour of every day. And the results of all of those customers voting on your business in real time will be available to everyone else in real time via the Web.

The most acute danger is that if the United States doesn’t get its act together on wireless-Web standards and platforms, it will suffer a severe talent exodus. Companies that don’t jump into the wireless Web will simply find themselves on the wrong side of the next digital divide. And they’ll face the same talent drain that afflicts many old-economy companies today, which are watching their most talented people defect to new-economy companies.

Make no mistake: The future of telecommunications is wireless. According to a McKinsey & Co. study, if the growth rate of wireless-technology usage in Europe continues on its present course, the European mobile-phone marketplace will reach a saturation point within two or three years. This trend is mirrored (although the conversion rate is less steep) around the world, including in the United States — where 80 million people are now cell-phone users.

Knowing that the future is wireless, the most talented and the most ambitious people will go to the new frontier to achieve fame and fortune. And that new frontier is Helsinki and Hong Kong, Singapore and Stockholm. Those cities are where the future of communications is being created. And, if the past has taught us anything, it’s that people go where they think the future lies.

John Ellis (Jellis@fastcompany.com) is a writer and consultant based in New York City.