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0Wireless Phone, Data Services Grow

Joint ventures proliferate as firms try to reduce development risks in the volatile market

YESTERDAY Apple Computer Inc. unveiled the first version of its long-awaited Newton, a hand-held computer for the age of wireless communications. But it is missing some features needed for wireless communications.

"One of the missing links ... is the cellular phone," says Stuart Brotman, a communications analyst at the Annenberg Washington Program. Also lacking in the Newton MessagePad is a built-in wireless modem for data. Moreover, the $700 base price makes it expensive for some consumers.

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"You want to create excitement," Mr. Brotman says. But he notes that industry hype cannot get too far ahead of reality or customers will be disappointed.

Yet the riskiest move of all might be to avoid the fray.

The wireless communications market, though uncertain, is potentially huge. Some of the fastest-growing "highways" for information services are on the airwaves. Jim Caile, marketing vice president at Motorola, predicts that wireless products and services will grow 21 percent a year - triple the rate of wired communications.

After only a decade in existence, the cellular telephone industry has 11 million United States subscribers. Sales of "personal digital assistants" such as Apple's Newton will surpass 3 million units in 1997, forecasts Dataquest Inc., a market research firm in San Jose, Calif.

Communications and computer giants are making big investments and forging alliances. Fierce competition is chopping prices and expanding options.

"The consumer should be the beneficiary of all this activity," says Robert Schmidt, president of the Wireless Cable Association International, referring to his industry's effort to compete with traditional cable and satellite TV. (See story below.)

Recent alliances, which parallel a similar spate of linkups in the arena of wired cable television and telephones, include:

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* MCI Telecommunications Corporation last week announced a consortium of 150 companies that hopes to develop a nationwide network for wireless phone service, tied together by MCI's long-distance wires. This "personal communications network" (PCN) would compete with existing cellular services. To get going, the consortium would have to be a winning bidder in an expected auction of radio spectrum by the Federal Communications Commission. PCNs send signals into a central network using "microcells," relay st ations that are cheaper and more numerous than current cellular "cells."

* Last November, AT&T agreed to buy a one-third ($3.8 billion) stake in the largest wireless phone company, McCaw Cellular Communications Inc. of Seattle.

* McCaw and other cellular players are jointly creating a North American Cellular Network, making it easy for clients to receive calls on their portable phone even when traveling.

* Last month the Cellular Telecommunications Industry Association (CTIA) announced it would develop another "seamless roaming" network that cellular carriers nationwide can tie into.

* Eight cellular companies, including McCaw and several Baby Bells, teamed up last year with IBM Corporation to develop a data-transmission service that can function alongside voice traffic on their networks. Fast-growing data traffic could eventually provide one-third of cellular revenues, some analysts predict.

* Apple, Motorola, AT&T, Sony, Philips, and Matsushita have joined to support General Magic Inc. in developing software for wireless communications.

Already, personal computer and cellular phone prices have been falling fast. Handsets that cost $3,500 in 1983 are $200 or less today, according to the CTIA. Average bills for usage fell 30 percent over the last seven years.

Herschel Shosteck, a Silver Spring, Md., market researcher, says cellular growth has remained strong due to a rise in consumers who keep phones in their cars for emergency use or to contact family members. But this group of customers generates less revenue than business users do, he adds, warning that his revenue forecast may need to be revised.

As for cellular getting serious competition from new "personal communications networks," Mr. Shosteck argues that the fledgling industry will have trouble if it tries to go head to head with cellular. Cellular already has a huge existing infrastructure and the lion's share of good customers, he says, while PCNs microcell approach is only about 10 percent cheaper than cellular. Still, PCNs will make "billions of dollars," Shosteck predicts, by providing private on-site networks to hospitals, hotels, and a irports.

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