Nobody dreamed it would all end in tears. Mobile Internet, the ultimate killer app, the union of the two revolutions and the biggest promise of the new millennium, is crumbling.
In less than a week, two of Europe's biggest cellular providers deflated what little hope was left. Vodafone, the biggest mobile communications company in the world, said gee sorry, don't hold your breath waiting for multimedia to your phones. At most, some data communications. Vodafone's third-generation network was simply too slow for such heavy applications.
Then British Telecom, according to the U.K. press, is pulling the plug on its cellular Internet program GENIE. After losing $60 million a quarter for eighteen months, BT had enough. GENIE's 5.5 million surfing subscribers will have to wave bye bye, as BT will to the $300 million invested so far.
How big was cellular Internet expected to be? Well, all those vast sums invested in 3G networks targeted that very goal. 3G networks were supposed to be broad of band and super-fast, and to allow not only Internet but media files to be transmitted. Companies paid up to $6 billion for licenses in Britain and Germany, dreaming of hordes of football fans dialing up to watch games on their phone screens while going home.
Then the going got rough
The promise was so great that no less than 3,000 startups sprang up to develop applications for cellular Internet, estimated British consulting firm Booz?Allen & Hamilton. Israel alone seemed to sport hundreds of these niche-of-niche startups, including highly financed companies.
Some time last year, the mood began to blacken. The first to start shaking their heads were investors, who started to snarl at wordy promisers. Next, Japan's NTT DoCoMo, the most advanced cellular provider in the world, put off launching its 3G network.
NTT DoCoMo was the role model for a host of European communications service providers, thanks to its breakthrough iMode phones and services, the first real launch of cellular Internet.
Europe's phone companies woke up with a brutal headache. Giants, usually former government companies, posted enormous losses and started to crumble. The sums involved were so vast that the central banks of Britain and France even warned of a threat to European financial stability.
Heigh ho, it's off to the Holy Land we go
Yet in Israel, investment in cellular Internet is not passe. In August 2000 Comverse Technology (Nasdaq:CMVT) paid $500 million for the startup eXalink, which develops WAP servers ? a technology even then on its way out, after never making it in. The investment, even Comverse will admit, is light-years away from justifying itself.
More up-to-date moves include Cellcom's decision to launch a new branch, "New Media", which will develop cellular portals and content services, mobile Internet, cellular banking applications, m-commerce, SMS, textual media, and so on.
Nor is Cellcom rival Partner Communications (Nasdaq, TASE: PTNR, LSE:PCCD) lounging about. It announced a competition to build cellular websites.
Israel's third cellular communications provider, Pele-Phone, announced that its Go-Next cellular Internet company saw its subscriber base grow from 50,000 at the beginning of the year to 70,000.
Investment in startups continues. DFJ sank $6 million into Israeli startup IXI for a quarter of its equity. IXI is developing technology to enable mobile phone subscribers to use advanced applications.
Another startup, Mobiltec, which developed a platform for cellular Internet applications, secured $10 million from AIG Orion, Sun Microsystems and Lucent. Speedwise signed a contract to supply Telecom Italia with software to accelerate its mobile Internet services.
Israeli company Emblaze System (LSE:BLZ) is one of the biggest players in its field. This year it carried out field tests of its rich-media transmission technology at several European and American mobile communications providers.
But even Israel's optimists are coming to admit that the technological obstacles are still daunting. The highest obstacle of all is the marketing challenge. Although cellular Internet isn't about to disappear altogether, there's just no critical mass of customers willing to pay to watch soccer over their phones, or for other dreamy mobile Internet applications. And if nobody will pay for the service, nobody will pay to provide it.