Are we ready for digital paper?

COMMENTARY-- Things go digital. That's just the way it is. Computers, phones, organizers, the tools in your doctor's office, music, cameras, movies, even dog tags and picture frames -- they've all been transformed by digital technology. Yet there's one artifact that has stubbornly resisted the trend -- paper. Despite countless attempts to digitize it or replicate its qualities electronically, paper refuses to get with the program.

In part, that's because it already works so well. Think about it this way: Paper is a versatile technology that's been perfected over the past 2,000 years. It's flexible, durable, cheap, and ubiquitous. Words and images can be stored on it using pens, brushes, crayons, typewriters, or ink-jet printers. It's easy to share. Drop it, fold it, leave it out in the sun or even in the rain, and it still works. Paper is comfortable with its nondigital status -- which may explain why technophiles are always gunning to replace it.

For the past few years, companies have been trying -- not entirely successfully -- to replicate paper's visual properties using electrostatically charged beads or capsules -- pressed between transparent sheets of plastic -- that turn black or white when zapped with an electric current. Microsoft has developed a PC tablet with handwriting recognition, while Palms employ the unnatural Grafitti alphabet as a way for the user to input information.

But a Swedish startup called Anoto has developed a new approach. A few weeks ago in Boston, I met an Italian named Nino Tarantino, who is one of Anoto's business development VPs. Tarantino took what looked like one of those overly fat pens that Europeans love so much, wrote a message on a yellow Post-it note, entered an e-mail address in some squares at the bottom of the note, and checked a box marked "e-mail" and another marked "send." That was it. His note -- handwriting, doodles, and all -- was captured and sent as a graphical e-mail.

The technology works like this: The pen has a built-in pressure sensor, which activates a digital camera that records your exact strokes. There's a Bluetooth transceiver in the pen, which can communicate the captured strokes to a Bluetooth-equipped phone or laptop nearby. The phone or computer then sends the note over the Internet.

The real magic, however, is the paper. The special pen isn't taking pictures of the pen marks -- it's recording the position of the pen on the paper. It can do this because the paper is preprinted with thousands of tiny, nearly invisible dots. They make up a kind of map on the Post-it note that the pen's camera can read. So, for instance, when you check the box marked "e-mail," it knows that that part of the map means "Send what you've captured as an e-mail message." Other boxes could be coded to send a fax or simple graphical message to a mobile phone. Only the e-mail address needs to be written neatly, in designated squares for each letter, so it can be read and translated by optical character recognition software in the pen.

Imagine a Bluetooth cell phone coming in a case with a small pad of Anoto paper and the pen. Using a phone to send e-mail messages would suddenly become more appealing -- better than typing on a keyboard. Vodafone plans to launch such a product in -- where else? -- Sweden this April. The phone will come from Ericsson, which owns 24 percent of Anoto's parent, C Technologies, and is desperately trying to popularize the Bluetooth standard. Other European carriers, such as British Telecom Cellnet in England and Telefonica in Spain, are expected to follow with their own launches by the end of the year, as is AT&T Wireless in the United States. Since the service involves sending data-heavy JPEG files, it currently works only with GSM or higher-speed GPRS cellular networks (which AT&T has to finish building before it can offer the service stateside).

The pens could initially cost as much as $200 -- Anoto has signed partnerships with A.T. Cross, Montblanc, and Pilot to let them produce their own versions, which will likely be cheaper -- but that cost will be subsidized by telecom carriers, who stand to make between 10 cents and 20 cents on each message sent. If the technology becomes popular, the pens would be produced in bulk and the price would drop even further.

As for the paper, it will initially be printed by 3M, Mead, and other manufacturers. The dots can be printed on any kind of paper, and it's not hard to think of other useful applications. For instance, Franklin Covey wants to make organizers that incorporate the technology. The paper could also digitize any kind of form: 1040s, exit polls, health care records, marketing surveys, or warehouse invoices. The elegance of Anoto's solution is that it modifies pens and paper but requires no change in behavior.

Anoto is not alone in its quest to make paper digital. Other digital pen companies -- including E-Pen InMotion, OTM Technologies, and Digital Ink -- use different technologies such as infrared positioning and laser-based techniques. But Anoto and its brethren all suffer from some major drawbacks.

First, it's not exactly clear who they're targeting -- people left behind by the digital age, or techno geeks? The former are not likely to be buying Bluetooth phones or laptops anytime soon, and the latter already have Bluetooth phones and laptops. So why do they need to carry around yet one more thing? Second, in most instances these pens just capture writing as a picture. It's digital, but it's still static. That means you can't search through the text of your Anoto messages for keywords or phrases (although you could search by sender), and you can't copy and paste the text to other programs or applications. Third, this may just be another case of a solution looking for a problem. Paper, after all, has a way of bending the digital world to suit its quirks, rather than the other way around.

As an editor at large for Business 2.0, Erick Schonfeld contributes to the editorial development of the magazine, writes feature stories, and pens a weekly online column (Future Boy). Schonfeld is also a contributing editor for Fortune, where he has written about technology and investing for the past seven years.