Free Web phones: Still not enough?

AT&T is offering free Web access to mobile phone users. But obstacles to wider adoption still linger.

When it launched its Digital One Rate pricing plan a couple of years ago, AT&T enjoyed a spurt in its number of cell phone subscribers. So far, two million people have taken advantage of the flat fee offer.

The company hopes lightening strikes a second time -- but this time, AT&T (T) is offering the lure of free wireless Internet access to cell-phone customers.

It also marks the first offering from AT&T Wireless Services, which was spun out by its parent company as a tracking stock in April. The service, called PocketNet, will be offered to customers who subscribe to any AT&T digital cell-phone pricing program.

The program, announced on Thursday, received a cautious welcome from analysts who said the lower pricing may well encourage users get beyond the "try me out" phase.

"But there are other obstacles to entry," noted Mark Lowenstein, an analyst covering the wireless industry for the Yankee Group.

For starters, there are competing cellular technologies out there, offering different coverage and bandwidth offerings. Faced with the choice of alphabet soup acronyms like CDMA, TDMA and GSM, users find it hard to decide which service is right for them.

What's more, coverage has not been accessible in all markets with all technologies -- a condition that will not change with Web-enabled phones. AT&T's service will only work in areas where wireless data networks have been installed.

Bandwidth will be a particular issue for Web phones as transmission rates will be limited to 19.2 kbps. This will handcuff the user experience with people opting to receive text-based versions of Web sites. Transmission rates will increase when 3G phones are released but they are not expected in the U.S. until after 2002.

The industry also needs to resolve the challenge presented by the small screens that predominate on Web-based phones. The phones with larger screens tend to be larger models, a clear negative in this age of mobility. Still, there is hope on the horizon: Smaller phones with PDA type features, larger screens, and graphical interfaces are due out later this year.

Many companies are working on overcoming all these obstacles. But this still nascent industry nonetheless has a way to go before it will be considered mainstream.

A spokesman for AT&T brushed aside all the negatives, saying people will still want these phones to get information."This will be the biggest reason for driving usage," said AT&T's Richard Blasi.

In this quickly evolving market, it is hard to judge what phone users will want in terms of Internet features. Shopping and news-related topics are already offered and companies are now testing online banking.

When the bandwidth increases with the release of 3G phones, streaming video and downloading music are also likely to gain popularity with mobile phone users.

Although it may take another two to three years before Web-enabled phones are really ready for prime time, analysts note this industry is moving faster than the wired Web ever did.


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