Mobile phones: Hitting saturation point?

Accessing the Web on the run takes patience

By Douglas Herbert, CNN.com Europe writer

LONDON, England (CNN) -- Great expectations can be maddening -- especially if your name is Nokia and you are the world's largest maker of mobile phones.

In almost any other high-tech sector, yearly sales of the kind unveiled by the Finnish giant on Tuesday -- 64 percent growth, well ahead of the overall market -- would be enough to set industry gurus salivating.

Worldwide, consumers bought more than 400 million mobile phones last year -- more than the total sales of personal computers, pagers, laptops, televisions and cars combined, notes Ed Snyder, an analyst with J.P. Morgan H&Q.

But evidently, that's still not enough for a market in which meteoric hopes -- and, some would say, hype -- has become seen as a virtual birthright.

Nokia's announcement that it had sold 128 million phones last year, accounting for about a third of the global market, sent the company's stockholders scrambling for the exits, driving shares down as much as 19 percent at one point.

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Investors, apparently, had been hoping for sales closer to analysts' forecasts of 140 million units.

The gap between hope and reality opened a breach into which analysts rushed with talk of slackening demand and "saturated" markets.

In some Scandinavian countries such as Sweden, 70 percent of people own mobile phones, depleting potential demand.

In the UK, where penetration rates are substantially lower, at around 50 percent, mobile phone ownership rose by around three million -- to nearly 32 million devices -- from May to August 2000.

But the greater problem confronting the industry, many believe, is the difficulty of switching to sleeker models of mobile phones that allow users to access the Internet using Wireless Application Protocol, or WAP, technology.

Consumers find many of the existing WAP-enabled phones much too slow and clunky for their purposes. The text is often four or five lines on a small black-and-white screen.

Before they can even access the Internet, WAP users must dial into a gateway -- a process that adds about 15 to 20 seconds to access times.

Even the most sophisticated phones fail to simulate the experience of surfing the Web on a personal computer -- not least because only a fraction of the sites available to a home Internet user are offered on WAP phones.

Yet after a faltering start, WAP may be poised to pay off, say telecom experts who tracked the teething pains of the early technology.

"This market is going to take off," said Joachim Bamrud, editor of Wapland.com, based in Norway.

"In a couple of years from now, we won't be talking WAP phones versus non-WAP phones, the same way we won't be talking of Internet companies versus non-Internet companies. … This is a revolution that's occurring -- nothing happens all at once."

Bamrud and others say a new technology that speeds up data transfer from the Internet to WAP phones, set for mass commercialisation this year, will breathe new life into the WAP market.

The technology, known as GPRS, or general packet radio service, will enable WAP phones to download data at speeds of around 40 kilobytes per second -- four times the rate of handsets using the current GSM, or global system for mobile, standard.

This time, market experts are hoping to avoid a recurrence of what some call the "WAP fiasco" -- when the technology was launched, but phones using it were late getting to the stores.

Per Lindberg, a telecom equipment analyst at Dresdner Kleinwort Benson in London, sees consumers asking themselves two fundamental questions soon: "What incremental benefits do I get, and what are the incremental costs?"

So far, however, few analysts doubt the ultimate viability of WAP technology. They are perhaps wary of famously wrong predictions of years past, such as one from a Western Union internal memo of 1876:

"This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us."

Reuters contributed to this report.

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