Goodbye Hardware, Hello Appliance

SYDNEY (03/30/2000) - If internet appliance providers have their way, the dawn of a new era in connectivity is just around the corner.

"It's only when we stop talking about the internet in the same way that we don't marvel about electricity anymore that it will really have arrived," says Giora Friede, managing director of Australian internet technology services provider i on australia.

While the uptake of non-PC internet appliances has not been as fast as analysts had predicted, Friede, who recently launched the second generation of US-based InfoGear's Ericsson iPhone locally, one of the first of a new breed of internet appliance, believes that the wind of opportunity is blowing now.

"2000 and 2001 will be the formative years for a whole new industry, and the dawning of a whole new era of total integration and network power delivering real value to the consumer," says Friede. "It's just a matter of time before there'll be a whole host of appliances linking consumers to the net, and they won't even be thinking about it anymore."

Surging Demand

Indeed, in 1999 almost 11 million non-PC internet appliances filled the worldwide market, but by 2004, the number is expected to reach 89 million units, according to International Data Corp. The research company values the internet appliance market at almost $US2.4 billion, and expects it to grow to $17.8 billion by 2004. Jupiter Communications believes some 20.6 million households will access the net via a non-PC appliance by 2002.

"Demand for internet appliances has surged in the US as consumers welcome the incorporation of the internet with regular appliances," says Friede.

"Accustomed to using appliances like telephones and televisions, consumers are now increasingly accessing the internet using these familiar devices."

With some 1.7 million (or 25 per cent of) Australian households currently connected to the internet, Friede expects the Australian market for non-PC internet appliances - including phones, web TV, games consoles, PDAs and mobile phones - to demonstrate a similar surge in adopting this new technology.

"Similar to the US market's demand for new products to access the internet, Australia can expect a surge in penetration of internet appliances," says Friede. "Australian consumers have consistently been at the forefront of technology adoption, and will be so again with the new technology.

Increasingly, households are taking to the internet and the consumer PC market is now saturated. This has resulted in more opportunities for the introduction of alternative products to the domestic market.

"Thanks to innovative technology architecture, the memory and processing capabilities of appliances have been enhanced," he adds. "Internet appliances therefore now fit the lifestyle of today's consumers, both tech-savvy and tech-shy."

Gerry Sutton, Telstra's managing director of product and business development for convergent business, agrees that we are just at the beginning of the real internet wave and, for companies hoping to make hay, speed to market will be much more important than comprehensiveness. "The key will be in getting in first and then working on developing the business," he says. "To this end, successful partnering, and not in the traditional mode of filling in the skills gaps, will be critical. "It's not just going to be about getting the capability, but even more about enhancing growth and scale."

For Sutton, it's the wireless application protocol (WAP) challenge that will drive the non-appliance market. "It's frightening how quickly WAP became the next big wave. Everybody thought broadband would be the next big thing, but it's being overtaken by WAP, which is moving at rocketship speed," he says.

"When you consider that Nokia already has its own country code, has bought millions of IP addresses and has done a deal with Visa regarding the use of phones as credit cards, you get a picture of just how staggering the developments have been. Six months ago, electronic access meant having a PC, in the next 12 months access will increasingly be via a WAP phone, and in the next 24, it'll be interactive TV."

Not to be outdone, Telstra's newly unveiled telstra.com portal boasts the latest innovations, making it both personal and portable, says Sutton, who advises companies going online to include WAP capability and personalization features from the outset. Dubbed "Telstra.com. It's your dot-com", the portal is designed to be fully personalized by users, a feature that forms the basis of Telstra's strategy for selling the portal to both its consumer and business markets.

Early Movers

The challenge now facing Australian manufacturers, retailers, and service and content providers is how to manage and deliver these appliances efficiently to consumers at an affordable price.

"Right now, there are more than a dozen companies out there pushing non-PC devices, mainly set-top boxes of all shapes and sizes, but they are all facing the same problems," says www.consult principal Ramin Marzbani. "There still isn't enough money to fund a major expansion to get critical mass, there's not enough distribution to sell the product, and there's not enough capability to adequately make money off a small customer base. The decreasing price gap with a full-function PC is also decreasing the value of the non-PC device."

Jossel Ginsburg, director of integrated web applications company Presence Online, agrees that numerous questions remain, but believes that the technology industry's obsession with access to information anywhere, anytime is about to be realized.

"The challenge of providing information anywhere, at any time, in any of the new formats, such as mobile phones, palm pilots and other handheld devices, for example, continues to be a key issue for web developers and site owners alike," he says. "But while companies are already providing clients with the means to push out WAP-enabled content to their customers, it's not just about information. By 2004, Gartner analysts predict that 40 per cent of all consumer transactions will be made using mobile devices.

"How website owners rise to the challenge of providing the same content in new formats, such as mobile phones and other handheld devices, while still allowing this functionality, continues to be a key issue," explains Ginsburg. "Doing it the hard way by using conventional strategies of web development would require the creation of different versions of core information to cater for the different media, each with its own rules about presentation. This is expensive and time-consuming, which is why innovative products like our aptrix solution, which delivers single-source content to multiple platforms, will increasingly play a greater role."

US-based Cabletron Systems recently announced its strategy for voice, video and data convergence, dubbed "inherent internetworking", which is intended to address the technology and business requirements of converged networks and to provide a clear migration path as convergence takes hold in the enterprise and service-provider realms.

Californian-based Smith Micro Software has introduced Wireless WebDNA, which taps into the emerging market for wireless internet phones, and allows users to access and shop at ecommerce sites with their phones.

3Com, America's number two networking equipment company, is now also focusing on other technologies, including IP telephony, equipment for wireless data and DSL. Despite not having a lead in the market, it clearly wants to remedy that situation, and is preparing for research, acquisitions and partnerships as it moves to bolster its stake in the broadband market.

Back at home, web applications company Guava Interactive has launched CallLogger, a web-based call logging application believed to be the first product of its kind to offer WAP capability. According to Guava Interactive's managing director, Peter Bray, CallLogger's key advantages over traditional call logging systems are ease of installation, accessibility and use. "Our research indicated that although there is a great use of call logging systems, the current software is constricted by too many physical boundaries," says Bray. "We believe a web-based alternative offers greater flexibility."

Clearly, there's lots of room for early movers, and it appears that in the appliance market, this will be a critical success factor.

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