Cell phones morph into all-in-one multimedia devices.
Byline: Jerri Stroud

Sep. 24--Ken Devine used to carry a laptop, cell phone, personal digital assistant and a camera when he visited franchisees for his employer, Panera Bread Co. of Richmond Heights.

He's ditched all but the cell phone -- a PalmOne Treo 600 SmartPhone from Verizon Wireless. The phone has a built-in camera, organizer, a full keyboard and messaging capabilities, including e-mail and mobile Internet access.

"It's the best tool -- the best gadget -- that I've ever had," said Devine, franchise operations manager for Panera. He often needs to take pictures of buildings and marketing materials for work, but he doesn't need a high-quality picture, just a record.

His phone is more than a work tool. He's downloaded games that he and his 11-year-old son play, and he's personalized the phone with about 30 ringtones and family photos.

"I've got ringtones for everybody in my family," and for various departments at work so he knows who's calling, he said. "Instead of carrying pictures in my wallet, I have pictures on my phone that I can scroll through."

Devine's phone is one of a growing number that do a lot more than ring and carry voice conversations. The newest phones are morphing into multimedia devices capable of playing CD-quality music, taking photographs, serving as game consoles and even playing and recording short videos.

Customers are personalizing their phones with musical ringtones and graphic "wallpaper" ranging from Shrek to sports figures to corporate logos. They play games while waiting in airports, check e-mail on the run and get text alerts on sporting events, stock quotes and pop stars.

"It's just amazing what's happening in the development of content" for mobile phones, said Clint Wheelock, director of wireless research for In-Stat/MDR, a research firm in Scottsdale, Ariz. Mobile phone companies typically offer about 250 games, and at least 317 companies are producing games for the U.S. market.

Six years ago, content developers expressed almost no interest in developing applications for cell phones, which could display maybe four lines of text and 12 characters per line, said Mark Desautels, vice president of wireless Internet development at the Cellular Telecommunications and Internet Association. Now that phones are capable of downloading more than 100 kilobits of data a second, every major software company is designing cell-phone games, ringtones, wallpaper, information services or Internet sites. Record labels are licensing ringtones, and sports teams are offering logos to use as wallpaper.

Wireless companies had been expecting businesses to adopt data services in a big way, Desautels said. "The fact that consumers are jumping out in front has caught them by surprise."

Carriers see nonvoice functions as a way to boost revenues and customer loyalty in an industry where one-third of cell-phone users switch carriers every year. Collectively, the segment is known as wireless data, but the services deliver a lot more than strings of 1s and 0s.

"The word 'data' is scary," said Mark Kupsky, wireless data director at Verizon Wireless in St. Louis. But data really means anything that you can do on a phone other than talk. Verizon Wireless has more than 500 downloadable applications in its "Get it Now" suite, including ringtones, wallpaper, games, dictionaries, weather maps and even a wedding planner.

"We believe that in general, the more services that the customer has with a carrier, the lower the odds of them leaving that carrier," said John Burris, director of wireless data services for Sprint PCS.

"As these things become easier and easier to use, more people are getting into it," Burris said.

For consumers, wireless data was a $520 million market last year -- less than 1 percent of the $60.5 billion consumer market for voice services, Wheelock said. Analysts expect wireless data usage to at least double this year.

Businesses spend more on wireless data, but their usage is skewed toward wireless e-mail, telemetry, computer access and machine-to-machine communication, Wheelock said.

Games and ringtones each accounted for about $100 million in spending. Wheelock expects games to more than double to $203.8 million this year, growing to $1.8 billion by 2009.

A recent study by Ziff Davis Media showed that the number of households playing games on their cell phones doubled to 16.3 million this year from 8.1 million a year ago. Other studies show an explosion of text messaging and picture messaging.

"It's getting pretty significant," Wheelock said. "But it's still only a few dollars per subscriber on average."

Consumer awareness of wireless data applications is growing quickly, too, said Linda Barrabee, senior analyst with The Yankee Group of Boston.

The percentage of cell-phone customers who said they have text-messaging capabilities on their phones jumped to 63 percent this year from 27 percent a year ago, Barrabee said. "We actually believe that it's much greater than that."

Customers who said their phones could download ringtones ballooned to 57 percent this year from 27 percent last year.

"The most widely used feature is text messaging," Barrabee said. "About one-fourth of all users say they use it at least once a month." Among teens, over half said they send text regularly.

Wireless carriers have seen their average revenue per customer stall as more and more users sign up for mobile phone service, Barrabee said. Wireless data applications could offset slower growth, although it hasn't been a significant upward bump yet.

Surveys show that consumers have no strong preference for one data application over another, although text messaging is certainly the most popular, Barrabee said.

"Carriers need to provide something that's compelling and easy to access," she said. As networks get faster and developers provide innovative content, consumers will be more likely to use services that are priced fairly.

Pricing for data services varies widely. Most companies offer text-messaging packages for a few dollars a month. Individual messages cost around 10 cents to send and from 2 to 10 cents to receive.

Most carriers charge a flat fee to download a ringtone, usually $1 to $2.99. Games average around $5.

Customers incur charges when they download a game, ringtone or other data service. If they use the Internet browser on their phone to search for ringtones or games, they also tap their monthly minutes of use. Some services, like weather forecasts, news, sports scores, movie guides and Mapquest directions, also incur airtime charges each time they're used or require payment of a monthly fee.

The growth in data is fueled by the popularity of phones with color screens and cameras as well as by the higher transmission speeds available as cell phone carriers upgrade their networks.

Five years ago, data speeds on cell phones were slower than most dial-up Internet connections. As carriers improve their technology, speeds are expected to approach 1.4 megabits a second -- slower than digital subscriber lines but acceptable for many applications.

Cell phones are approaching the memory, processing and multimedia capabilities that personal computers had in the late 1990s, Wheelock said. "It is like a portable PC. The only drawback is the size and the user interface."

Phone manufacturers are working on the interface:

--Samsung makes several phones that plug into a game pad. Many of the phones have built-in cameras as well as the usual functions like voice, text messaging and ringtones.

--Nokia's N-gage phone combines a gaming device, MP3 player, FM radio and a phone. It also has text- and instant-messaging capabilities and allows you to check e-mail remotely. While the N-gage's multiple functions are appealing, some critics say it's not a great game interface because it's set up for vertical format, whereas many games are horizontal.

--PalmOne Treo and Kyocera both make phones that combine the functions of a personal digital assistant and a cell phone. Some have cameras, and most have a larger screen that improves the experience of playing a game or surfing the Web.

Most consumers still are opting for a low-cost phone rather than the multimedia models, which can cost up to $600 before discounts. But competition among carriers has brought features like cameras and download capabilities to more and more consumers. And customers are discovering more and more features of the phones they already have.

"Everybody who has a cell phone now can use text messaging," at least if the phone is less than two or three years old, Kupsky, the Verizon Wireless data manager, said. Phones with color screens and cameras have become the standard for new customers, he said.