03 June 2005

A Little Primer on Cell Phones

The huge capital outlays of the early PCS* companies required large monopoloid firms like AT&T (OW). Later, firms like Cingular (SBC and BellSouth) and Verizon Wireless (Verizon Communications & Vodaphone) split the risk of new formats between huge local phone holding companies. This in fact replaced a vertically-integrated monopoly (AT&T or British Telecom) with multiple layers of dis-integrated monopolies, much like the oil industry.

The PCS groups could then re-package technical services to companies like Virgin, which would then bundle those technical services with other features, like custom software and premium handsets, into something special. Of course, the handset was likely to be designed by Nokia, Samsung Electronics, Motorola, Ericsson (now Sony Ericsson), or LG. In some cases, these companies team up with PDA** producers to utilize their own cellular chipsets and the PDA's existing user format.

In addition to cellular (or wireless) communications, there is Wi-Fi and Bluetooth. Wi-Fi enables a person with a wireless-enabled computer or personal digital assistant (PDA) to connect to the Internet when in proximity of an wireless access point (WAP; basically, a radio receiver-transmitter with a very short range). The geographical region covered by one or several access points is called a hotspot. The main difference between cellular and Wi-Fi is that the cellular system uses the licensed spectrum, and Wi-Fi is implemented in unlicensed bands; it is also operated over shorter ranges and costs a fraction as much for individual use.

Bluetooth is like Wi-Fi; however, it is for exchanging information between devices like PDAs, mobile phones, laptops, printers and digital cameras via a secure, low-cost, globally available short range radio frequency. Bluetooth lets these devices talk to each other when they come in range, even if they're not in the same room, as long as they are within 10 metres (32 feet) of each other. Cellular, Wi-Fi, and Bluetooth are all formats developed by different firms and licensed to producers. There are hence many suppliers of Wi-Fi and Bluetooth equipment, just as there are lots of makers of cell phones.

*PCS: personal communications service [provider].

**PDA: personal digital assistant; examples include the RIM Blackberry, PalmOne Tungsten, and of course the Apple Newton. PalmOne & Handspring merged in 2003; PalmSource, the software division of Palm, was spun off the same year. This fall, PalmOne will return to its old name, Palm.

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