Bringing the U.S. up to speed with Europe's wireless trends

When it came to the best-selling ringtone last year, North America and Europe clearly had their differences.

In the U.S., popular rap artist 50 Cent hit the top of the charts with "Candy Shop."

In the United Kingdom, "Crazy Frog," a ditty known for its annoying electronic croaking, soared to No. 1. Popular for quite some time, it regained momentum after a new version based on the 1984 "Beverly Hills Cop" theme was released.

But that's where the differences may be ending. Although "Crazy Frog" and all of its many variations are unlikely to go mainstream here, North America is quickly catching up to Europe when it comes to broader trends in the wireless industry.

Asia has long been considered the dominant powerhouse, followed by Europe and, in third place, North America. But billions of dollars being spent in the U.S. ensures that the wireless infrastructure will be in place to offer phone applications that once separated the U.S. from Europe and Asia.

With a level playing field under way, the defining difference will be in how much consumers use those services and what applications are the most popular.

The topic underscores developments in the global wireless industry as its leaders head to Barcelona, Spain, beginning next week for 3GSM World Congress, an annual event expected to draw 50,000. The conference starts Sunday and ends Feb. 16 with announcements expected from some of the biggest names in the business.

This year's show is likely to see how the U.S., according to analysts and industry executives, has begun to catch up with the rest of the world.

Up until now, the biggest difference between this country and others was in the use of data services.

The U.S. did not have the high-speed networks, called 3G, that made it easy to watch TV, download music and send quality photos.

Japan installed the networks in 2001 and they were in place in Europe by 2004. The U.S. started to build them only last year.

To be sure, Europe is still ahead, but if America continues at its current growth rates, it will equal its European counterparts soon, said Phil Marshall, an analyst with the Yankee Group.

He measures the emergence by looking at the ratio of revenue from data service to total revenue (including that from voice minutes). In 2003, only 2.6 percent of North American revenue came from data services, compared with Western Europe's 14 percent. This year that gap is expected to narrow to 12.4 percent in North American and 19.1 percent in Western Europe. By 2009, the gap will be even less significant.

"Relatively speaking, it's catching up," he said.

Network growth

Spurring the growth has been U.S. carriers' drive to build new networks.

Verizon Wireless, Sprint Nextel and Cingular Wireless all have started rolling out 3G service. Today, Verizon Wireless has 3G in 171 cities; Sprint in 213 cities and Cingular in 16 cities.

The intense competition is prompting U.S. carriers to move quickly.

In some respects what the three carriers have been able to do supersedes European carriers.

Cingular Wireless, for instance, leapfrogged the rest of the world in its recent 3G efforts. Instead of installing UMTS, the prevailing fast network found in Europe, Cingular deployed an even faster network called HSDPA, the first carrier in the world to do so commercially. On HSDPA, a 1 megabyte file can be downloaded in 15 seconds.

Having this kind of bandwidth in place, the U.S. may start to compete more broadly with Europe in applications offered on the phone.

"Not everyone has a phone yet, but the coverage is there and it's live and ready to go," said Steve Shivers, senior vice president of corporate strategy and development at Qpass, a Seattle company that helps carriers with billing processes.

Five years behind

Critics say just because the networks are in place doesn't mean the U.S. has caught up.

"The technologies are getting closer and the applications we are getting are closer, but in terms of user adoption we are not closer," said Steve Elfman, Bellevue-based InfoSpace's executive vice president of technology and managing director of Europe operations.

True, but it depends on what item is being measured, others say.

What is popular here is not necessarily popular there and vice versa.

For instance, Shivers said that in the United States, 70 percent of content is bought through the carrier's "deck," or cellphone storefront. In Europe, the opposite is true; 70 percent of the spending there is through a portal, or third party, that the subscriber reaches online or through other measures.

Text messaging is also extremely popular in Europe. Yankee Group's Marshall said that is because the cost of a voice minute is higher in Europe than in the U.S. To save money, a user will thumb a message to a friend rather than call.

And because text messaging is used so frequently, subscribers feel comfortable buying things by text message.

A typical advertising campaign in Europe could include a "text-to-win" feature. Although those features are available in the U.S., campaigns frequently revolve more around voice plans and how big the plan's bucket of minutes is.

Despite these differences, there are services that have been adopted faster in the U.S. than in Europe.

"The standard line is that the U.S. is five years behind Asia and three years behind Europe," said Mark Donovan, an analyst at Seattle-based M:Metrics, a research firm. "The picture is a lot more complicated and interesting."

In the U.S., he said, subscribers are more likely to use their phone for personal and work e-mail and instant messaging than users in the United Kingdom and Germany.

Qpass, whose customers include Cingular in the U.S. and T-Mobile International in Europe, said ringtones and wallpaper graphics sell better in the U.S.

Abroad, video and games are more popular.

Vantage point

Bellevue-based T-Mobile USA is in the position of seeing both sides of the Atlantic through its parent, T-Mobile International.

As a result, said Michael Gallelli, director and head of product market at T-Mobile USA, his company is the last nationwide carrier in the U.S. to roll out 3G, in part, because it doesn't see users rapidly adopting services requiring higher speeds.

T-Mobile USA is currently testing 3G in some of its markets and expects to roll it out more broadly in 2007. In the meantime, it has installed 2.5G, called EDGE, across the country.

Gallelli said it's still unclear how carriers in the U.S. and Europe will make money from the billions of dollars in investment the networks require.

"They [Europeans] are finally getting to the point where their services have been there long enough that they are starting to understand what the interest is and appetite is and what the business model is for new services," he said.

"But being further along in that space doesn't necessarily guarantee success."

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com