Open Sky’s wireless PDA future leaves Microsoft out in the cold

1999-09-03

Competition in a market is a good way of encouraging innovation and keeping control of costs. But what do you do if you don’t have any competition? In the Wireless PDA space, 3Com’s answer would appear to be – buy some.

3Com have a share in Open Sky, a joint venture with Aether Systems, Inc. Open Sky’s goal is to provide a US-wide wireless infrastructure to support handheld devices in general, not just to the Palm VII. Its two-pronged approach involves, firstly, linking up with existing mobile carriers and secondly, involving partners to develop modems and software to enable existing devices to talk to the ether. Whilst the initiative remains stateside only, this partnership approach is more likely to result in a european service than 3Com’s existing wireless service, the single-company Palm.net.

The move is interesting because, effectively, it pitches OpenSky against Palm.net. It is difficult to see how Palm.net will compete with OpenSky: the former requires a Palm VII, currently costing nearly three times the price of the chepest Palm (the newly released Palm IIIe) and it is unlikely that the price of the modem will make up the difference. Palm.net service costs are notoriously high, and likley to be put to shame relative to OpenSky’s fixed rates. On the eve of its national rollout of Palm.net, 3Com have taken a calculated risk – the greater good is to establish a market sector for the wireless handheld device, and the Palm VII/Palm.net combination cannot do it by itself. For credibility, the market needs to extend to all flavours of handheld, Palm or otherwise. Enter Windows CE.

Here is the fundamental element of 3Com’s risk calculation. It must establish a market, a move which is unlikely to succeed if it is linked to any one flavour of PDA. However it wants to retain its early bird advantage over the Microsoft camp, which makes up the lion’s share of the competition. For this reason, Open Sky has announced that it will be supporting Windows CE by autumn of next year. 3Com are relying on the rapid acceptance and uptake of wireless handheld devices, and will do everything they can to encourage the end user to come on board. There’s the rub – the company will even pitch against itself to create and win the market before Microsoft get a look in.

This strategy is fraught with risks. Corporate America is likely to be smarting for a couple of months after Y2K, which could dampen the acceptance of wireless. The success of the Palm was driven by the end user and not the IT department, however – this is a fact that will have been in 3Com’s calculations. In addition, of course, mobile phone manufacturers are not standing still, and the fruits of the Symbian alliance are to be yielding forth in the near future. Despite all this, 3Com probably feels it has no choice – it has to steal the initiative, because the risks of not doing so are even greater.

For the moment, from this side of the pond we can only watch. But we watch with interest.

(First published 3 September 1999)