Internet appliances make their debut as a new market force

At most of the 19 preceding Comdex shows, one technology or product group or another grabbed the spotlight, and at this year’s 20th Comdex, that light was clearly trained on a new generation of devices described as Internet appliances, Web appliance or information appliances. They will realize the long-held vision of consumes having instant, anytime/anywhere access to vital information and online services.

Ironically Web appliances, a concept now embraced by Microsoft, represent the vision espoused by Microsoft enemies Larry Ellison (Oracle) and Sun’s Scott McNealy. Internet appliances, which will start appearing on store shelves this Spring, are typically inexpensive devices (most costing around $200) that connect to the Internet and focuse on a few specific functions, such as downloading music, stock quoted, meeting scheduling, updating personal calendars, surfing and e-mail. They don’t have disk drives, are not bundled with productivity software, other than a Web browser. They are completely silent and connect to the Internet almost instantly at a touch of a button, unlike regular PCs that go through a lengthy boot-up procedure.

Consumers will be attracted to the devices because they are small, fast, simple to use and inexpensive. International Data Corp predicts that the Internet Appliance market will grow at a 76 percent compounded annual growth rate to reach $15.3 billion in 2002, up from $2.2 billion in 1998. 18.5 million appliances will ship in the United States in 2001, vs. 15.7 million home PCs.

But at Microsoft senior vice president Craig Mundie said he wasn’t sure Internet appliances will catch on as much as is predicted. Mundie said he thinks the appliances are just "training wheels" for using a real computers. Microsoft, however, put the attention on Internet appliances into high gear when Bill Gates first showed off some 2 dozen different types of Windows CE-based Internet appliances displayed on a podium during his keynote address. Gates also announced his company has set up special support services for "Web Companion" devices that use Microsoft’s Windows CE software and connect users to anyplace on the Internet from the MSN online portal. Acer, Vestel, Thomson and Compaq have all said they will make Web companion devices.

If successful, the Web Companions will mean a huge boost to National Semiconductor whose Geode GX integrated "system-on-a-chip" processor is the common processor used in the new Web appliances. The RISC-based chip features an Intel-based Pentium core with added circuitry for graphics, sound and communications processing. That combination is ideal for Web appliances being developed by Internet service providers, cable operators, e-Commerce businesses and other companies seeking to expand the Internet subscriber base, promote online services or increase brand awareness. "The Geode platform represents the next paradigm in Internet access," said Calvin Pan, associate director for Acer's Desktop division, which will is using the chip to produce it own I-Station as well as a variety of Internet appliances for National’s customers.

Acer’s I-Station comes with a wireless keyboard, folding screen and a 56K modem. The device is also compatible with high-speed DSL telephone lines. The machine will do e-mail and Acer is working on additional applications to give the system more functionality. Compaq showed a prototype with a 10-inch flat screen and running under a Pentium II and 32 megabytes of memory. Some of the Internet appliances will actually find themselves integrated into cellular phones and pagers. Cellular phones, with the expanded power of Internet appliance software, will let users check sport scores, e-mail and stock quotes and make airline reservations. Nokia demonstrated a new "smart phone" that sports Internet access. The Nokia 7100 weights under 5 ounces. It will run under the palm operating system and includes voice-activated dialing and a roller key for fast scrolling through text on the screen. And an infrared transceiver will let the device send and receive information from other computer systems.

And Motorola is bringing its pagers into the Internet appliance market with the new 2000X two-way pager that can connect to the Internet, a PC, the telephones and fax machines through an infrared port. The $400 pager can display 9 lines of text and has a tiny keyboard for users to enter in URLs, other minor bits of data, or short messages. 3Com’s Palm group, maker of the best-selling Palm personal digital assistant, is also jumping onto the Internet appliance opportunity by adding more online services to its popular line of Palm systems. Other Internet appliances are designed to sit by the phone and serve as e-mail stations, such as the MailStation from Cidco and the e-Mail Postbox and e-Mail Express from V tech Industries (www.vtechworld.com). Others integrate the telephone, answering machine and e-mail and Internet access into a single device.

For consumers, Web appliances, especially those using the Web Companion model Microsoft introduced (AOL is working on its own version) mean consumers are likely to end up not paying anything for these machines. ISP will likely distribute Web appliances free in return for a one to 4-year commitment by the consumer to use their service. The ISP, in return will be able to leverage the Web appliance user base to attract advertising dollars. Because the appliance won’t let consumers add applications, ISP will also be able to generate more revenue selling consumers new software applications and services that can be downloaded from their portals for a purchase or rental fee.

A large sector within the Internet appliance market will be devices that let consumers download and play back MP3-based digital music and other audio content from online sites. The gadgets, which follow in the footsteps of the Rio from Diamond Media and record music from Web sits that users can later play back through headphones. Sony showed off its new Music Clip, a 4.7-inch long, 64-megabyte device built around the company’s new "memory stick" that holds up to 120 minutes of downloaded music. The $299 Music Clip runs on 2 AA batteries and will be available this spring.

One negative market trend affecting the sale of MPO3 players is the rising cost of computer memory,which is threatening to put the devices out of range of millions of potential buyers as the price point is starting to exceed twice that of more traditional CD-based machines such as the Sony Walkman.

• The Rush from Philips, like many of these devices offer 32 megabytes of Flash memory, enough for one to two hours of recorded content.



• Hong Kong-based Pine Technology is selling its D'music series in see-through pink, green and blue starting the end of this month. The $249 model includes 64 megabytes of memory.



• C-One Tech of South Korea showed off its 1 ounce digital player, MP Wow, a wristwatch-size gadget expected to go on sale over the Internet in the U.S. in time for the holiday shopping season. the $169 model can store only about 4 songs.



• Creative Labs in Silicon Valley showed its Nomad 2 digital player that includes a backlit screen for displaying title, track and other information. The system will be priced between $300-$400 and have 32 megabytes of memory.