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SAN JOSE, Calif.—According to wireless industry executives here for the Bluetooth Americas 2003 expo, Bluetooth is now boring. And to some that is both a good and a bad thing.

In a keynote address, Mike McCamon, executive director of the Bluetooth Special Interest Group of Overland Park, Kan., said that while the short-range wireless technology has become accepted, Bluetooth still faces some last hurdles of interoperability.

On the other hand, fellow speaker Seamus McAteer, managing partner and senior analyst at San Francisco’s The Zelos Group sounded more pessimistic, noting that U.S. consumers and carriers alike simply don’t care about the technology.

Both speeches underscored the fundamental promise and challenge of the Bluetooth technology, which has labored under a cloud since its inception. Bluetooth components, now in their third generation, have overcome questions of interference with Wi-Fi radios, and become widely adopted in Japan and Asia. The Bluetooth 1.2 specification, released in late November, provided further provisions for removing interference and improving the user interface. vendors chips are being qualified now.

However, Bluetooth has also become intrinsically tied to the cellular phone, finding success in just three markets: as a connection to hands-free wireless headsets, tying together a PC or PDA to a cell phone, and as a means of connecting the mobile phone to an automobile. Slowly, McCamon said, the technology is being used for wireless gaming, such as in Nokia Communications’ N-Gage phone wireless gaming platform.

To read a 1UP review of Nokia’s combination gaming-talking platform, click here.

Bluetooth’s success, McCamon said, will be found in “disvergence,” allowing manufacturers to build in their best capabilities into a single device, and then tying them all together with Bluetooth.

“There is no [one] killer app for Bluetooth; there are probably dozens of killer apps for Bluetooth,” McCamon said. The challenge, McCamon added, is to improve the interoperability of Bluetooth devices.

Last year, the Bluetooth SIG installed a plan to ask manufacturers to allow devices to be set up in five minutes. Now, the SIG is still hammering out the last vestiges of interoperability concerns, with two dozen initiatives under way among the SIG’s 3,000 or so member companies.

In 2004, the SIG will work on brand building, and plans an “Operation Blueshock” publicity stunt at the Consumer Electronics Show in Las Vegas in January, McCamon said. Companies are also examining ways to “beam” business cards and other data via Bluetooth.

On Tuesday, Stockholm’s Ericsson Technology Licensing also announced that it would form an independent laboratory for interoperability testing, designed to facilitate interoperability studies on an application level with end-user products.

McAteer, however, offered a more pessimistic view. To date, the largest cellular carrier in the U.S., Verizon Wireless, has not qualified Bluetooth cellular phones, or handsets. In a survey of American consumers asking which technologies they considered important in wireless, Bluetooth ranked last on the list, he said.

“The bottom line is, consumers don’t care about Bluetooth,” McAteer said.

In 2003, about 2.2 million Bluetooth-equipped mobile handsets will be shipped, McAteer said, about 2.8 percent of all handsets sold. The total installed base of Bluetooth handsets will represent 1.4 percent of all mobile subscribers, The Zelos Group found. In 2004, an estimated 7.8 million Bluetooth-enabled handsets will ship, or 9.4 percent of the total, and the installed base will represent 5.1 percent of all mobile subscribers. By 2008, about 60 percent of all handsets in the market will include Bluetooth, McAteer said.

However, Bluetooth-equipped PDAs have topped out at between 6 to 8 million units and will probably decline, McAteer said. “We really need support for handsets if we are going to see any success,” he said.

National Semiconductor this week showed a new low-power Wi-Fi technology that could compete with Bluetooth. To read the full story, click here.

And that, McAteer said, comes back to the carriers. According to the analyst, representatives of the largest CDMA carrier in the U.S., Verizon Wireless, told him that the company has no near-term plans to add support for Bluetooth and “the jury is still out for Bluetooth.”

Representatives at Verizon, Bedminster, N.J., could not be contacted by press time for comment, although representatives of mobile handset makers here privately confirmed the accuracy of McAteer’s report.

Likewise, retailers have few incentives to sell Bluetooth-enabled data devices, McAteer said, as that would mean losing out on a cellular service subscription that they could otherwise attach to a cell phone.

However, handset makers have largely adopted Bluetooth, especially in Europe and Asia. More than 18 Bluetooth-enabled cell phones launched or shipped during 2003, according to Markus Schtelig, senior manager for wireless connectivity for Helsinki’s Nokia Communications, the world’s largest handset maker. In total, Nokia has shipped between 50 and 70 million Bluetooth-equipped phones in 2003, he said.

Stefan Svedberg, vice president of product management for Ericsson Technology Licensing, described 2004 as the “year of Bluetooth.”

Even Motorola Inc., the lone U.S. handset maker, is jumping on the Bluetooth bandwagon. “If you ask consumers what Bluetooth is, they still won’t know what you’re talking about,” said Steve Deutscher, director of product marketing for companion products at Motorola, Schaumburg, Ill. However, he added the time is right for Motorola to start getting involved.

“All the issues have been solved,” Deutscher said. “Motorola will be jumping in significantly on the handset side in 2004.” Motorola has one Bluetooth-equipped phone on the market, the V500, and will be launching the V600 in 2004, along with the A835 and A760, representatives for the company said.

Next Page: A Look at Bluetooth Headsets, Computer Support and Cost Challenges for Vendors.

Wireless headsets are making headway as well. David A. Hogan, vice president of carrier sales at Jabra Corp. of Frankfurt, Ill., said that in the U.S. the ratio of wired headsets to Bluetooth headsets sold has improved from 4:1 to 2:1 over the past few years. In Japan and Europe, sales of non-Bluetooth headsets are virtually nil, he said.

Analysts studies have shown that consumers will pay significant premiums to eliminate clutter, especially on the desktop. But to truly take off, Bluetooth headsets have to become a smaller percentage of that overall cost, said Michael Sharer, OEM sales manager at Fellowes Manufacturing Co. of Itasca, Ill., wandering the show floor in search of contacts.

“As companies put more technology into phones, it will drive the price up,” Sharer said. “But paying $100 for a headset is not going to be something people who buy these cheap, refurbished phones are going to do. It’s like saying, OK, you’re going to buy a $400 PC as well as a $400 Klipsch speaker system? That’s as much as the PC. That doesn’t happen.”

Fortunately for proponents of the technology, PC makers seem to have quickly latched on to Bluetooth. By 2007, 36 percent of all notebook PCs will be equipped with Bluetooth, according to analyst Ken Furer of International Data Corp., based in Framingham, Mass.

In addition, Robert Graham, brand manager at Toshiba Ltd.’s digital products division, in Irvine, Calif., said Bluetooth was being implemented in worldwide models of PDAs and notebooks, with the emphasis on Japanese models.

Bluetooth is also being implemented across IBM’s ThinkPad notebooks worldwide, added Howard Dulaney, market segment manager for wireless strategies within IBM’s PC division in Armonk, N.Y.

“We are seeing increased what I would call traction, where we see different amounts of sales in different geographies, but seeing more overall,” Dulaney said, including demand for Bluetooth-equipped printers.

However, The Zelos Group’s McAteer noted that there still is no standardized printer file for Windows, adding to the technology’s interoperability woes.

Bluetooth is also being added to automobiles, such as Toyota’s Prius hybrid car. Close to 40 percent of American Prius buyers order the Bluetooth option, according to Paul Daverio, marketing manger for advance technology vehicles at Toyota Motor Sales U.S.A. Inc., in Torrance, Calif. Toyota plans to offer Bluetooth in four models, including two vehicles in its Lexus line.

Part of the reason for Bluetooth’s success has been the steadily decreasing component costs, which have resulted in a shakeout in the industry. For example, longtime attendees of the expo noted that Microtune Inc. was absent, after the company decided to shop its Bluetooth business in October. In addition, Oki Semiconductor Ltd. and Koninklijke Philips Electronics NV were also no-shows.

The competition will also help next year to lower the expected bill-of-materials costs for Bluetooth radios to under $3.45 in volume shipments, IDC’s Furer said.

Chip makers also face some additional challenges, such as the problems of shrinking stubborn analog components, and whether or not to add boutique components such as a DSP for improved audio quality, said Jennifer Bray, a consultant for Cambridge Silicon Radio, based in Cambridge, U.K.

All other issues aside, the Bluetooth SIG’s McCamon said the economy will also play a critical role in Bluetooth’s development. “The next 24 months will be make or break for Bluetooth,” he said. If the economy doesn’t recover, the industry will be “in a pretty tight spot,” he said.