Bluetooth Is Coming…And How…

What do feisty contenders like Germany’s Hüft and Wessel and Sweden’s C-Technologies have in common with giants such as Ericsson, Nokia and Siemens? Bluetooth technology: the most quickly adopted industry standard in history.

And very soon you’ll own something that’s Bluetooth enabled – whether you know it or not.

Analysts say that Bluetooth, which allows broadband-speed wireless communication between computing and other devices, is at the cusp of ignition, but that its mainstream use is still one-and-a-half to two years away, despite the early release of British Telecommunications-enabled devices this year.

But oh, how it will go mainstream: in a June 29 report on Bluetooth, Merrill Lynch upped its market estimates of Bluetooth device penetration to an astounding 2.1 billion devices by 2005.

Early Problems
The main obstacles right now are robust software to operate the chips and a perception–if flawed–of the chips as being overly expensive. Not quite accurate, said Karl Hicks, a manager at Datamonitor’s technology division.

“Some would say that there’s a problem with price at the moment,” Hicks said, “but the cost is really only $15 or $20 per chip currently, and when you see the kinds of announcements and developments in Bluetooth, the large economies of scale will begin to bring prices down very soon.”

Merrill Lynch vice president and European seminconductor analyst, Andrew Griffin, who co-authored the Merrill Lynch report on Bluetooth, agreed. “We’re looking at the average price per chip dipping below $5 in 2002, but some firms will have reached that price level by 2001,” he said.

Another mildly worrying subject, according to Griffen, is the development of “bulletproof, robust software that won’t irritate the end user.” Point-to-point solutions are one thing, but software that can cope consistently with other kinds of applications–for example, cell phones speaking with PDAs, laptops and other devices–is still under development.

“Software issues aren’t going to prevent Bluetooth from taking off,” Griffen said, “but it will prevent it from taking off this year, and we won’t be seeing any of the really super sexy applications just yet.”

Why It Will Work
“It’s really simple,” said Johan Boman, chief financial officer of Sweden’s C-Technologies, which recently unveiled the first mass-market Bluetooth enabled device. “We expect Bluetooth to be the definitive standard for communications, replacing infrared and all other existing options. Companies simply must cope with it to have a place in the market.”

While the technology is currently under heavy development by major American manufacturers like Motorola, Dell, Microsoft and Intel, smaller European firms have some distinct advantages.

Ericsson, which initiated the standard, had the stunningly good sense to see that a) they had a hot one on their hands, and b) in order for it to succeed the standard must be open and royalty free. The result has been industry support by all major computer manufacturers, and a current membership of almost 1900 companies in the Bluetooth Special Interest Group (SIG) of Bluetooth device manufacturers.

The beauty of the open standard is that it allows smaller companies, which can move much faster on a new technology, the luxury of full entry to the market at this early stage. For example, take Neuer Markt gem, Hanover-based Höft and Wessel, which specializes in interactivity and mobile communications (they make the gizmo that the conductor uses to charge your credit card for tickets aboard European trains, and the one you paid for your rental car with at the airport last month).

The company, which made a name for itself in European mobile computing with the wildly successful “Taschen Kasse” mobile cash register, is now looking to empower its Web Panel with Bluetooth. The Web Panel is already a model of inteconnectivity, a wireless web device that can run both Windows Pocket PC and Linux operating systems.

Or take C-Technologies, whose Anoto division recently brought the first mass-market Bluetooth-enabled product, the Anoto Pen, to market. The pen, a bit chubbier than a Mont Blanc but with thinner versions planned, has a built-in camera and recognition engine that allows users to write a note on patterned paper by hand, and then send it as an e-mail via Bluetooth.

C-Tech is already a producer of popular handheld devices that lend themselves quite naturally to Bluetooth, such as the C-Pen and handheld scanners–and the company has already unveiled prototypes of these devices enabled for Bluetooth.

These companies are far from alone. This week, IBM and Toshiba announced they will offer Motorola Bluetooth devices across a range of their products. IBM also said it will produce Bluetooth-enabled PCMCIA cards, allowing users of current notebooks and laptops to connect easily with future Bluetooth devices.

And Ericsson will soon release its Bluetooth-enabled cellular phone wireless handset, which will work with any make or model Bluetooth-enabled phone. Analysts agree that Bluetooth, whose standard operates on the same frequencies worldwide, allowing users to use Bluetooth devices anywhere on earth, will substantially change the way devices communicate.

“That’s the really exciting aspect of Bluetooth,” said Jörg Müller, research analyst for new technologies at Value Research Management.

“People talk about the cable-free revolution; I’m not really interested in avoiding cables, but I really mind if I have to use 15 different adapters, like when I have my Alcatel cell phone that can’t connect to my car, which is wired for Siemens,” he said. “Or when I already own a Siemens headset and buy a new Motorola phone. In these cases, Bluetooth would let me use all my devices together.”

What It Does & How It Works
Bluetooth wireless technology lets a device speak, at broadband rates, with other nearby Bluetooth devices instantly and securely, and uses the same frequencies worldwide, so your cell-phone from the US can speak with your VCR in Hong Kong. Each chip can support up to seven “slave” devices, and that mini-network can in turn can be slaved to a second master–the possibilities are mind boggling.

The buzz over Bluetooth is just beginning, and while many products are in development, there’s a somewhat slow ignition process at the moment, but that won’t last long: it’s merely a matter of momentum.

“It’s a bit like the first fax machine or the first video phone,” said VMR’s Müller, “until there are more users you’re not going anywhere. The consumer only benefits when there’s a broad range of Bluetooth devices on the market. I’m really sure that this has a very big future, but at the moment, there’s a struggle to get enough products to market for the concept and the platform to really take off.”

Analysts agree. “I don’t think we’ll see very much happening this year,” said Johan Montelius, an analyst with Jupiter Communications. “We’ll see lots of press releases and a few products coming out, but the big thing is next year.”

For European investment opportunities, look to manufacturers like C-Tech and Höft and Wessel, as well as infrastructure and mobile telephony companies. But don’t forget an important player: “white devices”. Dishwashers, refrigerators and other kitchen appliances will be heavy users of Bluetooth in the future. As a Massachusetts Institute of Technology guru told the crowd last week at a London advertising convention, the majority of Internet communication in the coming years will be “machines, not people.”

So when your fridge calls your grocer to order more Nutella, Bluetooth will have come of age.