Mon, Apr 10, 2000 page18

• Consumers' old habits die hard, IA makers learn

  With consumer reluctance high, Internet appliance makers are hard pressed to find out exactly what consumers will accept. One firm thinks it's the ordinary telephone

  • By David Frazier / CONTRIBUTING REPORTER
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  It seemed like a can't lose proposition: brokerages would give away PCs with an eye toward recouping the expense though lower transactions costs.

  "They would do this for customers with high trading volume to encourage them to do their trading at home," said J.C. Liou, executive director at Tele-Infonet Inc.

  "But it didn't work, because the valued customers were mostly grandmas and grandpas," Liou said. "They'd take the PCs home and give them to their grandkids, who'd play video games on them."

  The lesson of brokerage firms says a lot about how difficult it is convincing consumers to adopt new behaviors. Simply put, it's the problem of winning consumers with fixed mindsets, or seducing consumers over to new mindsets.

  Regardless of the phrasing, consumer acceptance is unfolding as the central problem for manufacturers and big money backers of IAs (information appliances).

  There are scores of new gadgets flooding the marketplace, but no one knows exactly what will catch on, what to produce or where to invest.

  Making the problem even murkier is the lack of a clear definition of what constitutes an IA.

  "IA could stand for two things: `information appliance' or `Internet appliance,'" said Alfred Ying, vice president of research at Primasia Securities.

  "You could call anything that hooks into the Internet an IA. That includes PCs, PDAs [personal digital assistants], Web phones [cell phones with Internet capabilities] and even set-top boxes that lets your TV access the Internet."

  Net by Telephone

  But compared to these approaches, Tele-Infonet is coming at the IA problem from a slightly different angle. The company designs and develops end-user telecommunications equipment.

  Tele-Infonet was founded about 10 years ago and over the years has cooperated with telecom giants such as Lucent Technologies, Bellcore and Nortel.

  In recent years, one of the company's major revenue producers has been ISDN (integrated service digital network) telesets, or phone terminals commonly used in business networks. Tele-Infonet supplies the sets to Lucent.

  And with just 75 employees, Tele-Infonet is also a classic Taiwan SME. Most of its staff consists of engineers and administrators, and it outsources all of its production to local manufacturers.

  In the future, the company is looking to grow quickly and anticipates bringing in NT$800 million in revenue this year. It also sees an IPO down the road.

  A month ago, Tele-Infonet unveiled its first IA. The device is a telephone with a small monochrome LCD screen, slide-out keyboard, smart card slot and Internet hook-up.

  "Its important to make it look like a telephone. Everyone will use a telephone, even the grandparents," Liou said.

  Building a network

  Tele-Infonet describes its product as a kind of ADSI (analog display service interface) teleset. They are calling it something catchier, "TeleMall," which is also the name of the company that was created to market the device.

  Simply speaking, TeleMall is a telephone that has evolved into a home appliance for e-commerce.

  Of course, one terminal alone does not an e-commerce operattion make.

  Tele-Infonet is developing TeleMall as part of a large US-based association of businesses called E-village. The group includes more than 6,000 companies -- all working to create local networks that will link businesses to homes for transactions online. Tele-Infonet officials say they are the only Taiwanese company involved in the program.

  For end-users, TeleMall will mean ultra-convenience. From their home telesets, they will be able to pay bills, buy and sell stocks, perform banking transactions, shop at the local grocery store, make dinner reservations, set golf tee times, buy concert tickets and even order pizzas.

  Samuel Lin, a manager at Tele-Infonet, added that creating business networks will be necessary to make it all happen.

  "This kind of thing cannot work without the participation of neighborhood banks and the corner store," he said. "So recruiting them is very important."

  Personalized ID cards

  Enlisting local businesses for e-commerce, however, is not part of Tele-Infonet's responsibilities.

  "It will be up to ISPs [Internet service providers] to organize communities," Lin said. "They are the ones with the networks already in place, so they are the ones in position to become" application service providers.

  Just as ISPs provide access to the Internet, ASPs provide access to various Internet-based applications, such as online banking and shopping. Such applications are often associated with limited-access local networks.

  Since E-village networks will provide end-users with lots of power in managing the digital aspects of their lives, tight security is a significant concern. Users will be protected by a combination of personalized ID smart cards and input codes. In the E-village, even individual family members will have their own cards -- a necessary precaution against children withdrawing all their parents' funds.

  One local example of smart cards are those used for riding Taipei's MRT, which can hold up to NT$1,000. In the E-village, such e-cash will be even more versatile.

  In addition to mass transit, holders will be able to use smart cards for shopping and be able to put money on them at ATMs. As it happens, smart card interfaces for ATM terminals are another of Tele-Infonet's products.

  To sell its new IAs, TeleMall is marketing to networks, not consumers.

  "Networks will probably provide these terminals to users for free," Lin said.

  Making it affordable

  Still, if TeleMall is to become widespread, it has to be affordable on its own. "If it is purchased by the consumer, the retail price will be about NT$8,500," Liou said, "but networks will buy in volume, so naturally they will get it cheaper."

  In the US market TeleMall will retail for under US$300. The price makes it a bargain compared to Internet-phones and telephones equipped with Web browsers and e-mail capabilities that retail for US$700 and higher.

  TeleMall's economy is accomplished by dropping some high-cost components, such as the color TFT-LCD screens that are found on most Internet phones and video phones. TeleMall uses a monochrome F-STN LCD screen instead.

  Inside, however, TeleMall is still like a computer. It runs off a small CPU and a digital signal processor, a sort of microprocessor for transmissions in digital networks. The device's memory is taken care of with 1 MB of flash ROM and 1 MB of SRAM.

  Fortunately, TeleMall's exterior belies its high-techiness -- which is just as Tele-Infonet intended. The basic interface looks just like a regular telephone, and the slide-out keyboard leaves off advanced function keys such as "page up," "alt," and "ctrl."

  Will this make it consumer ready? Ask grandpa.
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