Bluetooth seemed like a simple idea when introduced in 1998 as a low-cost, cable-replacement technology designed to be embedded in wireless devices. Early forecasts had Bluetooth-enabled products on the market as early as mid-1999.
Those early predictions seemed believable at the time. Who would not want a product that did away with the multitude of wires needed to connect electronic devices together? L.M. Ericsson, which started a feasibility study on Bluetooth in 1994, signed up Intel Corp., IBM Corp., Nokia Corp. and Toshiba Corp. as the original founding members of the Bluetooth Special Interest Group in 1997 in an attempt to set standards for the technology’s interoperability. Other companies, including Motorola Inc., Qualcomm Inc., 3Com Corp., Compaq Computer Corp., Dell and Lucent Technologies Inc. quickly joined in.
Now, two years since the name first appeared on the scene and more than a year later than early forecasts, Bluetooth-enabled products, starting with wireless phones and accessories, finally are ready to trickle into the wireless marketplace.
Standards struggles
The delay in getting Bluetooth to the market has been attributed to many causes. Some of the blame has been levied against the Bluetooth SIG due to the strict standards required for the technology. Those standards, needed to ensure the quality of Bluetooth offerings, stymied many early attempts to launch products.
“The industry initially over shot where they thought they would be,” said Navin Sabharwal, director of residential and networking technologies at Allied Business Intelligence. “Component testing was bogged down due to the variety of standards needed for the technology. Manufacturers who did have the test equipment needed to properly test Bluetooth thought that if they followed the specs laid out by the SIG, their products would be compliant. Those manufacturers made their products only to find out later that they did not pass the testing standards.”
The rigid standards were a necessary evil for the interoperability needed for a technology that was to involve companies from such differing segments of the electronics market, and products ranging from wireless phones to refrigerators.
“The SIG has been very good at integrating the companies into the forced standards,” Sabharwal noted. “Of course Ericsson had a bigger say in the standards. But Ericsson did not have a sense of power over the group, knowing that for the good of Bluetooth and itself, it would have to allow input from fellow members of the SIG.”
“Everyone wants their specs to be tops, and there will always be some infighting when you bring together big players in an industry,” said Mike Guertin, a telecom analyst at TeleChoice. “But the compromises had to be made for Bluetooth to happen.”
Others point out that the delays in Bluetooth were exaggerated due to the Bluetooth SIG hyping the technology so much early on that the market was let down when Bluetooth products did not reach the market as quickly as the early predictors had hoped.
Don Baumgartner, business unit manager at Bluetooth development kit designer Extended Systems, noted that the hype was needed for the Bluetooth SIG to drum up the interest necessary to support development.
“In order to get 1,800 companies involved in the technology, Ericsson had to get a lot of interest in the market,” said Baumgartner. “That was really critical.”
Time and money
Adding to the delays, Bluetooth components were a lot more complex, thus more expensive, to produce on a silicon level. Sabharwal explained that the complexity kept the price of each Bluetooth node closer to $40 than the expected target price of less than $10 per node. Early modules were too large to fit into the ever-decreasing size of products that could best take advantage of the technology.
Keith Nowak, media-relations manager at Nokia, said he felt the release of Bluetooth products was not necessarily delayed, noting that if someone had released a Bluetooth-enabled device earlier, there would not have been enough other products for the technology to seem useful.
“The timing is not the issue,” noted Guertin. “There have not been enough uses yet for Bluetooth yet to say the market has been delayed.”
The industry adoption of Bluetooth is seen as a foregone conclusion. The backers of the SIG now include companies from the automotive industry, industrial automation, consumer electronics and home-appliance industries. Even the biggest company of them all, Microsoft Corp., had signed on as one of the SIG’s nine promoter companies.
ABI said in a recent report, “Bluetooth: More Than A Cable Replacement,” that despite recent market delays, annual shipments of Bluetooth-enabled devices is projected to reach more than 1.4 billion nodes in 2005, up from 56 million projected in 2001. The increase will represent a sizable silicon market opportunity, with semiconductor revenues of $5.3 billion expected by 2005.
Frost & Sullivan expects the Bluetooth market will stimulate a leap in wireless local area networks and Bluetooth-embedded systems overall revenues from $92.3 million in 1999, to $53.1 billion by 2006, noting that the market will become dynamic not only because it will be fueled by the rise in unit shipments, but also by the increasing trends toward integration of wireless technologies into products.
Price points
The main obstacle inhibiting Bluetooth adoption early on will be price. The target price, which many in the industry feel must meet a $5-per-node level for Bluetooth to be widely implemented, is still out of reach for most Bluetooth suppliers.
Forrester Research Inc. said that even as production ramps up, integration costs will add between $50 and $100 to retail prices for Bluetooth-enabled devices. The company noted price-sensitive consumers might not be willing to pay a premium for a technology until it has been proven to work. Forrester expects the big uptake in Bluetooth to start with printers, personal computers and comcorders, items for which another $50 is a small percentage of the product’s price.
While many expect the average price to hover between $10 and $20 per Bluetooth node until the end of next year, Cambridge Silicon Radio recently announced a single-chip Bluetooth solution for original equipment manufacturers priced at less than $9 per chip in large quantity orders. CSR said the chip will be ready to ship by the end of this year.
In addition to price pressure, Bluetooth has to compete with faster wireless interconnection technology already on the market, including HomeRF and 802.11b. While each uses the same 2.4 GHz wireless spectrum to transmit their wizardry, Bluetooth is saddled with a bandwidth maximum of 1 megabit per second, compared with the others offering up to 10 Mbps.
While Bluetooth does have a cost advantage, $20 per node compared with 802.11b’s $40 average price per node, the slower speed will turn off larger companies that can afford the faster rates.
“I see Bluetooth more as a complementary standard to 802.11b,” said Nokia’s Nowak. “Bluetooth is geared more toward what I call a personal area network. It is not a local area network embedded solution. It does not rely on a personal computer to work. There a lot of business applications where Bluetooth synching applications will apply.”
Bluetooth’s ability to find its niche in the market will be a its greatest challenge. The large companies involved in promoting the technology will be anxious to get products on the market to seed consumer demand. If they can convince consumers that life with fewer wires is better, the wait for Bluetooth will have been worth it.
“Lack of inexpensive silicon, interoperability problems and limited applications could serve to dampen the market in the early phase,” Sabharwal said. “But as these issues are addressed, Bluetooth adoption be equipment ve
ndors and actual use by consumers should be robust.”
