Business 2.0: With more than 400 million handsets sold every year, Ethernet inventor Bob Metcalfe is convinced that wireless is the new platform of growth.
Bob Metcalfe, the inventor of the Ethernet networking standard, knows a thing or two about the computer industry. He has seen it shift from mainframe to minicomputer to personal computer in his long tenure on the technology mound. Now he says that computing is moving to a new era, with wireless as the platform.
Why is this worth noting? In the late 1980s, the rise of the personal computer unleashed one of the greatest periods of wealth creation to date, as entrepreneurs and venture capitalists rushed in to create software. Metcalfe sees similarities when it comes to wireless. “The PC was the platform, Internet is a platform, and wireless is the same,” he says. “Even Ethernet has gone wireless,” Metcalfe says, referring to the 802.11 networking technology popularly know as Wi-Fi.
Now a general partner with Polaris Ventures, a company based in Waltham, Mass., the sage of networking says he is focusing all his energy on wireless. One can hardly blame him — more than 400 million cell phones are sold every year, and that number keeps rising. That’s nearly three times the total number of personal computers sold every year. The sheer size of the market makes investment there compelling.
Metcalfe notes that the opportunities are not in chips and hardware. The cell-phone handset business has become a low-margin, high-volume one, largely dominated by Asian manufacturers. Similarly, the chip business has been locked up by major players such as Qualcomm (QCOM), Samsung, and Texas Instruments (TXN).
Rather, if there’s one thing history can teach us, it’s that software and applications are where riches abound. Take something frivolous, like those annoying ringtones. At 99 cents for a few measures of “Super Trouper” or the Love Boat theme, the music industry rakes in $2.5 billion a year. Downloadable games and wireless content are inching up on that figure. Swedish company Opera made a tiny browser for cell phones, beating out giants such as Microsoft (MSFT), and has profited handsomely from it.
Certainly, there is still a lot of room for new ideas. The emergence of wireless as a platform opens up opportunities for small independent developers — who can hack tiny apps such as an instant messenger or a photo-blogging tool and sell it to millions of users worldwide. The software doesn’t have to be aimed at the consumer market either. Metcalfe is funding BridgePort Networks, a Chicago-based startup that makes software to facilitate seamless switching between Wi-Fi and cell-phone networks. BridgePort sells the software to large phone companies.
And if there’s one other thing history can teach us, it’s that it makes sense to listen to Metcalfe.