October 13, 1999 Web posted at: 11:31 a.m. EDT (1531 GMT) by Jana Sanchez

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GENEVA (IDG) -- Microsoft Chairman and CEO Bill Gates demonstrated here a prototype of a Windows CE-based smart phone capable of accessing the Internet, and said his company has changed its vision statement to reflect the importance of such devices.

Microsoft's original vision was "a PC in every home and on every desk," he said, but that vision is no longer big enough.

"This is the first time in our 25-year history we've actually changed our vision statement," Gates said, in a speech at the opening session of the Interactive 99 forum taking place here at the Telecom 99 exhibition.

The handset demonstrated by Gates featured a color screen and a scroll button on the side for maneuvering a cursor, and is capable of accessing any Web site based on HTML, he said.

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It also offers users four different ways to reply to e-mail, Gates added. The response can be in the form of text, a phone call, a recorded voice file or a fax, he said.

The presentation was made over the Swiss carrier diAX's GSM (global system for mobile communications) network.

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Connecting at 9.6Kbps, Gates also connected to the Web via Microsoft's microbrowser, displaying Web pages with high graphic content. Although the time to download appeared to be quick, the pages were cached for the demo, confirmed Jonathan Roberts, general manager market development for Windows CE at Microsoft, in an interview with IDG News Service.

"At 9.6Kbps or even 14.4Kbps, you are not going to want to do free-range browsing," but the system is fine for e-mail, Roberts said.

"How long would it really take to download a page that highly graphical?" questioned Ben Linder, vice president, marketing at Phone.com, a company that makes a competing microbrowser that relies on WAP (wireless applications protocol) for accessing Web pages, speaking as a member of the WAP Forum industry association.

Unlike most of the smart mobile devices being shown here, the Microsoft prototype does not rely on WAP (wireless application protocol) to download Web content. WAP was designed to make the transfer of data more efficient, so that applications such as Web browsing do not require as much bandwidth. WAP uses WML (wireless markup language), a language for Web content that is more lightweight than HTML.

Other WAP Forum members questioned the efficiency of wireless bandwidth that would be required to use such a device. "Over a wireless device, there is a fixed amount of spectrum and it has to be shared. The spectrum is limited and the amount of total capacity is limited," said Greg Williams, vice president of wireless systems at U.S. carrier SBC Communications. SBC, for one, wouldn't be interested in such a device running on its network because of the bandwidth demands of downloading HTML pages, Williams said. "We cannot keep building cell sites. You cannot put a tower in every backyard."

Even with the advent of higher bandwidth systems such as GPRS (General Packet Radio Service) and third-generation (3G) systems, such a system would not use bandwidth efficiently, said Williams. Even when faster networks are available, SBC wouldn't be interested, he said. "Not today. Not tomorrow." Ironically, SBC owns a substantial stake in the network on which the demonstration was conducted, diAX, Williams said.

Roberts disputes that opinion, saying that operators are searching for ways to use the bandwidth they will have with the advent of faster broadband networks. "Carriers are telling me 'I've spent billions of dollars to build this (3G) infrastructure ... how are we going to fill it?'" Roberts said.

Even if bandwidth were not an issue with systems such as GPRS, the battery required to sustain color screens and transmit radio frequency are not expected to be developed for several years, said Linder of Phone.com.

Although the prototype, which Microsoft built itself, can run for about 10 hours, battery capacity is a big challenge for any phone that would run on the Windows CE operating system, Roberts said. "Battery life powering high resolution is more of a critical bottleneck than RAM and ROM."

Some observers have questioned if wireless carriers would want to adopt such systems, saying that only carriers in which Microsoft invests are deploying its mobile technologies. Roberts disputed that, pointing to several U.S. carriers, including BellSouth, US West and Sprint, which are deploying technology developed by Microsoft and Qualcomm in their Wireless Knowledge venture.

The phone will be ready for trials during 2000 on GSM or CDMA (code division multiple access) networks, said Roberts. Microsoft does not know when such a phone might actually be on the market.

Some of the technology required to implement Microsoft's new mobile vision has come from recent purchases it made in Europe, including its July purchase of Sendit, a Swedish provider of back-end software to carriers. Also in July, it purchased U.K. software maker STNC Enterprises, whose employees are leading the development of the next generation of the Microsoft microbrowser, Roberts said.

Jana Sanchez is London bureau chief for the IDG News Service.