he Mobitex network is a case of here today, gone tomorrow. But when will tomorrow come? The day after POS device manufacturer ExaDigm Inc. announced a Mobitex conversion program for wireless terminals, Sprint gave the network a one-year reprieve, extending it through at least the first quarter of 2008. Sprint Nextel Corp. bought Velocita Wireless LP and its Mobitex network in March 2006, primarily to use its wireless spectrum for another service.

In a Sept. 28, 2006, letter to Mobitex customers, Velocita Vice President Eric Eife stated the company had received extensive customer feedback indicating "most notably how satisfied you are with Velocita's service and value and your desire to maintain that service for as long as possible."

"The fact that they've moved the date is a blessing in disguise," said Scott Holt, Director of Marketing for ExaDigm. "Merchants and our ISOs will not be pressured into making as hasty a decision." The new date will give terminal manufacturers, processors and ISOs a chance to build comprehensive conversion programs, encompassing hardware and software, with input from the wireless service providers, he said.

Mobitex "was the wireless network of choice by customers," said Bulent Ozayaz, Vice President of Marketing for POS terminal manufacturer Lipman USA. After Sprint announced the eventual phase-out of Mobitex, the industry began to move toward newer third-generation (3G) systems. But Lipman (which will be part of VeriFone after Nov. 1) will continue to sell Mobitex-enabled terminals as long as the market wants them, he added.

ExaDigm hopes to switch the merchants using some of the 120,000 active Mobitex terminals to its modular XD2000 wireless terminal, Holt said. The unit allows merchants to switch out modems, enabling them to change wireless service providers if they choose.

Eeny, meeny, miny, Mobitex

The key open-format wireless alternatives to the older, proprietary Mobitex protocol are code division multiple access (CDMA), employed by Verizon and Sprint, and global system for mobile (GSM) and general packet radio service (GPRS) technologies, both used by Cingular and T-Mobile. These formats are 3G, operating at speeds faster than Mobitex, a second-generation (2G) technology.

In general, 2G networks have transaction times of 10 seconds, compared with 12 seconds for dial-up, according to Paul Coppinger, President of Apriva, which integrates POS hardware, software and network connections. POS transactions on 3G networks through systems set up by Apriva average three seconds, he added.

Merchants are already moving away from Mobitex to 3G systems because network performance and coverage are better, Holt said. The downside to open-protocol telecom giants is their lack of concern for the merchant market.

"We're not driving the technology; the technology is driving us," he said. When cellular carriers "announce the latest standard, we will have to adhere to it." If a carrier were to change protocols, modems may cease to be interoperable.

Whereas consumers replace cell phones every year or two, "in an industry such as ours, a terminal can sit on a countertop for 15 years," making the impact of a technology upgrade much more costly, Holt said.

Modular modems that can be switched in the field can help merchants guard against future network changes and downtime, he added. Should the network carriers upgrade their technologies, for example, offering an advanced version of CDMA that is incompatible with current-generation modems, merchants can keep their terminal.

"We as an industry have been very slow to move," Holt said, citing the phase-out of an early cellular network that forced merchants off early wireless terminals. "When CDPD [cellular digital packet data] shut down, people continued to buy products that didn't have the modularity and flexibility to meet needs as the technology changes."

The velocity of transition

While manufacturers say they have not received reports of any downgrade in the Mobitex service this year, Sprint's intention to devote the spectrum to another service could become an issue. "There is concern Sprint will start taking power down on Velocita," Ozayaz said.

Sprint spokesman James Fisher said the remaining Mobitex customers should not experience any service issues due to dual use of the spectrum. Many Velocita users have been moved to other Sprint services.

"We've looked at the whole group of users and set aside 20% of Velocita's spectrum for [Mobitex] customers who need to stay on it longer," although they should not count on it beyond early 2008, he said. The recent letter to customers was meant to counter disinformation in the market, he added.

The spectrum used by Mobitex is also used by Sprint's iDEN, a voice application and "bandwidth hog," Coppinger said. "As iDEN grows, Mobitex disappears at twice the rate." Coppinger expects Sprint to give preferential treatment to iDEN users because it is a more lucrative application.

Seven months ago, several processors still supported Mobitex as their only wireless technology, Ozayaz said. But with Sprint's announcement that it was phasing out the Mobitex service, most made transition plans. If Sprint pulls the plug, Lipman will help its customers choose between CDMA and GPRS and support them through the installation and integration process.

Merchants select networks based on three criteria: which network has the best coverage in their areas; the cost of network service; and which technology is supported by their acquirer bank or processor. The pricing of network data plans shifts constantly as costs come down, Ozayaz said.

Ingenico has few Mobitex-enabled terminals in the U.S. market, according to Grant Drummond, Ingenico's Director of Marketing Communications. At the end of 2006, the vendor will bring its i7910 wireless terminal to the U.S. market. Already available in Europe, the i7910 will come with the merchant's choice of a GPRS or CDMA modem.

Apriva supports all generations and formats of wireless, IP-based technologies, according to Coppinger. "One nice thing about Mobitex was security, because it could not be directly connected to public networks. It was safe from hackers," he said.

While 3G formats are faster, they're also more subject to intrusion, making it crucial that providers support security in wireless terminals on open networks. The Payment Card Industry Data Security Standard guards data at rest, Coppinger said. MasterCard Worldwide has recognized that data is also vulnerable while it's moving, issuing a mandate - the POS Terminal and Security program - requiring all terminals in the field to support encryption by Jan. 3, 2007. (The encryption deadline for all newly deployed wireless and IP-enabled terminals was Sept. 1, 2006.)

Apriva submitted its AprivaTalk proprietary messaging format to MasterCard for certification, Coppinger said. The card brand's approval is all but assured: the National Security Agency already uses AprivaTalk for all its e-mail traffic running through the Apriva data center, including classified messaging.