Residents of this upscale New York suburb may have thought the benefits of an ambitious screen phone project were too good to last. They were right.
Philips Home Services, the unit of Philips Electronics that chose Garden City as a showcase for its advanced telephone technology, has for all intents and purposes closed its doors. It has essentially abandoned all hope of adding to the banking, electronic mail, and other information services delivered through its P-100 telephones during the 18-month-old pilot.
Executives who were involved put a positive spin on the results, saying they opened a window on why consumers embrace new delivery devices and alter their behavior.
But the experience also reflected bankers' waning interest in screen phones, despite Philips' and others' attempts to portray them as a lower- cost alternative to personal computers with potentially broader market appeal.
"Giving away screen phones isn't that easy," said Barry K. Schwartz, the former senior vice president for planning at Philips Home Services in Burlington, Mass. "The only thing I know of that's harder is selling them."
"For the last couple of years, we have seen the error of trying to marry banks to screen phones," said John C. Backus, an early proponent of screen phones who is president of Intelidata Technologies Corp. in Herndon, Va. He said banks should "offer access on whatever device the customer wants to use."
The Garden City project had a promising beginning.
Philips screen phones that retailed at about $300 each were distributed free to virtually all of the Long Island town's 6,500 households, and consumers seemed pleased with the services made available by Citibank, Nynex Corp. (now Bell Atlantic), and the newspaper Garden City News.
One snag they ran into involved the E-mail capability. Giving every participant a mail account was one of the system's big selling points, but it was not available at the start. And the upgrading introduced a bug that temporarily disabled one of the other information options, Garden City Services.
A second problem was the delivery of new applications. Soon after the phone's introduction, its initial features-banking and Caller ID-were supplemented with a local business directory and a community bulletin board. But other promised add-ons, including a national telephone directory, electronic shopping, and merchant discounts, never materialized.
Many consumers never used the phones they received. Some did not even bother to take them out of their boxes.
Philips Home Services eventually fell victim to its Dutch parent's cost- cutting mandate. The multinational electronics giant's restructuring included three rounds of layoffs, the most recent of which reduced the home services unit staff to skeletal proportions.
Gerrit Schipper, the executive who led the home services unit, was among those departing.
Origin BV, a systems integration company 82%-owned by Philips, has assumed responsibility for the remaining activities of Philips Home Services. Origin spokesman Tom McGuire said the company is committed to electronic commerce development, but he declined to comment on the future of the Garden City project.
Despite the disappointments, bankers may have reason to be encouraged by Citibank's results.
According to Philips, Garden City households averaged 3.8 calls a day on the phones. During each call, the phones would display a marketing message inviting the user to "explore Citibanking." With a touch of a button, a call could be placed to the nearest Citibank branch.
Up to 33% of users in Garden City pressed the Citibanking button within six months of getting the phones, and 36% of those opened accounts. Philips said the Citicorp subsidiary added more than 600 accounts, almost one for every 10 Garden City households.
"Going to market with the screen phone is more effective than an ad in the newspaper by an order of magnitude," said Mr. Schwartz, the former Philips executive.
"Although some households use the screen phone as a secondary device, most devotees of the devices are customers who don't like the PC or don't have one," said David S. Smith, director of access management for Citibank in North America.
Behavioral differences emerged between screen phone and PC banking customers. Phone customers tend to check balances often, but they tend not to use automated bill payment services.
Another lesson from the pilot was that market acceptance hinges on the phones' utility. Availability of just one or two services is not likely to hook the consumer.
"One of the things that has held the screen phone back is that consumers are apt to want to have it as a multiaccess device," said Mr. Smith.
"The newspaper (was) probably the most important" of the partners, said Mr. Schwartz, "although it was Philips that put up most of the money for the project."
Garden City News publisher Ed Norris sponsored a series of community meetings that helped persuade residents to take the phones and use them. About 82% of Garden City households used the phones regularly, Philips said.
About 65% of regular users were women, and 70% were older than 40-a profile different from the PC population.
Women older than 40 are "the most underserved market in the country, and we knew that," said Susan Vladeck, former vice president of marketing at Philips Home Services. "In Garden City, it was the people using the screen phone who were not using the Web."
The E-mail glitch spelled trouble for the pilot. Users had to take their phones to a central location to have them upgraded, and only one-third did so.
Even with the problems, and despite the fact that banks seem to have grown less interested in screen phones than they were a few years ago, some observers still see a future for them.
"Is there a role for screen phones? Absolutely, yes," said Matthew Lawlor, chief executive officer of Online Resources and Communications Corp., a McLean, Va., company that has long included screen phones among its delivery options.
"How will these screen-based telephones get sold into the marketplace?" he asked. "The jury is still out."
