What do you do after you`ve invented the cell phone, touched off the wireless revolution, and created new markets where there were none before? Well, if you`re Martin Cooper, the venerable father of the cell phone, you go into network optimization, the hottest little market under the airwaves.
On Wednesday, the U.S. General Accounting Office released the results of a study indicating that getting the much-coveted radio spectrum into the hands of the wireless industry could cost billions more than originally anticipated and may take until 2017. That being really bad news for the industry, it`s time to make some lemonade out of those lemons that keep coming out of Washington, D.C. Looking at the bright side, the dearth of spectrum has sparked a truly compelling market in wireless network optimization, one of the very few technology markets right now with endless potential.
Given that spectrum is a finite resource, which, at least in the U.S., is already being stretched to its limit, there will be a self-perpetuating market for entrepreneurs that can devise ways of using spectrum more efficiently. There will never be more spectrum than there is right now, but the demands placed on those radio bands will continue to increase for the foreseeable future. And right now there are only a handful of startups that address this space.
A MARKET TO CALL THEIR OWN
Mr. Cooper`s new company, ArrayComm, has a motto: "There is no lack of spectrum, only a lack of spectral efficiency." To that end, ArrayComm developed IntelliCell, a smart antenna that retrofits a typical cell tower and focuses the energy on individual users rather than wastefully broadcasting signals over huge swaths of territory. And besides having the father of the cell phone as its CEO, the company has the backing of Amerindo, American Century Ventures, Bank of America, Marconi, and Sony. For the time being, ArrayComm battles it out with Metawave Communications (Nasdaq: MTWV) in the smart antennae market, but there is plenty of work to go around. How many cell sites can you count on your way to work?
On the software side, Israel-based Schema has developed a suite of optimization products that help carriers plan out networks and maximize frequencies. Loaded with Ph.D.s, Schema`s management tends to lean toward the geeky side, using something called "evolutionary computation" to squeeze between 20 and 50 percent more out of wireless networks. And to a carrier whose profits are falling on capacity-constrained networks, that`s a huge moneymaker.
Another company hoping to serve this nascent market is ScoreBoard, which acts as more of an end-to-end consultancy that would incorporate solutions from any of the above companies in a complete solution for wireless carriers. They have some big-name customers, including AT&T (NYSE: T) and Cingular Wireless, and were recently able to clear 10 MHz of spectrum for one customer in just three weeks. That translates into savings of about $3 million.
Other than these players, there is not much going on in this market. But with an estimated 200 million devices accessing the Internet by 2005, and wireless subscribership still experiencing strong growth, there is a lot of room for more solutions to the spectrum constraints. For an in-depth look at the spectrum issues facing the U.S., see the September 15 issue of Red Herring magazine.
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