Chinese Start-Up Fixes Problem
Stalling Many New 3G Networks
By H. ASHER BOLANDE
Staff Reporter of THE WALL STREET JOURNAL
A Beijing-based start-up is quietly developing what might seem like the last
thing the telecommunications world needs: another third-generation mobile
technology.
Around the globe, huge upfront costs and technical delays are calling into
question the commercial justification for so-called 3G networks, which aim to
transform cellphones into powerful Internet-linked tools. But it is exactly those
obstacles that the start-up, LinkAir Communications Inc., says present an
opening. The company has developed a technology that it says does
everything that the current, approved 3G standards do, but at a fraction of the
cost to mobile operators. It promises six times more capacity for voice calls or
data downloads, using the same amount of spectrum.
The company has already attracted blue-ribbon U.S. industry executives to its
management team and reeled in US$27 million in venture funding from
big-name backers including Intel Capital and the Carlyle Group. In doing so, it
has begun to solve a problem that impedes many budding inventions in China:
insufficient funding. Because of a scarcity of loans and venture capital,
copious university research has languished in labs.
But in order to survive beyond the start-up phase, the two-year-old LinkAir
will need a boost from the Chinese government. Like all wireless vendors,
LinkAir aims to license its technology to manufacturers around the world for
use in their handsets and infrastructure equipment. But the biggest telecom
equipment vendors -- companies like Nokia and Motorola -- are already
deeply committed to proving that the existing crop of 3G standards can work,
and are loath to restart with a new one.
What the company needs is some government pressure on China's
state-owned wireless manufacturers and carriers to adopt LinkAir's
indigenous technology, called LAS-CDMA. Once the standard is proven in
the world's biggest mobile market, the thinking goes, LinkAir will have the
clout to go global.
LinkAir and LAS-CDMA are the brainchild of Li Daben, a 62-year-old
Beijing University of Posts and Telecommunications researcher who in 1968
began pondering a problem that many scientists world-wide had given up on:
Signal interference.
Traditional radio-frequency technologies use elaborate, bandwidth-consuming
schemes to prevent incoming and outgoing signals, as well as signals from
different phones, from crossing. Even a study over several years by NASA,
the National Aeronautics and Space Administration agency, using
supercomputers to search for an "optimum code" to cut signal interference
and increase capacity ended in vain.
Mr. Li, however, was convinced there was a shortcut, and he set about in
search of a timing code that could eliminate interference. In 1984, he
presented a paper proving mathematically that such a code existed.
Finding it, though, would take another 11 years of research.
The breakthrough came at midnight in the sleeper compartment of a train
from Beijing to Xian in 1993. "I couldn't sleep, still thinking about the coding,
and drew some figures in combination. Suddenly I found a nice combination,"
he recalls. Computers weren't able to find the winning formula, he says,
because "it does not use a traditional coding structure."
Mr. Li couldn't find a backer to commercialize the discovery until early 1999,
when the China venture-capital arm of the U.S. company International Data
Group got wind of his innovation. IDG invited Ting Zheng, then working as the
group manager for wireless data and messaging at Sprint PCS Group, to fly to
Beijing to conduct due diligence. "I came back and told them, 'This is a great
discovery, and we should focus on getting into the cellular market,'" says Mr.
Zheng. He went on to co-found LinkAir and is now its chief executive. The
company is expecting to roll out LAS-CDMA toward the end of next year.
Irwin Jacobs, chairman of San Diego-based Qualcomm Corp., which owns
patents on the core technology of all 3G standards, said in an interview in May
that he doubts LAS-CDMA is the breakthrough LinkAir is portraying it as.
"On the theoretical, engineering and business side of things, right now I don't
see an advantage," he said. (A number of LinkAir's high-ranking executives
have previously been associated with Qualcomm, either as employees or
outside consultants.)
Mr. Zheng says Mr. Jacobs can't possibly know about the presence of an
advantage, because LinkAir has been circumspect about its technology. Some
investors and government bureaucrats have seen test runs, but that's as much
as they've been told about the mechanics of LAS-CDMA.
LinkAir's entry into the market comes at a time when Beijing is working hard
to groom home-grown telecom-equipment makers. While the country has
more mobile subscribers than any other country, most of its networks and
handsets are built by foreign giants like Sweden's Ericsson. Chinese
companies like Huawei Technologies Ltd. are pushing hard, but they're
playing catch-up. Still, it is these companies that LinkAir is counting on to
make its technology a reality in the marketplace.
The government hasn't set a timetable for introducing 3G, and that could work
to LinkAir's advantage. In lobbying Beijing, LinkAir emphasizes
LAS-CDMA's flexibility: Unlike other 3G standards, it can share spectrum
with current wireless networks. That enables operators to install 3G base
stations alongside existing, second-generation ones. "You can keep the old
infrastructure intact and gradually move into a new system," says Mr. Zheng.
He estimates it would cost $200 per subscriber to enhance an existing
network with LinkAir's technology, about a fifth the cost of building a 3G
network from scratch.
That band-aid approach would have some appeal in China's biggest cities,
which are straining to cope with call traffic at peak hours, says Peter
Lovelock, the head of telecom research at madeforchina, a Beijing-based
information-technology consultancy. "The networks are breaking down," he
says.
Despite the obvious commercial benefits for China's telecom equipment
makers and service providers of adopting a 3G standard in use elsewhere in
the world, the government has given hints it plans to get behind LinkAir. A
senior Ministry of Information Industry official applauded the company in the
official newspaper Science and Technology Daily in September, after
witnessing a Shanghai trial that included both streaming video and voice
conversations while in a moving vehicle. At the same time, a big state-owned
technology company is set to become a principal investor. While details of the
deal with the Founder Group, a computer software and services company
affiliated with Beijing University, have yet to be made public, LinkAir
executives say it has agreed to inject between US$20 million and US$30
million into the start-up.
But even with government prodding, Chinese equipment vendors may simply
lack the cash to adopt the technology, something Cadol Cheung, Intel Capital's
regional director for strategic investment, identifies as the biggest obstacle
facing LinkAir. To develop a cellphone model using a new technology can
cost hundreds of millions of dollars, and China's up-and-comers are battling
tough economic times. "Everyone is tightening their belts," Mr. Cheung says.
Write to H. Asher Bolande at hyam.bolande@awsj.com |
