Breakthrough Ideas (continued, with a [[significant addition]] enclosed in double-square brackets)
The Wireless Internet Launchpad Suite
In February 2000, Qualcomm announced Launchpad as a suite designed to drive innovation of new terminals, applications, and Internet services. The suite addresses functional requirements for: (a) multimedia, (b) connectivity, (c) positioning, (d) user interface (UI), and (e) storage. By consistently using this leading feature set for wireless product development across all QCT product lines, and by providing a SURF development kit for OEMs, Qualcomm stimulates innovations by member of its value web as it expands the dimensionality of its platform.
Introduced into the 3xxx family, Launchpad is improved and extended with each new family of chipsets. At the May Analysts Meeting, Qualcomm highlighted what’s done, meaning already integrated: Wavetable music synthesizer; MP3 player, MPEG-4 decoder, gpsOne, Image processors; SSL crypto library; Bluetooth, USB, and R-UIM; and what’s on the way, meaning soon to be integrated: Streaming MPEG-4 video with stereo audio player; Two-way video conference phone solution; 802.11 support; Secure digital copyright-protected storage (for paid content); hardware-accelerated 3D graphics for wireless gaming; and Stand-Alone GPS mode.
Multimedia. Multimedia is a key member of the suite because it incorporates a set of general-purpose standards that are basic to using digital media. As you know, standards drive network effects. Many of these industry-wide standards are offered as Qualcomm’s trademarked versions of the standards because the software is either directly integrated into the ASSP itself or its functioning is indirectly enhanced by assured, cross tested software compatibility. The ARM CPU often adds its own functionality as a controller for the multimedia package.
Included as MSM multimedia functionality within Launchpad are: (1) the trademarked Qsynth, an improved 128-sound synthesizer, with general MIDI (Musical Instrument Digital Interface) support; (2) a MIDI player, with 16-or 32-voice polyphony and multiple audio channels; (3) trademarked CMX (Compact Media Extension), with a morphing engine and C-MIDI; (4) support for trademarked QChat, which is discussed below; (5) trademarked Qtunes, with MP3 and MPEG-ACC audio decoders (encoders are on the roadmap); (6) trademarked QTV, with MPEG-4 video decoder and MPEG-4 low complexity encoder; (7) Still Image decoders, PNG, JPEG, and GIF, and (8) a coming-soon Graphics Accelerator for games.
To illustrate, Qualcomm’s CMX software is an optimized platform for launching enhanced applications that require time-synthesized multimedia outputs of MIDI-based music, text, graphics, animation, and voice. CMX software solves the problems of conserving power and reducing size in a wireless handset by using a small-code-size low-resource 100% software toolkit to support a complete multimedia solution that can be customized for a wide variety of applications.
How does it work? CMX reads as input especially formatted files containing MIDI music that is interleaved with text, graphics, or animation. A proprietary “dispatcher” function within CMX segments the interleaved data into separate streams representing each stream of media. These segmented digital data streams are dispatched to their appropriate decoder or controller modules for synchronized display of, say, text or animation on the handset and sound from its stereo speaker. For instance, inside the integrated MSM chipset within the handset, the ARM CPU fetches the CMX software from nonvolatile memory so that it can read the input and direct the CMX controller within ARM to dispatch the synchronized, say, animated graphics to the external LCD display as it also sends the synchronized sound data stream to the QDSP2000’s Wavetable synthesizer that outputs MIDI music through a stereo DAC that is amplified as stereo sound.
The value that Qualcomm adds comes from its facilitating and integrative functions as a basic and enhanced platform. For example, in February 2002 Qualcomm announced CMX 2.1, which incorporated both Faith’s Compact MIDI Wavetable for its exceptional sound quality and smaller file size and NeoMtel’s Simple Animation Format player that animates portable network graphic (PNG) files. CMX 2.1 was used in Kyocera and Toshiba handsets to deliver personalized and enhanced wireless ringers, karaoke, greeting cards, cartoons, screen savers, and horoscopes with animation, text, music, and sound effects. BREW enables handset users to download various approved applications from 30 web sites. As another example, the JPEG encoder/decoder software enabled a variety of camera applications that KDDI has used so successfully to acquire one million cdma2000 1x customers in its first three months of availability.
CMX 3.0 software is currently shipping to customers. When integrated into the MSM6050, it significantly enhanced music quality because its more advanced DSP doubles the previous CMX performance from16-polypony to 32-polyphony MIDI music at a doubled 32 KHz sampling rate. These technology improvements further facilitate enhanced applications that pull in new customers and handset replacements. There are more than 8 million CMX users today. Once again, notice that the basic platform pulls through the enhancements to create an upgraded whole product that is further augmented by the value web’s contributions. The augmented applications help transform a mere device into a differentiated product.
This added value creates added power, most of which lodges in the platform itself as the principal enabler of customer-desired services and applications. Power resides in Qualcomm because it advances the crucial RF interface for mobile connectivity, the ASSP hardware and software, and the complete systematized solutions that enable mobile wireless to escalate value to users by including more and more valuable augmentations into its ever-fresh, ever-growing, evergreen platform.
Mimicking the Internet’s history of progression, just as the handset recapitulates the ontogeny of the PC, with the handset today similar in capabilities to the PC of the early to mid ‘90s, we shall see the same incrementally expanding spread of functionality from the Internet to mobile wireless: from voice to multimedia data, from graphics to animations, from smile symbols to emotive sounds to personalized evocative music as a background for video-voice-mail; from still photos to streaming video, from SMS to MMMS, from voice mail to push-to-talk, and still more versatile connections than we can yet imagine, always on, always with you.
And on some blessed occasions, we will leapfrog into a new future by inventive discontinuities in architectures that announce new winners in monopolistic contests to overthrow the depleted, exhausted, and washed-up paradigm. But, Qualcomm has miles to go before it sleeps.
Connectivity. Extending the reach of networks is a direct network effect because adding more nodes arithmetically increases value exponentially. Launchpad facilitates interoperability among devices, standards, information content, and users through USB, Bluetooth, PureVoice Mail, IP protocol stack, WAP Interface, SSL Encryption, BREW Integration Support, JAVA J2ME, including Jazelle in the ARM core, and soon 802.11. Increasing the reach of the wireless network by making more connections in these diverse ways generates both direct and indirect network effects. Connectivity that helps a customer connect to other devices and networks produces extended and augmented connections, always on, always with you.
Positioning. SnapTrack/gpsOne has been discussed. VectorOne is a geo-magnetic digital compass that adds additional value by integrating, using a direct system bus interface, an advanced sensor system developed by AP One System in Tokyo into the MSM. Sensors orient map orients the map like the needle of a compass. VectorOne allows users to simply point their phone to determine what direction to follow to find place of interest, friends, or other participants in location based games.
UI. The User Interface features include: (a) PureVoice VR (Voice Recognition), enables voice commands for dialing and phone feature activation; (b) PureVoice Recorder, enables voice memo and answering machine; (c) PureVoice AGC (Automatic Gain Control), improves call intelligibility under noisy conditions; (d) SIM/RUIM (Subscriber Identity Module, Removable Universal Identity Module) card interface, permits roaming in GSM or other regional networks; (e) PDA interface, introduces compatibility with third-party operating systems; (f) Digital CMOS/CCD Image interface, allows camera image capture; and (g) Color Liquid Crystal Display (LCD) driver, enables viewing of still and moving images.
Qualcomm has extensive expertise in voice compression. PureVoice and SmartRate are variable rate voice coding technologies developed by Qualcomm that reduce sending times by a factor of 10 times compared to other common formats. While maintaining voice quality, digitized speech is re-encoded to a lower rate packet bit-stream. During a pause or silence, the bit rate is sharply reduced, unlike other speech encoders like AMR, which encode everything, speech and silence at the same rate.
TFT Color LCDs are pulling phone sales, and at least one organic LCD by Korea’s LG Electronics has entered the market.
Memory. The storage features include: (a) Multimedia Card (MMC) interface, enables adding high capacity storage of data for music, images, maps, and transfer of data to and from PCs or other consumer devices; (b) Secure Digital (SD) Card interface, enables secure e-commerce services and copyright protection.
The Chasm Crossing Elevator Message: For users who are dissatisfied with phones that only let you talk, the new Internet Launchpad gives you a powerful multimedia experience, unlike I-Mode, which lets you send short, simple messages, the Qualcomm solution lets you, find friends, send photos and video e-mail, listen to your favorite music, watch streaming video, download and play new sound- and graphic-rich games, browse the Internet, find nearby restaurants, contact emergency help that can rapidly find you, while you play interactive real-time action games with others (gg).
Implications. As new generations of the basic ASSP are developed, more industry-standardized-functions are integrated into the ASSP platform, not only expanding its features but also deepening the generality of purposes that the stabilizing and growing platform supports. This means that any competitor’s chipset or operator’s handset that fails to include the specific integrated functionality is differentiated as failing to add this desirable function’s integrated value. This also means that Qualcomm’s total package or whole product necessarily becomes better than any competitor’s incomplete product. Thus, multimedia standards add significant value to Qualcomm’s multipurpose platform. Not only making access, say, to music or video possible, but also keeping you connected with news, sports, stocks, friends, and family anywhere at any time.
Because Qualcomm offers end-to-end solutions, the SURF development kit assists OEM’s who develop devices, just as BREW’s SDK assists developers, by making all of the functionality at the level of the RF system and multimedia transparent, keeping the rules hidden within their modules. Developers who write their software to be compatible with the BREW API can leave the rest of the heavy hauling to Qualcomm, the star-node in the value web. Also, BREW can download updated telephony or software standards and new, updated, or debugged applications: all of which rest transparently on top of the basic ASSP Platform with its pre-integrated multimedia extensions.
Implications. The key point for investors to understand is that by integrating multiple industry-wide standards into its platform, Qualcomm incorporates the scale-dynamic network effect of the standard itself into its own platform. This leverages the incorporated-standards’-value-added-power by transforming it into the platform’s own general-purpose power. Hence, the platform becomes still more valuable to its entire value web of suppliers, complementors, and customers. The flexible power of the Internet Launchpad is similar to adding Microsoft Office to WINDOWS, only it permits endless applications with endless improvements, all downloadable using BREW.
What’s more, in a gorilla game this means that Qualcomm’s always-playing-catch-up competitors must now try to duplicate this expanded and enhanced functionality. Thus, even when Qualcomm has not set, say, the multimedia or connectivity standards, it still becomes the mobile wireless industry’s de facto standard-setter when it is first-to-market.
This leveraging power resides in the platform because Qualcomm controls the crucial architectural interface, spectrally efficient mobile connectivity, that is proximately central, as the nexus of the value web’s interrelationships and, even more important, as ultimately crucial to the value web’s expanding economic proposition. [Take Qualcomm out of the equation and the value proposition collapses.]
The platform’s ultimate standard-setting power resides in its ability to leverage the accelerating advance of technology that reduces costs and increases performance of its key air interface and augmented ASSP platform.
To concretize this logic, let’s apply it to the case of Qualcomm. By commercializing the innovation of its breakthrough ideas in spread spectrum, data optimization, and harmonizing radioOne architectures, Qualcomm controls the accelerating functionality of the third-generation mobile wireless air-interface and the advance in chipsets and software that beautifully implement its patented ideas-as-codified-knowledge. This commercialization of CDMA2000 shapes and controls its value web’s and its industry’s future. This is a point of strategic control called architectural control because of Qualcomm’s introduced discontinuities in RF architecture and in the deeply crafted chipsets that instantiate its machine beauty.
[[The decisive advantage of CDMA2000 over WDCMA was the evolutionary continuity in design rules, parameters, and interfaces from cdmaOne. Not only were the parameters continuous, Dr. Andrew Viterbi, as the principal Qualcomm architect, selected the design rules by using a combination of scientific theory and practical knowledge based on the combined engineering experience of the Qualcomm team to take into account the complex interdependencies that are found in the actual practice of designing networks and chipsets that enable spread spectrum modulation. These elegant design rules and the selected specifications of interdependent parameters made both CDMA2000 1X and 1xEV-DO close to the theoretical optima in spectral efficiency for either voice or data respectively.
Whereas, the design rules and parameter selections of WCDMA were discontinuous with GSM, motivated by political concerns in an effort to bypass the Qualcomm IPR, and based on inadequate experience-based knowledge of the interdependencies required to optimize spread spectrum functioning. The choice of asynchronous handoffs, a higher chipping rate, and a wider bandwidth that required new spectrum has proved to be a disturbing technology handicap and a serious economic setback for WCDMA.
In addition, and crucially important, based on a stunning theory of design put forth in “Design Rules: The Power of Modularity” by Baldwin and Clark, the politicized design of WCDMA fundamentally violated a basic principle of design for an architectural module:
The best third-generation successor to second-generation spread spectrum architecture is an evolutionarily close descendent, not a radical new departure.
According to Baldwin and Clark (2000, pp. 292-293):
“When there is a high price to exercising a design option, we would expect that design to change very slowly. Moreover, if the high exercise price is due to costs of visibility, we expect designers to try to hold these costs down by imposing legacy design rules. For this reason, architectural modules—those that contain visible information—have a tendency to display more continuity in their designs across generations than hidden modules. The ‘best successor’ to a particular architectural module is likely to be a close descendent of the previous design and not a radical new departure. As an example of this principle, the most valuable implementation of a GUI interface for IBM-compatible personal computers was Windows, a descendent of MS-DOS, and not a totally new operating system.
The visible information embodied in architectural modules will persist even longer than the modules themselves. Such information will have a tendency to be passed from one generation to the next in the form of legacy design rules. This in turn suggests that contractual claims and property rights to visible design rules can be extremely valuable assets.”
The new set of design rules for the visible information contained in the more-or-less-complete WCDMA specification was very costly precisely because it was a new set of design rules that were not compatible with GSM’s design rules, parameters, and interfaces. It required the development of new 3G interfaces, including new air-link networks, and also required the compliance with the visible information in the new and untested WCDMA standard by each company who wanted to participate in this new value chain.
Also, because the relevant interdependencies always found in complex information and communication systems were not discovered from previous experience with the engineering problems in spread spectrum modulation, the rules and their implementations were far from ideal, requiring more than the ordinary amount of testing to ensure compatibility across infrastructure and handsets. In addition to raising overall capital and operating costs, poor design choices generate poorly functioning systems.
What’s more, the recognition of the problems that probably lay ahead also led the European to lengthen their own migration path by introducing costly and poorly functioning version of the GSM-derived systems for GPRS and EDGE in hope of competing with CDMA2000 1X data rates. But, Europe failed to anticipate and were unable to respond to Qualcomm’s second data optimized breakthrough in DO that raised the bar still higher. Qualcomm and Asia shape, leaving Europe to Adapt.
I believe this thesis based on Baldwin and Clark’s theory of the option value inherent in modularity offers the strongest conceptual support for my argument that Qualcomm controls the architecture of third-generation spread spectrum. Qualcomm controls both the property rights through their established contractual licenses and the accelerating advances in their best-practice implementation of spread spectrum principles in their choice of parameters, interfaces, and design rules.
Moreover, Qualcomm continues to raise the bar ever higher. Each breakthrough becomes patented proprietary architecture, and every augmentation is subsumed into the platform. The commercialization process continues to advance at the pace of Moore’s law, staying abreast with the leading edge of spread spectrum modulation theory and advances in coding, standards, and connections.
Not only strategic architectural control, but also the harmonization strategy for world phones has transformed the 3G game into the game that only Qualcomm can best play. It has become a game requiring a high technology platform of architectures to enable worldwide mobile connectivity within a network of social and economic networks that are always on, always with you. So far, it remains a game where competitors cannot match Qualcomm’s excellence and analysts have yet to understand the nature of this harmonizing game.]]
Moreover, Qualcomm’s strategic recipe for growth as a platform-standard-setter includes rapidly advancing performance, expanding functionality, and facilitating the easy and rapid growth of augmenting products from complementors in its value web. For each member [And, I intend to include competitors here.] in its value web, Qualcomm strives to make its platform valuable, useful, convenient, easy to use, and increasingly necessary.
The expanded platform that includes the Internet Launchpad introduces the product extensions that facilitate the additional augmentation provided by its value web that, taken together with marketing, creates a whole product. Qualcomm’s unique power to do so ultimately rests on its superior integrated learning base in 3G spread spectrum, a theme introduced by the business historian, Dr. Alfred Chandler, which I have yet to address. |
