This series of articles by George Gilder provides some
     interesting technological and cultural background that helps
     prepare readers to better understand and place in proper
     perspective the events relative to the National Data Super
     Highway, which are unfolding almost daily in the national press.
     I contacted the author and Forbes and as the preface below
     indicates obtained permission to post on the Internet.  Please
     note that the preface must be included when cross posting or
     uploading this article.


The following article, FROM WIRES TO WAVES, was first published in Forbes ASAP, June 5, 1995. It is a portion of George Gilder's book, Telecosm, which will be published in 1996 by Simon & Schuster, as a sequel to Microcosm, published in 1989 and Life After Television published by Norton in 1992. Subsequent chapters of Telecosm will be serialized in Forbes ASAP.


According to Web-Counter, this article has been accessed times since Nov 3, 1995.





 

FROM WIRES TO WAVES



BY



GEORGE GILDER


As wireless telephony goes digital,
it gets very cheap very fast.



     U.S. Sen. Ted Stevens of Alaska wants to know:  With
deregulation of telecommunications, who will bring
connections to Unalakleet, to Aleknagik and to Sleetmute?
Who will bring 500 channels up the Yukon with the salmon to
the people in Beaver?  What will happen to the Yupik, the
Inupiat and the Inuit?  Will we leave them stranded in the
snow while the world zooms off to new riches on an
information superhighway?


     
     A senior Republican on the Senate Commerce Subcommittee
on Communications, Stevens is a key figure in the telecom
deregulation debate on Capitol Hill.  As he contemplates the
issues of restructuring communications law, he has reason to
be suspicious of the grand claims of an information age.  He
knows that universal service--the magic of available dial
tone in your own home--has hardly reached rural Alaska at
all.  As George Calhoun points out in his sort invented by
Alexander Graham Bell in 1881 and now extended to some 95%
of American households) are simply not feasible, either
technically or economically, in many remote regions.


     
     In Beaver, for example, there is one telephone in a hut
linked to a nine-foot satellite dish.  Permafrost and cold
economic reality make it impossible to extend dial tone to
the several hundred households of this town, even though its
average household income, mostly from salmon fishing, is
some $120,000.


     
     Ted Stevens is right to be concerned.  Portentiously
sharing his concern are other powerful Republicans from
rural states, including Larry Pressler of South Dakota, the
chairman of the subcommittee.  Extended now from phone
service to broadband digital superhighways, their concerns
could pose a deadly obstacle to true deregulation of
communications and thus to continued American leadership in
these central technologies of the age.  At stake is some $2
trillion of potential value to the U.S. economy (see Forbes
ASAP, April 10).  The problems of universal service in
Alaska disguise the more profound paradox of telephone
service in most of the world.


     
     The fact is that the universality of telephones is
crucial to their usefulness; yet universal service using
current technology is totally uneconomical and impractical.
Snow and ice are the least of it.  The basic problem is the
architecture of the system, with a separate pair of lines,
on average two miles long, devoted exclusively to each user.
It simply does not pay to lay, entrench, string, protect,
test and maintain miles of copper wire pairs, each dedicated
to one household that uses them on average some 15 or 20
minutes a day.


     
     Connections in cities are one thing.  Urban access
systems comprise a bramble of millions of wire loops, each
linking a home or business telephone to a nearby central
office switch.  Under a half mile in length, these lines
still represent some 80% of the cost of the system.  But
because the lines are short and often bundled together, city
telephony benefits from economies of scale and convenience.
In rural areas, however, the copper lines cost between 10
and 30 times as much per customer as they do in cities.


     
     Moreover, Calhoun reports that in general, phone
companies cannot supply ISDN (integrated services digital
network) and other digital services over twisted-pair wire
more than 18,000 feet (some 3.5 miles) from the central
office.  Perhaps a third of all the nation's phones are more
than 3.5 miles from a central office.


     
     What saves us is socialism.  Closing the huge
differential between the costs of serving rural and urban
customers is a Byzantine web of cross-subsidies, whereby
inner-city and business callers in urban areas subsidize the
worthy citizens of Kirby, Vt.; Vail, Colo.; Mendocino,
Calif.; Round Rock, Texas, and Tyringham, Mass., among other
bucolic locales, to the tune of billions of dollars.
Overall, subsidies from business and urban customers to
rural and other expensive residential users total some $20
billion a year.  In case the cross-subsidies do not suffice
to guarantee universality, Congress has  established a $700
million "Universal Service Fund."  For all that, some 5% of
homes still lack telephone service (compared with 2%
unreached by TV, which faces no universal service
requirement).


     
     Lending huge physical authority to this Sisyphean
socialist scheme are some 65,049,600 tons of copper wire
rooted deep in the rights of way, depreciation schedules,
balance sheets, mental processes and corporate cultures of
the regional Bell operating companies and other so-called
local-exchange carriers. The minimum replacement cost of
these lines deployed over the last 50 years or more--and
still being installed through the mid-1990s at a rate of at
least five million lines a year--is some $300 billion.  By
comparison, Calhoun estimates, the telcos could replace
every telephone switch for one-tenth that amount while
radically upgrading the system.


     
     In this cage of twisted copper wires writhe not only
the executives of the telephone companies, but also the
addled armies of telecommunications regulators, from the
Federal Communications Commission and other Washington
bodies to 50 state public utilities commissions and the
towering hives of lawyers in the communications bar.  The
coils of copper also subtly penetrate the thought processes
of MIT Media Lab gurus, libertarian lobbyists from the
Electronic Frontier Foundation and myriad political analysts
who see this massive metal millstone as a fell weapon of
monopoly power.  The copper colossus even intimidates scores
of staunch Republicans who have arrived in Washington
determined to extirpate every government excess, but who bow
before the totem  of universal service in their districts.


     
     Like any socialist system, the copper colossus will die
hard.  But die it must.


     
     Some 20 years ago, AT&T's long-distance lines comprised
a similarly imperious cage of copper wires, installed over
the previous 50 years and similarly impossible for rivals to
duplicate.  Then too, analysts termed telephony a natural
monopoly because the system could handle additional calls
for essentially zero incremental cost and because network
externalities ensured that the larger the number of
customers, the more valuable the system.  These assumptions
had led to government endorsement of the Bell monopoly as a
common carrier committed to universal service.


     
     Regulators, politicians and litigators always imagine
that they can control the future of telecom, awarding
monopoly privileges in exchange for various high-minded
goals, such as universal or enriched services.  But their
actual role, as Peter Huber and his associates show in their
new text, Federal Broadband Law, is mostly to promote
monopoly at the expense of such values as universality,
which ultimately depend not on law but on innovation.  As a
form of tax, regulations reduce the supply of the taxed
output.  It is technological and entrepreneurial progress,
impelled by low tax rates and deregulation, that brings once-
rare products into the reach of the poor, always the world's
largest untapped market.


     
     In this case, the decline and fall of the long-distance
monopoly was not chiefly an effect of politics or litigation
but of technology.  Effectively dissolving the copper cage
of long distance were the millimeter waves of microwave
radio.  Over the years, it turned out you could set up
microwave towers anywhere and duplicate long-distance
services at radically lower cost without installing any new
wires at all.  But this realization came woefully slowly to
the regulators.


     
     In the "above-890-megahertz" decision of 1959, made
possible by new Klystron tubes and other devices that opened
up higher frequencies to communications, the FCC permitted
creation of private microwave networks.  On the surface, it
was a narrow decision affecting a few large corporations.
But as AT&T planners noted at the time, it represented a
clear break from the previous principles of common carriage,
cross-subsidy and nationwide price averaging in the
telephone network.


     
     Sure enough, over the next two decades a cascade of
further decisions climaxed with the authorization of MCI to
emerge as a direct competitor to AT&T. Within less than a
decade, MCI added to its panoply of aerial microwaves the
yet more advanced technology of single-mode glass fibers.
Issuing some $3 billion of junk bonds over a four-year
period, MCI built the first nationwide network of advanced
fiber optics.  GTE made comparable investments in Sprint,
and AT&T rushed to excel its new rivals.  Combining
microwave with fiber, long-distance telephony became a
technologically aggressive and openly competitive arena;
AT&T's monopoly was a thing of the past.


     
     Today, the remaining monopolies in local phone service
face a threat from radio technology still more devastating
than the microwave threat to AT&T in long distance.  As with
microwaves, the government--in the name of preventing
monopoly--dallied for decades before acting to allow
elimination of the monopolies it had earlier established.
After the invention of cellular at  Bell Labs in 1947, some
34 years passed before the FCC finally began granting
licenses for cellular telephony.  By the 1980s, the FCC and
Judge Harold Greene, managing the Modified Final Judgment
breaking up AT&T, permitted limited competition in wireless
telephony.  However, the FCC allocated half the
metropolitan licenses to existing RBOCs, which had no
interest in using wireless to attack the local loop
monopoly.  The other licenses it assigned by lottery to
gamblers and financiers with no ability to create an
alternative local loop. The process of buying out the
spectrum speculators required leading wireless carriers to
hobble themselves with huge amounts of junk-bond debt.
Although McCaw Cellular Communications created a robust
national system, its financial structure prevented
aggressive price competition with wireline service.


     
     As a result, the idea persists that wireless telephony
is an expensive supplement to the existing copper colossus
rather than a deadly rival of it. The installed base of
twisted-pair wire still appears to many to be a barrier to
entry for new competitors in the local loop, rather than a
barrier to RBOC entry into modern communications markets.
The conventional wisdom sees the electromagnetic spectrum as
a scarce resource.  Few believe that it will soon emerge as
a cheaper and better alternative to the local loop, in the
same way that microwave emerged as a cheaper and better
substitute for copper long-distance wires.



Making Waves

     At the foundation of the information economy, from computers
to telephony, is the microcosm of semiconductor electronics.
It reaches out in a fractal filigree of wires and switches
that repeat their network patterns at every level from the
half-adder in a calculator chip or the SLIC in a telephone
handset to the coaxial trees and branches of a cable TV
system or the mazes of switched and routed lines in the
global Internet.  In computers, engineers lay out the wires
and switches across the tiny silicon substrates of microchips.
In telecommunications, engineers lay out the wires and
switches across the mostly silicon substrates of continents
and seabeds.  But it is essentially the same technology,
governed by quantum science and electrical circuit theory.


     
     Semiconductor engineers may still spend more of their
time with circuit theory, contemplating the operations of
resistors, inductors and capacitors on currents and voltages
in the device.  But quantum theory is most fundamental,
because it allows humans for the first time to manipulate
matter from the inside--to control the conduction bands and
energy-band gaps of the internal atomic structure of silicon
and other elements, and to make electrons, holes and photons
leap and lase at the behest of the designer.  It is quantum
theory that allows chip engineers to control with exquisite
precision, gauged in tenths of microns and trillionths of
seconds, the movements of electrons at the heart of
electronics.


     
     At the heart of quantum theory, however, is a
perplexing duality.  Most of contemporary physics seems to
deal with particles--electrons, quarks, leptons, neutrons,
protons.  In 1994, for example, scientists at Fermilabs in
Chicago announced "discovery" of the "top quark," which they
described as the "last building block of matter."  Yet these
entities manifest themselves only in the midst of explosions
in which their wave signatures can be identified.  So-called
quantum particle theory is unintelligible without quantum
wave theory.


     
     The elements of quantum physics intrinsically combine
the characteristics of particles--definite specks of
mass--with the characteristics of waves-- an infinite radiance
of fields and forces.  Entirely unlike particles, waves
merge, mingle and mesh in vectors and tensors propagating
boundlessly through space.


     
     It is this paradoxical combination of the definite with
the infinite that gives the microcosm its promise as a
medium, not only for computation in one place, but for
communications everywhere.  Spectrum unfolds in a global
ethersphere of interpenetrating waves that reach in a self-
similar fractal pattern from the plasmas of semi-conductor
lasers through the ethers of the planet.


     
     Today, the telecosm of modern communications brings
decisively to the fore the wave side of the quantum duality.
Wires may seem more solid and reliable than air.  But the
distinction is largely spurious.  In proportion to the size
of its nucleus, an atom in a copper wire is as empty as the
solar system is in proportion to the size of the sun.  The
atmosphere and wires are alternative media, and to the
electron or photon are only arbitrarily distinguishable.
Whether insulated by air or by plastic, both offer
resistance, capacitance, inductance, noise and interference.
In thinking about communications, the concept of solidity is
mostly a distraction.  The essence of new devices emerges
more and more as manifestations of waves.


     
     Whether in the air or in a wire, the electrons or
photons do not travel; they wiggle their charges, causing
oscillations that pass through the medium at close to the
speed of light.  As in waves of water, the wave moves, but
the molecules of water stay in the same place.  Thus belied
is the analogy of particles or even bullets favored by
physics teachers who give primacy to the mass rather than to
the wave.  Since the age of carrier pigeons and catapults,
communications systems have transmitted masses only in the
postal services.


     
     Today, even in entirely stationary electronic systems,
the wave action is increasingly dominant.  The microchip
itself--a Pentium processor, say--now runs at 120 megahertz, a
rate in cycles per second that puts it in the middle of the
FM radio band.  New computers must pass the FCC requirements
for radio emissions.  Texas Instruments now advertises its
486 SXL-66 microprocessors as selling for under 50 cents per
megahertz.  Increasingly in the world of computers, people
speak of bandwidth and cycles, reserving the discussion of
mass chiefly for the batteries.  The world of the telecosm
is subtly shifting from electronics, with its implicit
primacy of electrons, to what might be termed spectronics,
seeing the particle as an expression of the wave rather than
the other way around--moving from Bohr's atom and
Heisenberg's electronic uncertainty to Maxwell's rainbow and
Schrodinger's wave equation.


     
     In a global marketplace increasingly unified by
telecommunications at the speed of light, the vision of
waves as fundamental affords not only a better image of
physics, but also a better purchase on economic reality than
a spurious search for solid states, physical resources,
national economies and commodity products.


     
     Conceived as some irreducible essence, the particle of
mass, whether in the form of a top quark or Higgs boson,
wire conduit or central switch, pushes our thinking about
the world toward a vision of ultimately discrete and
confinable entities, with electrons moving through the p-n
junctions of microchips like so many steel ingots crossing a
national border.  Conceived, by contrast, as a continuous
span of waves and frequencies, tossing and cresting,
reflecting,  diffusing, superposing and interfering, the
telecosmic vision accords with the ever-rising global
commerce in information services--ubiquitous, simultaneous,
convergent, emergent.


     
     To grasp the next phases of the information economy,
one begins not with the atom or any other discrete entity,
but with the wave.  In 1865, in a visionary coup that the
late Richard Feynman said would leave the American Civil War
of the same decade as a mere "parochial footnote" by
comparison, Scotch physicist James Clerk Maxwell discovered
the electromagnetic spectrum.  This spread of frequencies
usable for communications is both the practical resource and
the most profound metaphor for the global information
economy.


     
     Is it a domain of limits, to be husbanded by
governments and appropriately allocated by auctions at a
price of billions of dollars for a tiny span of wiggle
rates?  Is it beachfront property to be coveted as a finite
and unrenewable resource?  Is it a constricted domain to be
exploited under the iron laws of diminishing returns?  Is it
a zero-sum game to erupt in Star Wars and street fights as
satellite magnates and personal communications entrepreneurs
crowd into a feudal fray of frequencies?  At the heart of
the gathering abundance of the information economy, would it
sustain a new economics of scarcity?


     
     So one might imagine from today's conventional wisdom.
Contemplating these limits, diminishing returns and zero-sum
economics at Richard Shaffer's Mobile Forum in March was
industry guru Carl Robert Aron.  He sees the world of
wireless entering a "new ice age," like the recent ordeal of
the tire industry in the face of radials.  He predicts that
customers, capital and revenues will become increasingly
scarce and many species of company will become extinct.
Offering a similarly grim vision, BellSouth Vice President
of Corporate Development Mark Feidler declares that the
price elasticity of demand for telephony is negative--you
lower the price and revenues will sink.  On the same panel,
AT&T-McCaw executive Rod Nelson asserted that he could see
no threat from personal communications services, because
McCaw was already offering "a low-priced, high-quality
service."  Even Martin Cooper of ArrayComm saw spectrum as a
limited resource sure to grow more valuable over time.


     
     What would Maxwell say?  As he discovered it, the
spectrum is infinite, ubiquitous, instantaneous and
cornucopian.  Infinite wave action, not the movement of
masses, is the foundation of all physics.  It ushers in an
age of boundless bandwidth beyond the dreams of most
communications prophets.  As industry guru Ira Brodsky
concludes in his authoritative new book, Wireless:  The
Revolution in Personal Communications, "We are quickly
moving from the era of spectrum shortage to the age of
spectrum glut."  This expanding wavescape is the most
fertile frontier of the information economy.  In its actions
are the essential character of the coming economics of
abundance and increasing returns.


     
     In contemporary networks, as Nicholas Negroponte
stresses in his best-selling book, Being Digital, all bits
are fungible.  In spectronics, all spectrum is fungible.  In
particular, the distinction between wireline and wireless
service dissolves.  A wire is just a means of spectrum
reuse.  Down adjacent wires, appropriately twisted or
insulated, you can transmit the same frequencies without
fear of interference or noise.


     
     Using new digital radio technologies, such as code
division multiple access or smart and directional antenna
systems, you can similarly beam the same frequencies through
the atmosphere, insulated by air.  The chief difference is
that the wire system costs far more to install and inhibits
mobility.


     
     The only wire technology commanding a decisive edge
over wireless for critical applications is fiber optics.
The intrinsic bandwidth of a fiber thread is nearly 1,000
times larger than the bandwidth of all the "air" currently
used for terrestrial radio communications.  In both media,
capacity is largely governed by the need to avoid the water
molecules that absorb many frequencies of electromagnetic
waves--in air, from humidity or precipitation; in fiber, from
the unremovable residue of water in the structure of the
glass.


     
     Compared with perhaps 30 gigahertz of currently
accessible frequencies in the air, every fiber thread can
potentially bear 25,000 gigahertz.  This huge bandwidth
derives from the possibility of using infrared light
frequencies for long-distance communications rather than
radio or microwave frequencies.  When you are dealing in
terahertz (infrared light encompasses some 50 trillion hertz
worth of frequencies between 7.5 X 10[11] and 3.5 X 10[14]),
there is a lot of room for sending messages.


     
     One fiber thread the width of a human hair can
potentially use about 25 trillion of those hertz for
communications (the rest tend to be fraught with moisture).
This span is enough to carry all the phone calls in America
on the peak moment of Mother's Day, or to bear three million
six-megahertz high-definition television channels--all down
one fiber thread the width of a human hair.  As Paul Green
sums it up, fiber commands 10 orders of magnitude greater
bandwidth than copper telephone lines and 10 orders of
magnitude lower bit-error rates.  Optical engineers have
packed as many as a million such threads in one bundle with
a cross-section a centimeter square.  Such feats plausibly
support the assertion that, as a practical matter, spectrum
is infinite.


     
      The capacity of fiber is so large that the best way to
think of it is as a radio system in glass--a fibersphere that
can potentially accommodate as many as 10,000 separate
wavelength bitstreams.  Under a system called wavelength
division multiplexing, users will tune in to a chosen
frequency band in the same way they currently time in to a
chosen radio or television channel, whether in the air or in
a coaxial cable.  Indeed, engineers can take the same
infrared frequencies used in fiber and move them to the air
for shorter distance applications such as local-area
networks, point-to-point connections between buildings,
links between handheld computers and desktop hosts, and even
television remote controls.  As tunable laser transmitters
and photodiodes, along with other optoelectronic gear,
become more sensitive and efficient, airborne infrared will
become more robust and useful.  Experiments by the Israelis
with ultraviolet frequencies suggest that even these
superhigh frequencies above visible light might someday be
used for communications through the atmosphere (offering
tens of thousands of TV channels, for example).


     
     Now the FCC has auctioned off 120 megahertz of
frequencies for personal communications services.  The most
prominent winning bidders were consortia led by Sprint, TCI,
Comcast and Cox (a long-distance carrier and three cable
companies going under the name Wireless Co.); by AT&T; and
by AirTouch, Bell Atlantic, NYNEX and U S West as PCS
PrimeCo.  Most analysis has focused on what is called the
wireless market and has assumed the major competitor to PCS
to be the current cellular companies.  Aron's ice-age
ruminations stemmed from contemplation of this radical
increase in competition for a limited number of  cellular
customers who currently cost some $540 each to sign up
(counting handset subsidies) and whose per-capita revenues
are declining at a pace of some 8% per year.  Remember
BellSouth's Feidler's vision of a negative elasticity of
phone markets, meaning that lower prices bring lower
revenues?


     
     From a spectronic perspective, all this analysis is
deeply misleading. Whether channeled down wires or through
the air, spectrum is spectrum.  Digital wireless is a
cheaper and better way of delivering service.  The market
for PCS is not the cellular customer, but the one billion
wireline customers in rich countries and the several
billions of potential phone and teleputer customers around
the globe.  In pursuing these customers, the price
elasticities will be dramatically positive, with various
price points reachable with new wireless technologies
releasing torrents of new demand and new revenues.  What
Aron calls an ice age will in fact prove to be a gigantic
global warming, unleashing huge new growth in telephony,
using spectrum in all its various forms (except perhaps the
twisted-pair copper wires that currently dominate the
installed base of the industry).


     
     The winning bidders from AT&T and Sprint did not put up
their $3.7 billion in order to join a zero-sum straggle for
new cellular customers.  These bidders are dominated by long-
distance businesses that can use PCS to reduce their some
$30 billion in access charges to the local exchange carriers
by creating an alternative local loop.  Similarly, MCI,
though avoiding the auction, created a subsidiary called MCI
Metro that may seek to manage service for spectrum winners
in 17 cities, again harvesting the benefits of obviated
access charges.  Then all these companies can use their PCS
technologies to pursue customers around the world without
any thought of wire.


     
     A chart created by industry analyst Herschel Shosteck
illustrates the opportunity.  The Shosteck chart is a bell
curve relating the incomes of the world's households to
telephone penetration rates.  He shows that telephony has so
far penetrated only to countries representing the top tail
of the curve,  where national wealth suffices to reduce the
cost of telephony to a threshold of  between 4% and 5% of
incomes.  As incomes rise around the globe, more and more
people cross the telecom threshold.  A chart of GDP in real
dollars per capita versus telephone penetration shows that a
40% rise in incomes could bring a 1,600% increase in
potential customers.


     
     Compounding the surge in incomes, however, will be the
plummeting cost of wireless telephony.  Shosteck estimates
that between 1985 and 1994 the price per customer  dropped
80%, from $5,000 to $1,000.  Combining these two trends, he
calculates that there will be between 400 million and 800
million new wireless subscribers by the end of the year
2000.  These numbers represent an awesome upsurge from the
world's current level of some 60 million cellular customers.
Any further acceleration in income growth or decline in
telephone prices will increase these numbers.  A 50% further
drop in telephone prices combined with a 50% rise in incomes
would quickly thrust the vast bulk of the world's population
above the Shosteck threshold.  Far from the negative
elasticities that U.S. phone executives see in their
saturated wireline voice business, the world-wide
communications market will be a financial trampoline.



Just Chips And Antennas

     In an ordinary industry, a 50% drop in price seems a major
obstacle.  But telephony is becoming a branch of the computer
industry, which doubles its cost effectiveness every 18
months.  The wireless convergence of digital electronics and
spectronics will allow the industry to escape its copper
cage and achieve at least a tenfold drop in the real price
of telephony in the next seven years.


     
     Sen. Stevens should meet Martin Cooper, a former
research chief at Motorola and now CEO of ArrayComm.
Located in San Jose, ArrayComm is devoted to drastically
reducing the cost of telephone access over the next two
years while entirely obviating the problems of twisted-pair
wiring that afflict Alaska.


     
     The current pitch of ice-age cellular providers is "pay
more and get less. . .and don't even think about universal
service."  Although they claim penetration rates in
industrial countries of nearly 10%, most cellular users make
most of  their calls on wireline systems.  The real market
share of cellular is in fact under 1% in the industrial
world.  The cellular companies' formula for success is to
exploit the public hunger for mobility by charging more
money for worse service--extracting premium prices for calls
with acoustics and reliability far inferior to wireline
telephony.  Followed by both sides of the cellular
duopoly--by Bells, McCaws and other suppliers--this pay-more-
for-less-and-worse formula has concealed from much of the
industry the basic technological fact that wireless will
soon be acoustically better than wireline and drastically
cheaper as well.  As the CD example shows, after all,
digital sound systems are superior to analog.  And without
wires, phones finesse the largest capital and labor costs of
conventional telephony.


     
     In economic terms, the intrinsic cost advantage of
wireless is concealed by the colossal installed base of
copper.  Already mostly paid for and largely written off,
the 154 million twisted-pair access lines will allow the
Bells to compete in price for some time with wireless rivals
that have lower real costs.


     
     Nonetheless, technical reality will prevail in the end.
Spectronics offers technologies in four dimensions for
dividing and conquering spectrum:  Frequency division, time
division, code division and space division.  All address in
various ways the issue of frequency rouse--how many times in
a system particular frequencies can be roused without
causing interference in other calls using the same
frequencies.  Of the four techniques, so far only frequency
division has been widely exploited.  As these other methods
come on line, the cost of telephony will go over the same
kind of digital cliff long familiar in computers.


     
     Surveying all these proposed schemes and their promised
upgrades (see sidebar next page), it is safe to project
between a 60% and 90% drop in the cost of wireless telephony
over the next five years, depending mostly on the progress
of  CDMA.  Qualcomm's CDMA could reduce costs tenfold,
compared with the threefold gains from current global
services mobile (GSM) technology, which contemplates an
upgrade path chiefly through downgrading the voice quality
with a half-rate vocoder.


     
     All these gains in wireless efficiency from dividing by
time, code or frequency are compounded by dividing spectrum
by space.  Mathematically, every 50% reduction in the cell
radius yields a 400% increase in the number of customers who
can be served in a given area with a given technology.  Huge
theoretical gains accrue from cell-splitting--reducing the
physical extent of cells and multiplying their
numbery--converting current macrocells as large as 35 miles in
diameter into microcells a mile or so in width, and into
picocells measured in hundreds of yards in buildings,
shopping centers or congested urban streets.


     
     All these gains, however, could be nullified by the
expense and difficulty of implanting base stations all over
cities and neighborhoods.  The key to the gains of space
division, therefore, is creation of base stations
drastically cheaper, smaller, more discreet and more
functional than the current cell sites, costing between
$500,000 and $1 million, occupying 1,000 square feet and
containing between 55 and 416 radios, depending on the
frequency reuse factor.  The most notable breakthrough in
base stations is the Steinbrecher MiniCell, to be
demonstrated in July and launched at the end of the year.


     
     Putting a base station into a briefcase, Steinbrecher
uses a single broadband digital radio to perform the
functions of between 55 and 416 analog transceivers.  The
key breakthrough is a proprietary mixer that can flawlessly
down-convert all the waveforms in the entire cellular
spectrum into a stream of baseband digital bits without
losing any information or introducing spurious signals.
Containing all the electromagnetic contents of the cell,
this digital bitstream is broken into channels by a 0.4-
micron technology application-specific integrated circuit
and is interpreted by digital signal processors.  Governed
by the learning curves of semiconductors, the MiniCell
promises to reduce the cost of a cell site by an initial
factor of 10 and by an eventual factor governed chiefly by
the Moore's Law exponentials manifested in the PC industry.


     
     In an important article in the April issue of IEEE
Personal Communications, Donald Cox, former Bellcore
wireless leader who is now at Stanford, calculated that such
digital base station technologies soon could lower capital
costs per wireless customer to $14, compared with a current
cellular cost of $5,555 (assuming, in both cases, 180
channels per unit).


     
     Using leading-edge silicon technology, the broadband
digital radio can transform the entire landscape of
wireless.  It takes the channeling, tuning, filtering,
modulation, demodulation, coding, decoding and other
processing out of the analog radio domain, where a different
radio system is needed for each frequency band or modulation
scheme.  Moved into a digital signal processor or ASIC,
these functions yield to the huge efficiencies of the
computer.


     
     The ultimate in space division, for example, is
devoting the entire available spectrum to every caller.
Using broadband digital radios fed by arrays of smart
antennas, Cooper's ArrayComm is approaching this ultimate.
"We believe that over the next few years, everyone will be
using broadband radios," Cooper says, pointing to Watkins-
Johnson and Airnet joining Steinbrecher in this business
(though with far narrower bandwidths).



     All base stations, one way or another, have to find all
the callers in a cell and link them to callers outside.
Broadband digital radios move the search function from an
array of radios to a single computer.  Cooper contrasts the
technology with radar.  As he puts it, traditional radar
systems use active beams to scan a location and find a
targeted object; ArrayComm uses a passive array of antennas
and a digital radio to provide a broadband snapshot of a cell
20 times a second, and employs computers to locate the
targeted object, in this case a handset.


     
     Like the Craig McCaw-Bill Gates low-earth-orbit
satellite scheme called Teledesic, the ArrayComm IntelliCell
originated with work done for the Strategic Defense
Initiative program.  Inventor Richard Roy developed
algorithms for rapidly calculating the source and trajectory
of missiles from their electromagnetic emissions as detected
by satellite antennas scanning the surface of the earth.
Now he is using similar algorithms to identify the position,
direction, distance and amplitude of electromagnetic
emissions from handsets in a wireless cell, as collected by
arrays of smart antennas at a base station. Once the
information is digitized, Roy's algorithms can sort out all
the calls by their location in the cell, excavating signals
otherwise buried in neighboring noise or shrouded in cross-
talk, and conducting several calls at once on the same
frequencies.


     
     Cooper gives the analogy of human hearing.  "You close
your eyes and I walk around talking, and you can point to me
at any moment.  Add another voice and you can still listen
to me, or shift to the other voice.  You can hear the voice
you want to hear twice as loudly as the voice you want to
suppress.  You null out the interference.  This is not a
physical process.  You don't move your ears.  Your brain
calculates and correlates the different sounds or signals.
That's what Dick Roy's algorithms do in our smart base
stations."


     
     Roy explains further:  "That works if you have a
variety of frequencies. Suppose, though, you were faced with
a chores of monks all chanting in monotone in the same
frequencies.  This is more like the cellular telephone or
PCS situation in the presence of interference or cross-talk.
This is what prevents frequency reuse in adjacent cells.
Amid the drone of the monks, you could not isolate the sound
of one monk.  What you need is more ears.  Then you could
resolve the source of a particular sound by its location.
That is what we do with antenna arrays."


     
     Adding a spatial dimension to the frequencies, time
slots or codes tracked by ordinary cell sites, an ArrayComm
system can distinguish signals entirely unintelligible to
other systems.  For example, an array with eight antennas
can effectively magnify the signal by a factor of eight.
There is no theoretical limit to the number of antennas, but
as a practical matter, the size of the array becomes a
problem in urban cells.  By moving up spectrum from 900
megahertz 15 centimeters to 1,800 megahertz, PCS reduces the
size of the antenna array from two meters across to one
meter across (antenna size drops in proportion to  the
decline in wavelength at higher frequencies).


     
     As a result of the effective magnification of signals,
an eight-antenna array could double the range of a base
station, quadruple the area covered, reduce to one-third or
one-fourth the number of cell sites, and raise frequency
reuse to 100%, without CDMA.  Because CDMA doesn't define
channels by frequency at all, but by codes, its limit is the
number of codes that can be differentiated in the cell.
Thus, Roy believes that among all the competing
technologies, CDMA can benefit most from using the spatial
dimension.  Spatial processing can help differentiate the
calls in a cell as the noise of call codes accumulates
toward the limit where further traffic is impossible.  As
Qualcomm leader Andrew Viterbi declared in a paper released
on Jan. 13:  "Spatial processing remains as the most
promising, if not the last frontier, in the evolution of
multiple access systems."


     
     ArrayComm is part of what Don Steinbrecher calls "the
transformation of wireless from a radio business to a
computer business."  As a computer business, wireless will
share in the gains of Moore's Law.  It will double cost
effectiveness every 18 months, rather than continuing on the
stagnant price curves of wireline telephony in its cage of
copper, dominated by the costs of rolling out trucks,
digging trenches, laying wire and climbing poles.


     
     Cooper predicts that over the next five years, the
combination of broadband digital radios, ArrayComm smart
antennas and a stream of other advances in wireless
telephony will reduce the cost per minute of wireless phone
calls to a penny a minute, one-quarter the average wireline
level and one-twelfth the current cellular price.  This
price collapse will ignite huge positive elasticities in
demand, reaching for the first time billions of new
customers in India, China and Latin America who are now
untouched by telephony.


     
     ArrayComm's first customers are Alcatel in Europe,
which is creating a system for GSM, and DDI Tokyo Pocket
Telephone.  The fastest growing company on the Tokyo stock
exchange for the last five years, DDI is often termed the
MCI of Japan.  Using transceiver chipsets from Cirrus
Logic's PCSI subsidiary, DDI is already the world leader in
low-cost wireless telephony.  The ArrayComm technology
should lower its costs to the point where these pocket
telephones can break through as a wireless local loop
throughout the huge new markets of Asia and elsewhere.
Earlier this year, the DDI technology, called Personal Handy
Phone, was combined with a Bellcore-Motorola proposal as a
new low-end wireless standard under the name Personal Access
Communications Systems.


     
     By transforming the technical landscape of
communications, spectronics are also transforming the
lawscape.  Indeed, by entirely closing the gap between the
costs of serving rural and urban customers, digital wireless
phones will obliterate the need for cross-subsidies that
underlie the entire regulatory edifice.  In the new world of
bandwidth abundance, the only group that will need cross-
subsidies and emergency aid is the communications bar.


     
     As a guide to the era ahead, telephone executives,
regulators and Washington politicians should contemplate the
computer industry.  The market share of centralized time-
shared computer systems dropped from 100% in 1977 to less
than 1% in 1987.  International Business Machines and
Digital Equipment Corp. lost nearly $100 billion in market
cap in five years.


     
     Or, for a more recent example of the power of wireless
technology in the digital age, the telcos, regulators and
politicians should consider the video distribution industry,
Last year, Washington was so obsessed with the cable
industry and its apparent monopoly power that Congress
enacted a reregulation bill that ultimately imposed 700
pages of new rules on the distribution of video news and
entertainment.  Politicians and pundits let forth a stream
of lamentations about the future access of the poor and the
rural to the new services of digital television and proposed
a series of new requirements for universal service.


     
     A year later, however, the very survival of the cable
industry as a distributor of point-multipoint video is in
doubt.  Before Congress could enact broadband universal
service rules, Direct Broadcast Satellites were propagating
150 channels of digital video with supreme universality over
the entire expanse of the continental United States.
Attaching 18-inch dishes to the tops of their igloos, the
Inuits might acquire television images of a variety and
resolution far excelling any offering of cable television in
the midst of the nation's capital.  With a software upgrade
to MPEG-2 video planned later this year, the number of
channels will rise to some 200.


     
     Privately dubbed "deathstar" by cable industry
executives, digital DBS became the fastest growing product
in the history of consumer electronics.  Just seven months
after its introduction, it had already surpassed the
combined first-year sales of VCRs, CD players and big-screen
TVs.


     
     Today, in the name of deregulation, politicians are
preparing to impose a series of new competitive requirements
upon the Bell operating companies, on the assumption that
they still wield monopoly power.  Pundits still seem to
believe that the copper cage protects local telephone
companies from outside competition.  But in fact, the cage
incarcerates them in copper wires, while the world prepares
to pass them by.


     
     The digital future is not wired or wireless.  It is
spectronic and spectacular.  To participate in this
explosive market, all telephone companies will have to
escape from their copper cages into the infinite reaches of
the spectrum.



                                               #####