Martha McKay

July 20, 2003

Jul. 20--With a few simple keystrokes, Flarion Technologies' demo expert Ed McFadden showed how his company plans to turn the $50 billion wireless industry on its head.

In a split second, a massive download of data streamed over the airwaves into McFadden's laptop computer.

A Web site appeared in the background, a second Web site popped onto the screen showing a TV news broadcast, and then a third Web site piped in jazz radio, with both music and news audible through the same speakers.

This broadband signal arrived in Flarion's conference room beamed from a rooftop antenna at the company's Bedminster headquarters.

In some ways, a visit to Flarion is like a short step back in time when wireless was a magic word and venture capital flowed freely.

The company has raised $100 million.

It's hiring people.

And enough industry heavyweights are paying heed to give this upstart an awful lot of confidence, a rare commodity in the beleaguered telecommunications sector these days.

"We aren't hopeful we'll become commercially available, we will be commercially available," said Mike Gallagher, Flarion's president, a former Nortel Networks executive who began his career at AT&T.

Gallagher says a milestone agreement with a wireless carrier will be announced within 90 days to deliver Flarion's technology in an unnamed major metropolitan area. And a dozen large wireless carriers around the world will conduct trials this year, he said.

Flarion's technology isn't brand new although it uses a radically different approach to wireless data from the one chosen by most major cellphone companies.

The company grew out of a Lucent Technologies' Bell Labs research project in 1997 run by Rajiv Laroia, Flarion's founder and chief technology officer.

Laroia and his team wanted to build a wireless data network from the ground up, instead of designing improvements to commercial networks.

They took a method of sending data through the airwaves -- a mouthful called orthogonal frequency division multiplexing, or OFDM -- and added their own bells and whistles so it could be deployed in a large wireless network.

Simply stated, OFDM splits a radio signal carrying voice and data into many smaller sub-signals that are transmitted simultaneously at different frequencies.

And it's this fancy bit of data dicing that makes it potentially more appealing to big cellphone operators eager to sell reliable high-speed Internet service, particularly to business customers.

In 2000, Lucent spun off Flarion and the company plotted its course, swelling to 165 employees and attracting investors like Cisco and SK Telecom, South Korea's biggest cellphone operator.

Flarion proposes to put its gear in cell tower base stations where signals would be broadcast over a wide range. A cellphone company that installs Flarion equipment could use the network to provide both voice and data service.

Flarion promises it can deliver data download rates that average 1.5 megabits per second, or about the same as a cable modem.

Bill Casey, Flarion's marketing director, said they've managed to reach speeds of 700 kilobits per second while driving 70 mph.

That's faster than most consumer-grade digital subscriber line (DSL) service that comes over a copper phone line connected to a computer that's sitting on a desk.

These days, the very best wireless networks built by the nation's largest cellphone companies -- known as 3G, or third generation -- poke along at speeds of about 60 kilobits per second or slightly faster than a dial-up Internet connection.

Although the cellphone companies have said they'll improve their networks and some have begun testing higher-speed services, they've chosen technologies that differ from Flarion's.

And that's Flarion's first major hurdle.

It needs to convince wireless companies to jettison their investment in one technology and take an entirely new approach.

Earlier this month, Flarion received an undisclosed investment from T-Mobile, the wireless carrier owned by Deutsche Telekom, but so far, no one has committed to a full-scale deployment.

Flarion may have its best bet with Reston, Va.-based Nextel which has tested Flash-OFDM. That's because Nextel's the only major U.S. carrier that hasn't yet chosen a technology for its network upgrade.

Some industry experts believe most cellphone companies are quietly looking at alternatives like Flarion's.

Executives are said to be disappointed that the furious growth in wireless data they predicted hasn't happened, largely because the 3G networks aren't very fast.

Verizon Wireless spokesman Jim Gerace said his company, whose headquarters sit almost directly across the street from Flarion, isn't disappointed at all. But he did say his company has spoken to Flarion and others.

"We wouldn't discount any of these emerging technologies," said Gerace, who added, "it's a bit premature to make any definitive statement about a technology that essentially won't make its way to market for several years." One thing is certain.

The cellphone companies have spent billions to upgrade their networks and many of them, especially in Europe, are committed to upgrading without switching to a new technology. Some analysts believe companies might decide to stick with what they've already built for a while and delay any upgrades, meaning Flarion would have a long wait.

Still, Flarion's offer may look tempting to the cash-strapped wireless operators.

Analysts say a cellphone company could install Flarion's gear at a fraction of the cost -- some say six to 10 times less than upgrades to an existing 3G network.

Flarion also likes to point out that demand for their service would be high since consumers worldwide have already proven they're willing to spend close to $50 per month for wireline high-speed Internet access.

Flarion does face other challenges including issues surrounding technology standards as well as a handful of rivals that offer similar so-called 4G, or fourth generation, solutions.

Competitors include San Jose-based ArrayComm, Inc. which has a small engineering office in Freehold and was founded by Martin Cooper, the man credited with inventing the cellphone, IPWireless in San Bruno, Calif., Navini in Richardson, Texas, and a few others.

These companies offer a variety of different technologies but all claim, like Flarion, to boost wireless to broadband speeds over a wide area.

As Flarion and others jostle for a shot at market share, another wireless broadband technology called Wi-Fi is exploding in popularity.

Wi-Fi delivers fast Internet access although over a much smaller geographic area called a hotspot (300 feet from an antenna). It burst on the scene two years ago, and quickly grabbed the attention of almost every major wireless carrier. Wi-Fi hotspots can now be found in coffee shops, airports, and hotels around the country.

Casey says Flarion and Wi-Fi are complementary technologies and could work together, but that may be just diplomatic talk.

Flarion's Flash-OFDM would send signals out over a very wide range, overlapping Wi-Fi hotspots and potentially making most of them obsolete.

"I think Flarion's a hotspot killer," said Andy Fuertes, a senior analyst with Visant Strategies, a research company based in Kings Park, N.Y.

Fuertes also believes Flarion is the "hands-on favorite" among the companies out there jockeying for position to be the Next Big Thing in wireless.

A few years ago, that kind of blessing would make people at a wireless start-up giddy. These days, it might draw a tight smile from one of the seasoned executives at Flarion.

"We're a start-up with gray hair," Casey likes to say.

Most of the people at Flarion are in their 40s and 50s and they've all lived through the last two years, the worst in the history of the telecommunications industry.

In other words, they're not burning through cash or throwing elaborate parties out in Bedminster.

Yet.

"We plan to party at the end of the ride," Casey said.

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(c) 2003, The Record, Hackensack, N.J. Distributed by Knight Ridder/Tribune Business News.

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