Cellular operators are looking to do business with Schema for the same reason investors have been so eager to invest in it (eleven investments companies and funds have invested in the company). The reason is that Schema gives wireless operators the ability to add new users on existing frequencies, which, as everyone knows, is their most valuable resource, particularly in countries that do not have any additional available frequencies.
Schema was founded in 1994 by Dr. Yuval Davidor, an expert on genetic algorithms (a mathematical method for solving complex problems). CEO Yossi Ben-Dov, an expert in operations research, and former vice president of Amdocs, is now managing the company.
Schema initially focused on an entirely different area from what the company does today, yet the basis for its technology and algorithms remain the same. When the company was first founded, Davidor used his research to develop defense applications, focusing on the areas of missile launching and radar. The same algorithms were later used to allow cargo to be loaded on ships more efficiently, so that when the ships were unloaded at various ports on the way, not all the cargo would have to be unloaded and reloaded.
Schema's product was successful, but the company realized that its solutions was too advanced for an old, conservative economy sector like shipping, that has a market size which does not create particularly large business potential. Davidor tried to find a new market that he could capitalize on.
In 1998, Davidor met with representatives from Pele-Phone, who showed him the difficulties they had in planning frequencies for cellular systems. Wide antennae must be deployed in order to set up cellular networks. The government sets the final frequency spectrum and the goal is to place as many frequencies as possible on each antenna, since each call uses one frequency. On the other hand, if two nearby antennae work on the same frequency, the cellular phone will receive both frequencies and the call will be disconnected. Unfortunately, this is a very common problem that is difficult to identify, since the reception rate records show that a call was received even when the call was disconnected. In other words, the problem is not due to coverage problems, but to a lack of frequencies. Schema calls the phenomenon poor frequency management.
Schema enables wireless operators to increase capacity while simultaneously maintaining quality. After price considerations, quality of service is the most important element in the cellular operators’ attempt to compete with landline telephones.
What did 650 million cellular users do before Schema’s technology? Wireless operators looked at the cellular coverage as a hexagon, around which they built six hexagons, dividing the frequencies among the seven hexagons they created. What is inefficient about this method? It assumes equal division of demand, which of course is not realistic, since the antenna on Hayarkon Street covers the sea just as equally as the streets in Tel Aviv. Equipment manufacturers Nortel, Nokia, and Motorola (and cellular operators) were interested in finding a solution.
Using Schema’s genetic algorithms, cellular operators have developed a very efficient solution. The system is capable of allocating a small number of frequencies to the sea, while giving a much large share to the streets.
In late 1999, Schema started beta testing installations at cellular operators, such as Pele-Phone, Cellcom, Bell Atlantic, Cingular, Pacific Bell, At&T Wireless and Cellcom Green Bay of the US. Cingular is Schema’s major customer. Schema has sent an RF (radio frequency) engineer, software engineer, and algorithm engineer to its customers to study the structure of the cellular network . Ben-Dov says that in one case, Schema managed to add 50% to a customer's frequency capacity, simply by redeploying its frequency spectrum.
”Globes”: For the moment, Schema is not entering the European market, which is more saturated than the US in terms of cellular use. Why?
Ben-Dov: “We avoided entering Europe because of technology differences in the US market, that lead to bigger problems. The US operates on TDMA technology, whereas Europe works with GSM. TDMA has many more frequencies to work with, and the more you have for distribution, the bigger the problem. Cingular and AT&T Wireless are the biggest customers worldwide of TDMA."
“I also believe we’re now ready to start preparing to enter the European market. The technology is more mature and we've received adequate funding.”
Third generation communications will no doubt require more frequencies for reliable broadband data transmissions. This must be encouraging to you.
“Definitely. Data transmission takes longer than calls and frequencies will be busy. All third generation applications will require more frequency resources, which are very limited for cellular operators. In Germany, someone paid $48 million just to buy third generation frequencies. In the US, the problem is even more acute because there are no frequencies. We certainly anticipate demand for our services will grow with the penetration of third generation networks.”
Will all antennae work with all existing frequencies in third generation, without disturbing each other? Why is Schema needed for third generation networks?
“UMTS and CDMA networks operate on completely different systems and there's no problem allocating frequencies. Each frequency has a special code and the telephone can recognize the frequency when it's being received, but a different code is used, so the call isn't disconnected. We’re not needed in order to re-deploy frequencies, but there’s another problem. Today, we can overcome faults in the initial planning of cellular networks by re-planning the frequencies. In third generation, it won’t be possible to correct errors made in setting up the network. It's therefore vital to plan the setting up of the network correctly. Here's where Schema enters the picture. We offer a deployment plan, with the correct positioning and angle of antennae, which is no less important.”
What revenues will you get from a cellular network with a million customers?
“A one million customer network will build approximately 1,000 antennae. For us, this means revenue of $1.5 million a year.”
Product: Optimization technology for cellular frequency distribution
Employees: 75 in Israel, 25 in New Jersey
Market: Cellular operators
Competition: British company MSI, acquired by Marconi, ScoreBoard of the US
Ownership: Walden Israel, BRM Capital, Challenge Fund, Gemini Israel Funds, Eurofund, EnerTech Capital Partners, TL Ventures and Docor International BV
web site: www.schema.com
Published by Israel's Business Arena on 20 June, 2001