”Everyone is waiting for third generation cellular technology as if it were the messiah and could solve all our problems. It's getting further and further away at the moment, but just as with the messiah, many people believe it will eventually arrive.” This religious-technological analysis was provided by Aharon Shapira, joint CEO of start-up Nomad Access.
Shapira and joint CEO Israel Fermon founded Nomad Access. Fermon, who met Shapira in Rafael (the Israel Armaments Development Authority), has been a technology consultant for cellular companies in recent years. Before taking up his consulting work, he founded Nemonix, a Karmiel-based company that designed and manufactured traffic enforcement systems. Shapira served in various R&D positions at Rafael, involving radar, communications, and electronic warfare. After leaving Rafael, Shapira managed AVR Communications, which manufactures hearing aids that send radio signals from a speaker’s microphone to a receiver in the listener’s ear. He was also a communications consultant for large organizations.
In October 2000, Nomad Access raised $2 million in seed money at a company value of $6 million. The proceeds from the round of seed financing, organized by Israel company 4HighTech.com, came in equal shares from London investment bank EVC Christows (now called Evolution Group), the Goldman Ventures investment fund founded by Daniel Goldman of 4HighTech.com, and a group of private investors, including Nomad Access director of business development Roy Barr, a former Nokia (NYSE: NOK) executive in the US.
”Forecasts are that by 2003, half of the cellular traffic will be based on information, not voice,” Shapiro quotes. “The proportion is expected to rise to 90% by 2007. The problem with cellular networks is that while the bandwidth for vocal applications is known and fairly constant, information applications can require a lot of bandwidth for long periods and at peak times, without any warning.”
While the cellular operators spent astronomical sums on acquiring third generation frequencies expected to realize part of the vision of quick flowing information, they do not have enough money left to set up infrastructures to use the frequencies. Only a few countries that foresaw the problem, like Sweden, gave the frequencies away for free in exchange for a commitment to spend the amount saved on setting up the infrastructures themselves.
Cellular companies will have to invest in infrastructure in order to find a solution to the problem of fair billing. During a voice call between two subscribers, there is constant communication between them. In a “data call”, the customer can be charged according to the air time he actually uses, regardless of the amount of information transferred, which is what most cellular companies do. However, the customer can also be billed according to the amount of information transmitted over the network, a method employed by the MIRS Communications network.
The more crowded the network, the harder it is to persuade customers they're getting something for his money, since they can transmit very little information over the network. In the next generation, also known as GPRS, which is actually the 2.5 intermediate generation before the third generation, the intention is to charge either a fee based on the amount of information transmitted, or a predetermined flat rate. “This (flat) pricing is against human nature, since it causes providers to waste resources and (leads) to situations in which the customers takes advantage of the flat rate by flooding the network,” Shapira says.
The data is right under their noses
Nomad Access develops solutions that assist cellular operators in tailoring bandwidth to individual customers, by designating “preferred customers,” or through other methods. “The goal of all the cellular operators is to increase the throughput to the customer. This can be accomplished by either widening the entire network to support more bandwidth for all customers or channeling the existing resources for the benefit of heavy users,” Shapira notes.
Nomad Access’s product, based solely on software, is integrated with cellular transmitting stations and increases their output. “The quantity of bytes passing between the device and the network depends on the standard (CDMA, GSP, etc.) and the reception quality,” Shapira explains. Cellular telephones are mobile, which means the broadcast must be adapted to the reception quality. When the telephone receives a signal from the transmission station, adaptation takes place according to the lowest common denominator between the two speeds. The customer gets a much lower speed than the network is actually capable of providing.
Under the CDMA broadcasting system, for example, 1,000 requests per minute are sent between the telephone and the broadcaster in order to test the reception quality. CDMA personnel wanted to exploit this continual and repeating interaction between the two points in order to get an idea of the quality at which information could be broadcast. “In theory, the broadcast can be optimized after getting information from every one of those 1,000 requests, which would always make the reception optimal,” Shapira says. Nomad Access exploits the fact that the data were right under the nose of the cellular people, who did not make proper, instant use of them. Nomad Access’s software is designed to do just that.
The focus on CDMA is no accident, since the UMTS third generation will also be constructed on CDMA infrastructure and will include large sections of RF technology. Shapira claims, however, that his company will also introduce solutions for other standards in the future. Nomad Access’s business model has not been fully solidified, but is expected to be based on a combination of product sales, according to the number of the operator's cellular users, and calculating the improvement the cellular operator derives from the product.
Nomad Access, located in Or Yehuda, has 12 employees and plans to recruit three more, while readying itself for its upcoming first financing round.
Other Israeli companies operating in this field include Schema and Flash Networks. Schema provides operators with solutions for smart frequency management, while Flash Networks developed an effective protocol for transmitting information on a network. The infrastructures companies themselves, like Nokia and Nortel (NYSE: NT) are considered both potential customers and potential competitors, since the competition between them is likely to cause them to develop competing solutions.
Name: Nomad Access
Founders: Aharon Shapira and Israel Fermon
Product: Software to optimize data transmission over cellular networks.
Previous financing round: $2 million in seed money; first financing round taking place now.
Competition: Schema, Flash Networks, infrastructure companies
Market: Cellular operators
web site: www.nomadaccess.com
Published by Israel's Business Arena on October 3, 2001