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Phoenix Struts Its Wireless Stuff

scared audienceI’m watching on a wide-screen television the most painfully revolting thing I’ve ever seen, and Mikael Hällström is gleefully pointing at the screen.

“This is almost…almost…broadcast quality, and there’s no delay at all,” he said proudly. Hällström’s biggest problem in the coming months is whether to stay at Ericsson, where he has been for four years, or to head out with the spin-off he helped create.

These are good problems to have.

Truth be told, the resolution is more than “almost broadcast” – in fact it’s clear enough to give me nightmares for weeks and ponder each future meal carefully. We’re in Ericsson’s Stockholm headquarters, in a conference room that has been temporarily turned into both a highly impressive display of very cool technology and a chamber of horrors.

Here’s the story: Malmö University Hospital in southern Sweden wished to demonstrate to a hotel conference center packed with leading international medical observers a controversial, highly unorthodox and possibly revolutionary approach to an operation to remove a cancer in a patient’s rectum – going in from the top.

I’m watching the “highlights.”

I’m watching this to see a clear end-use example of the types of networks Ericsson believes will be prevalent in the very near future. And Ericsson Business Innovations (EBI), the “incubator” arm of Ericsson, is looking into using technology like this to create a number of businesses.

For example, EBI has also been working on something it calls the Phoenix Project, based around Ericsson’s Open Service Gateway Initiative (OSGi) protocol. Phoenix was set up to establish a solution for home health care, security and safety products, and EBI is looking internally at Ericsson, as well as at third parties, to develop other OSGi applications.

Now, that horrible tele-operation challenge I am trying not to remember was not part of Phoenix, but with it Phoenix saw a chance to strut its technological stuff. To this end it established a 24-megabit-per-second (MB/s) upstream and downstream connection between the hospital and the conference center (which are meters from one another) by way of a 750km loop through public networks using existing technology and infrastructure.

The setup included two cameras in the operating theatre – one on the surgeons and the other on the action – that broadcast to two projection devices in the conference center, both producing crystal clear 20 and 35 square-meter images. Real-time voice communication between the center and the theatre was a key element, allowing the surgeon to converse with the observers.

“You can’t have voice delays,” said Hällström, the simultaneously mild-mannered and intense architect of Phoenix, “and we did this without compression or echo canceling – if we used those, we could have gone several times farther.”

With traditional broadcasts, such as television, a gap between the time of broadcast and arrival at the user’s device doesn’t matter as it’s a one-way signal. But anyone who’s watched the poor CNN reporter, listening to a question by satellite and standing clueless, staring blankly at the camera for two to six seconds, can understand why a satellite hookup would be unacceptable in a tele-medical situation, where seconds count.

You might well wonder why Ericsson is in the television business, and the answer is that it’s not. It’s in the business of building up teams that will form the core of new units within Ericsson or of new companies that will be spun off.

The broadband system above grew out of research by Ericsson Media Lab and the work of Hällström and others in Ericsson working on telemedicine applications.

Phoenix To Be Spun Off

The goal is to have Phoenix, now still part of Ericsson, build up its system around OSGi, establish and maintain its standards and protocols, license users of the system from health care, security and other industries, and then eventually remove itself from the fray, licensing third party operators who will pay Phoenix for the right to operate the slice of the network in their special fields. Phoenix, of course, would then sit back and count its royalty and licensing income.

Phoenix’s E-Box is an OSGi-based system. It’s a home-running device that brays at you if you leave the iron on and potentially allows you to, for example, let your kids in before you’re home but deny them access to the garage, oven and VCR. The box controls safety issues like those, security (locks and alarms), as well as health-monitoring systems. EBI announced in October that it began an E-box trial run in 3,000 homes in Sweden.

“The Phoenix group deals with infrastructure and we need to have a network,” Hällström said. “We don’t want to operate the network, but we need to make sure that it is, in fact, a network, and it will be maintained and operated in the proper way.”

Working with partners in those related industries (they’ve embargoed us from saying even which space within the industries), other groups deal with the health care and security aspects of the applications, and another deals with the construction and installation aspects.

“We will start to roll this out in new houses initially,” Hällström said, “because then the costs of building the infrastructure in the house is near zero when looked at in context of the building costs. And we want to have a large base of customers.”

Opportunity for VCs

That’s an opportunity for VCs looking to back products in the related industries. EBI is actively seeking venture partners and offering support and resources for venture-funded companies who develop related technologies or end-user applications that would use the OSGi protocol.

“We believe a very strong part of Phoenix is the partner program, which is mainly venture-funded companies – and it’s not just the money, it’s the knowledge the VCs and third-party companies bring to the table,” Hällström said.

If the demonstration I saw is any indication, EBI has a lock on the networking part. Observers interviewed afterward said on camera that the setup was incredibly valuable and remarked that it could have an untold number of applications in medicine.

And, of course, they mentioned the vivacity of the colors. “I’ve seen lots of these types of presentations,” said one doctor. “Many times the details are fuzzy, and the colors are often washed. But here the colors were perfect, the resolution and clarity better than I’ve ever seen.”


Smart money would say that, at least technologically speaking, Phoenix should make the cut as a spin-off.

Clinitrac’s Brick Could Save Pharmaceutical Companies Millions

The development cost of a pharmaceutical drug can easily run between $500 million to $800 million, and clinical trials alone can cost between $1 million and $2 million per day in lost future revenues. So imagine a service that could reduce by a year the time it takes to perform a clinical trial, analyze the results and submit them to the US Food and Drug Administration (FDA).

That’s the dream of Stockholm-based Clinitrac, which has produced a working prototype of its GSM-based wireless solution geared to the problem of initiating, gathering, analyzing and accessing the information generated through medical clinical trials. The time to market is, of course, dependent on loads of factors, but probably refers to larger, longer trials.

VCs Believe
Clinitrac received $3 million in seed funding in May 2000, mainly from BrainHeart Capital and HealthCap, but also netted stakes by the Swedish Industry Fund and others. The company is currently entering a second round with the original funders, to the tune of an additional “three to four times that amount,” and are seeking to bring in an additional, US-based venture partner to the fray.

The company has yet to produce revenues, but its working prototype is impressive. It has already cut a deal with Psion for the Netpad and is in discussions with a major PDA manufacturer. And it has had meetings with US GSM operators to ensure that Clinitrac’s product will have all the GSM network coverage it needs when it offers its product to US markets in 2001.

Patients enter information on a half-brick-sized Psion NetPad, which has a wireless Internet connection, a touch-activated screen and enough shock absorption around its edges to tolerate a month in a New York City public secondary school. The information is then transferred back to the company performing the testing, and made immediately available to doctors, scientists, product managers and developers.

“This sounds like an interesting technology,” said Nick Woolf, biotech analyst for ABN AMRO. “There are other companies in clinical trial services who claim to have various systems – voice recognition systems and others – but it’s certain that real-time information on a clinical study is valuable.”

Clinical Trials Today
The process is, in a word, revolutionary. Today, patients are asked to fill in paper forms, and they often forget, fill them in late or inaccurately. This information is delivered to a doctor after 30 days, which means that a patient who repeatedly misses his noontime dosage or has an adverse reaction to a drug would not be identified until after at least a month.

“The biggest problem with clinical trials,” said Clinitrac CEO Andreas Segerros, “is keeping the patient in the trial. Once they blow the protocol a certain number of times, you need to take them out. Our product would allow monitors to see, on a daily basis, that Mr. Thompson over there keeps missing his 3 p.m. pill, and call him early enough to keep him in the study by making sure he took the drug.”

That indicates a level of involvement and monitoring of tested subjects unheard of today. Currently, paper forms are stacked up from around the world, flown to central data processing facilities and keypunched into systems before anyone can even have an idea of the nature of the data.

The major risk, Woolf said, is getting the product out there and recognized as a clinical trial service. Most large pharmaceutical companies, he said, contract out much of the work of clinical trials to Contract Research Organizations (CROs).

“Today there are CRO subcontractors that do nothing but take dirty paper forms filled in by patients and scan in the results,” said Henrik Linder, Clinitrac’s clinical research operations senior director. “[Our] system gives you clean data, digitally, directly where you need it and in real time. And when we approach the pharmaceutical companies, they’re like, “Finally! Thank you!””

There are potentially several areas in the pharmaceutical industry where a product like this could be used to affect both savings for the end user as well as increased profits for the manufacturers. Traditionally, on approval of a drug, the onus is on the drug companies to appeal to the FDA in order to maintain a high price – the FDA is in effect negotiating on behalf of the American Medicaid system, which will pay or not pay for a drug based on the assessment of the FDA.

The pharmaceutical company will argue that a) the thing took them years and billions of dollars to research, b) it meets an immediate, and heretofore unaddressed, need of the general public, and c) the quality of life improvement, or simply the decrease in necessary medical attention required by a patient taking this drug, is so compelling as to justify a higher dose or daily cost of the drug.

Clinitrac said its product can help in this process as well, by allowing pharmaceutical manufacturers to have access to a broader-than-ever range of quality-of-life questions, or information above and beyond the physical effects of the drug.

For example, in addition to hard medical questions of efficacy to a patient on a clinical trial for a drug that attacks skin rash, they would also be asked questions such as: “In the last week, how often did embarrassment about your condition cause you to make more conservative clothing choices?”

The answers to questions such as these would enable pharmaceutical makers to argue that in addition to straight efficacy, the drug in question has a positive impact on the patient’s quality of life – a compelling argument for a higher price for the drug.

“As a monitoring tool it could be extremely effective,” said ABN AMRO’s Woolf, although he stopped well short of saying that the technology alone would amount to a stronger negotiating position. “Whether you can correlate the monitoring tool to a gain of negotiating points with the FDA, HMOs and other reimbursement agencies would be difficult to claim.”

He added: “These guys need to team up with a Quintiles or a Covance,” referring to two of the larger CROs. “Because those are the ones that already have the relationships and access to clinical hospitals.”

Absolutely true, Clinitrac agreed. For now.

But the company is convinced that eventually pharmaceutical companies will see the savings involved in their real-time offerings, and Clinitrac won’t be keeping many friends in the CRO world for long.

Job Hunter’s Heaven

The loneliest people at this week’s European Conference on Optical Communication (ECOC) in Munich were upstairs, through the small fire door, around the corner and down the hall. If you were to enter through the first door on your right, about two dozen heads would pop out from behind paper-plastered cubicle dividers and stare at you wistfully, as if you’d shone a searchlight into a woods full of deer.

Welcome to the world of photonics industry recruitment.

“Staffing is definitely an issue,” said Walter Hobbs, director of ACT Venture Capital. “We get a lot of technology companies coming to us and saying, ‘Yeah, we can do this, but we need 30 engineers’ and our first question is, ‘Well, where are you going to get them?’ In general, this is a big concern for our companies – how to build the team.”

Steven Storey, managing director of Equate Human Resources, which sponsored the ECO recruitment area, agreed. “There are thousands, ridiculous numbers, of vacancies across Europe, and there’s simply not the candidates to fill the positions,” he said.

That sentiment was echoed among recruitment representatives from several companies, which included large players like Alcatel, Siemens and Lucent – all of whom have stands plastered with job openings for engineers at locations around the world – as well as by representatives from venture-funded companies like England’s Southampton Photonics and Scotland’s Kymata.

Southampton, a manufacturer of DWDM (Dense Wave Division Multiplexing) products, which recently received a $55 million (€61.76 million) in seed funding, says that it needs to fill 200 high-tech positions in the next 18 months. Southampton intends to establish design, production and sales facilities in California, where it wants to hire an additional 250 staff by the end of 2002. The new jobs will consist of professional engineers and manufacturing personnel, as well as sales and marketing staff.

“We’re aggressively seeking employees,” said Southampton’s product marketing manager Adam Reeves, “and the way we can do it is that we offer a really good package, but we also have something else. We’re a young company, but we’re very well-funded, so working for us is less risky than it would be for less well-funded companies.”

Equate’s Storey, who also consults for companies by seeking trained technicians working in other technical fields with crossover potential, including medical imaging, lighting systems and even semiconductor fields, says that in attracting talent, high-tech companies in Europe are finding increased competition from US firms – which offer salaries that human resources people at the conference called “outrageous” – as well as finding a trend among European firms to look for talent across Europe and Asia rather than just locally.

Large salaries and employee stock option packages, so common in the US, are beginning to pop up in Europe as well, as top-flight engineers begin to realize that they are in the midst of a revolution, in which they ply a vital role, that some say further increases the challenge for the smaller companies to find and retain the talent they need.

But Brendan Hyland, CEO of Kymata, which makes DWDM opto-electronic devices for the telecoms industry, dismisses the idea that there’s no one to fill the jobs. This March, Kymata completed a third round of venture funding for $72 million (€80.85 million) from 3i, Kleiner Perkins Caufield & Byers, Bowman Capital, ACT Venture Capital, CommVenture and Telesoft Partners.

“We’ve grown from 12 to 250 employees in the past 12 months, and our turnover rate has been effectively zero,” Hyland said, “and we didn’t do that with stock options alone. Yes, you have to treat people well and we do, but the thing that attracts and keeps people is to challenge their minds.”

Kymata, founded in England, relocated to central Scotland where, Hyland says, it found one of the richest pools of high-tech talent they could hope for: Within an hour and a half, they’re surrounded by five university research facilities, which produce 450 graduates and 60 to 70 PhDs per year.

And the region has a history of large-scale semiconductor fabrication, which meant that there was an ample supply of people already used to working in a clean-room environment.

Kymata, too, is looking to fill positions, in areas of optical packaging development, wave-guide device and sub-system design and failure analysis, as well as in non-technical fields including marketing and, of course, human resources.

Indeed, perhaps as important to these companies as engineers are salespeople. “This isn’t pots and pans these guys are selling,” said ACT’s Hobbs. “You need some pretty specific skills to go out and sell products of a sunrise industry. But fortunately with sales people, you can recruit them from the territory in which you want them to sell, as opposed to trying to get engineers to relocate themselves and their families to be near your headquarters.”

“This is a problem in the economy in general and in high-tech, high-growth industries in particular,” said an analyst at Merrill Lynch, “and part of it is the issue of huge compensation packages and part of it is keeping the people interested.”

While Kymata’s Hyland points to several universities cranking out 450 graduates a year, that number is bound to increase tremendously as students push to learn skills required to get them into the ground floor of such a fast-growing industry. This will, in turn, eventually lead to a glut.

“It’s nothing radically different in photonics,” said the Merrill analyst, “Last year we had thousands of programmers running around doing Y2K work – need a programmer? There are thousands of them available right now waiting for work in e-commerce. And in four years, you’ll have 25,000+ highly trained and qualified photonics engineers sitting around doing nothing.”

VCs Eye Location-Based Startups

With UMTS license bids in Germany in full swing [2000], there’s tons of hype about the coming of the mobile Internet. Signs are encouraging that the new mobile Internet will in fact allow VCs to look at some rapidly emerging technologies that will indeed change the way Europeans use information.

And right now, the smart money is betting on location services. VCs are saying they’re the coming killer app on the UMTS-powered mobile internet. The character string “m-” is currently as in vogue as was the character string “e-” two years ago. The space is heating up quickly, but there’s room for many.

“We haven’t yet invested in the end-application space, but I’m certainly personally very interested in finding some good, solid business plans in the area,” said Peter Boehringer, Investment Manager at 3I in Munich, which currently invests in location infrastructure company, Cambridge Positioning Systems.

“These are great applications that allow businesses to super-target their marketing and sales to very specific areas without wasting a lot of money. And the user likes it, too, because they get noticed and start getting offered things they really want and can use. Up to now no one’s been able to address this really local market on a broad scale.”

Great. So in the near future, as we’ve all heard, if we’re within five minutes’ walk of a Starbucks, our phone will beep telling us that a) a friend of ours happens to be nearby, and b) if we’d like to get together and have a coffee, we’ll get $1 off a large half-caf-mocca-skim-chocca-no-fat-triple-latte –if we show up in the next ten minutes.

There are two sides to the space, both interesting. There’s infrastructure technology – companies like Cambridge Positioning Systems, which develop the technology that can do the positioning systems and report locations of users. Cambridge’s Cursor system compares the relative times of arrival of signals between base transceiver stations and the actual handset and can thus extrapolate a user’s location within 50 meters or so. Cursor has already undergone trials working with companies including the AA, Vodafone and Maxon.

And then there are other companies, such as iProx that are developing means to use the positioning data for end-commerce applications.

“iProx is a very interesting company,” said Martin Fiennes, Investment Manager at Top Technology Limited, a UK VC firm, “and we’ve indirectly invested in them through Brainspark. Iprox is developing a series of applications and my personal view is that I don’t know which of them will become the killer app, but I’m confident that one or more of them will.” iProx received seed funding of US$1 million in April, and is presently in the middle of an interim round of funding, looking for £3 to £5 million.

“The trick is,” said Ravi Kanodia, Iprox co-founder and Chief Operating Officer, “if you know where the people, stores and places of interest are, then you can be quite clever with the technology, for example by letting people know when their buddies’ phones are in the area without their actually “asking” for it, through our use of intelligent profiling. You have to be capable of following millions of users but you mustn’t send the traffic bandwidth through the roof or require millions of supercomputers to process.”

There are barriers.

First, the technical: telecoms believe that the location data it can provide are the crown jewels in their collection of services, and they’re not only not willing to let those go cheaply, they want to have total control over them. This brings up the issue of just whose data it is – it isn’t the operator’s location, it’s the user’s location, and it could well be argued that the user may indeed own the rights to his location signal.

But it would seem that this first barrier is less of a problem than it might seem: true, different telecoms use different technology, and have in the past refused to share it with their rivals. But companies offering end-use applications will have the opportunity to act as a ‘Switzerland’ – a middle ground interface offering cross-platform services. This has benefits for both telecoms and users: for example, SMS usage became what it is today only after the telecoms allowed it to became a cross platform tool.

“I think that rather than the services being controlled by the operators,” said Sandeep Kapadia, Investment Associate at Prime Technology Ventures in Amsterdam, “what we’ll see is something similar to the web-based portals, and similar to what NTT DoCoMo is currently doing: synergy of multiple applications. There will be hundreds of available applications, from hundreds of companies, and the operators will take a cut.”

Another barrier is, naturally, that this brings up the old privacy bugaboo in a major way. Privacy laws and etiquette varies throughout Europe, and, as 3i’s Boehringer says, “Not everyone wants their movements tracked.”

But VCs agree that solutions to the legal as well as the privacy issues are on the horizon, perhaps as early as this coming autumn. Users probably will be able to selectively give permission to m-marketers to allow them to receive, say, certain types of offers. Or use Iprox’s much touted “buddy system”, which tracks the movements of a group of friends, constantly vigilant for the opportunity to beep any two and tell them they’re in close proximity to one another.

And the legal issues are currently under review throughout Europe as well. It is to the advantage of all parties to come up with a solution to any legal barriers as quickly as possible.

One last thing: this is an entirely Euro-phenom. US-based mobile systems are simply too creaky, too convoluted and frankly to pre-m-historic to even contemplate such a system without major investment. With this technology, Europe clearly leads the way, and things are moving fast – so fast that searching the internet for companies in the space will likely be an unrewarding activity.

“We’re talking about something that’s moving fast,” said 3i’s Boehringer, “way too fast for Internet here.”

Visiting The Front Lines

The future is wireless, or at least that is what Nokia, Ericsson and a host of startups and network operators are earnestly hoping. But the quick success of 3G – The Third Generation of mobile telephony – is more than profitable icing for these companies; it has now become a matter of survival….

This article, which ran in the February, 2001 issue of Tornado Insider magazine, looks at the overall climate in European development of 3G, and then explores how each of Europe’s largest telecom networking manufacturers, Ericsson and Nokia, is coping with the challenge.


For some time, both Ericsson and Nokia have vigorously embraced the role of global industry hothouse by developing new divisions and enhancing old ones to deal with the 3G challenge. But it is about more than money.

“For a fraction of what the operators spent on 3G licenses, they could buy 10 application startups to help with rollout,” says Martti Malka, a partner in Nokia Venture Partners, which is independent from parent Nokia. “It’s not the money; it’s the business model, and the successful operator is going to look to third parties to come up with the innovative business propositions.”

Resources for innovation, too, are only part of the problem. Ericsson has established itself as a curious anomaly. The heavily bureaucratic, press release-driven monolith commands a sensational ability to introduce and gather support for industry-wide protocol initiatives, like Bluetooth and OSGI, its home gateway protocol. Nokia, meanwhile, has made huge progress in end-user customer loyalty through its desirable handsets, capturing 30 percent of the worldwide handset market. Nokia is claiming great gains in GPRS and 3G networking contracts as well.

Nokia and Ericsson realize that in order to give their customers, the operators, the return they’re demanding, they must aggressively court small startups working on applications, services, and hardware for 3G. They’ve partnered with VCs for some, and will continue to do so for others. They have also spent considerable time and money making sure that when 3G rolls out it will live up to the hype.

Enter the startups
“We know we have to develop this market and the key issue is getting the right applications,” says Bengt Larsson, marketing manager for Ericsson Business Innovations (EBI), an independent subsidiary of Ericsson. “It’s not until we have the applications on board that we will see the 3G market take off.”

Nokia Venture Partners, with $500 million under management, concentrates on early stage mobile Internet companies, and looks specifically toward those creating enabling technologies. A perfect example is AVS Technologies, an Espoo, Finland, company whose MVQ (motion vector quantization) method is a high-end video compression and transfer technology that compresses video streams 10 times more effectively than RealPlayer or Windows Media.

For its part, EBI, as well as main divisions of Ericsson such as its Mobile Location Services, work closely with small startup companies developing applications that would eventually work with an Ericsson 3G network. For instance, Ericsson Mobile Location Services works and co-markets with It’sAlive, a startup games-maker funded by Speed Ventures in Stockholm. It’sAlive just rolled out its first product, a location-based game called BotFighters, in which SMS messages appear when opponents are in firing range.

BotFighters is currently running in Sweden on regular public networks. “Ericsson would welcome any application developer who would like to try out a 3G application to come and use it on our demo network in Kista. It’s one of the few places in the world where you can actually test 3G applications in a practical environment,” says EBI’s Larsson.

The first step taken by application startups is a visit to the Ericsson and Nokia developers’ websites, which allow any company to register to receive technical specifications, assistance, emulators, and limited access to the developers’ community for the particular product in which they’re interested. Companies that push past that point and go for a more formal partnership, like It’sAlive, are given co-marketing support and access to live research and development projects, not out-of-the-box technology.

While Ericsson and Nokia are both taking to their roles with gusto, developing deals with laundry lists of third parties from startups to global players, there are subtle differences in their approaches. The following profiles look at the efforts by each of the vendors, and compare and contrast their approaches.