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, THE NEW RULE OF THE WIRELESS, was first published in Forbes ASAP, March 29th, 1993. 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.

                                    THE NEW RULE OF THE WIRELESS


                                                 GEORGE GILDER

     At first glance, Vahak Hovnanian, a homebuilding tycoon in
New Jersey, would seem an unlikely sort to be chasing rainbows.
Yet in the converging realms of computers and communications that
we call the telecosm, rainbows are less a matter of hue and
weather than they are a metaphor for electromagnetism: the
spectrum of wavelengths and frequencies used to build businesses
in the Information Age.

     An Armenian Christian from Iraq, Hovnanian ran a business
building high-quality "affordable" housing.  His first coup came
on Labor Day in 1958 when, together with his three older
brothers, he bought an apparently undesirable property near the
waterfront in Tom's River for $20,000.  From this modest
beginning has arisen not only one of the nation's largest
homebuilding enterprises (divided among the four immigrant
brothers), but also a shattering breakthrough on some seemingly
bleak frontiers of the electromagnetic spectrum.  Together with
maverick inventor Bernard Bossard, Hovnanian has launched a
wireless cellular TV business in frequencies once thought usable
only in outer space.

     Perhaps the reason Hovnanian feels comfortable today
pioneering on the shores of the telecosm is that some 35 years
ago he was an engineer at Philco Semiconductor following in the
theoretical steps of AT&T Bell Laboratories titan William
Shockley.  Shockley led the team that plunged into the microcosm
of solid-state physics and invented the transistor.  At the heart
of all-digital electronics, this invention still reverberates
through the world economy and imposes its centrifugal rules of

     This law of the microcosm dictates exponential rises in
computer efficiency as transistors become smaller.  It is this
law that drives the bulk of the world's computations to ever-
cheaper machines and pushes intelligence from the center to the
fringes of all networks.  Today the microcosm is converging with
the telecosm and igniting a new series of industrial shocks and

     The convergence of microcosm and telecosm in an array of
multimedia industries - from personal intelligent communicators
to video teleputers to digital films and publishing - is now the
driving force of world economic growth.  John Sculley, chairman
and CEO of Apple Computer, has projected that by 2002 there will
be a global business in multimedia totaling some $3.5 trillion -
close to the size of the entire U.S. economy in the early 1980s.

     This new world of computer communications will break down
into two domains - the fibersphere and the atmosphere.  The
fibersphere is the domain of all-optical networks, with both
communications power - bandwidth - and error rate improving by
factors in the millions.  In "Into the Fibersphere" (Forbes ASAP,
December 7, 1992), we saw that the potential capacity for
communications in the fibersphere is 1,000 times greater than all
the currently used frequencies in the air - and so radically
error-free that it mandates an entirely new model of wired
telecommunications.  Now we will discover that the atmosphere
will offer links as mobile and ubiquitous as human beings are.
It thus will force the creation of an entirely new model of
wireless networks.

     In one sense, Sculley's $3 5 trillion dream can be seen as
the pot of gold at the end of Maxwell's rainbow.  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, Scottish physicist James Clerk Maxwell
discovered the electromagnetic spectrum.  Encompassing nearly all
the technologies imagined by Sculley, Maxwell's rainbow reaches
from the extremely low frequencies (and gigantic wavelengths)
used to communicate with submarines all the way through the
frequencies used in radio, television and cellular phones, on up
to the frequencies of infrared used in TV remotes and fiber
optics, and beyond that to visible and ultraviolet light and X-
rays.  In a fabulous feat of unification, Maxwell reduced the
entire spectrum to just four equations in vector calculus.  He
showed that all such radiations move at the speed of light - in
other words, the wavelength times the frequency equals the speed
of light.  These equations pulse at the heart of the information
economy today.

     Virtually all electromagnetic radiation can bear
information, and the higher the frequencies, the more room they
provide for bearing information.  As a practical matter, however,
communications engineers have aimed low, thronging the
frequencies at the bottom of the spectrum, comprising far less
than one percent of the total span.

     The vast expansion of wireless communications forecast by
Sculley, however, will require the use of higher frequencies far
up Maxwell's rainbow.  This means a return to the insights of
another great man who walked the halls of Bell Labs in the late
1940s at the same time as future Nobel laureate William Shockley,
and who left the world transformed in his wake.

     In 1948, the same year that Shockley invented the
transistor, Claude Shannon invented the information theory that
underlies all modern communications.  At first encounter,
information theory is difficult for nonmathematicians, but
computer and telecom executives need focus on only a few key
themes.  In defining how much information can be sent down a
noisy channel, Shannon showed that engineers can choose between
narrowband high-powered solutions and broadband low-powered

From Long & Strong to Wide & Weak

     Assuming that usable bandwidth is scarce and expensive, most
wireless engineers have strived to economize on it.  Just as you
can get your message through in a crowded room by talking louder,
you can overcome a noisy channel with more powerful signals.
Engineers therefore have pursued a strategy of long and strong:
long wavelengths and powerful transmissions with the scarce radio
frequencies at the bottom of the spectrum.

     Economizing on spectrum, scientists created mostly analog
systems such as AM radios and televisions.  Using every point on
the wave to convey information and using high power to overcome
noise and extend the range of signals, the long and strong
approach seemed hugely more efficient than digital systems
requiring complex manipulation of long strings of on-off bits.

     Ironically, however, the long and strong policy of
economizing on spectrum led to using it all up.  When everyone
talks louder, no one can hear very well.  Today, the favored
regions at the bottom of the spectrum are so full of spectrum-
hogging radios, pagers, phones, television, long-distance, point-
to-point, aerospace and other uses that heavy-breathing experts
speak of running out of "air."

     Shannon's theories reveal the way out of this problem.  In a
counterintuitive and initially baffling redefinition of the
nature of noise in a communications channel, Shannon showed that
a flow of signals conveys information only to the extent that it
provides unexpected data - only to the extent that it adds to
what you already know.  Another name for a stream of unexpected
bits is noise.  Termed Gaussian, or white, noise, such a
transmission resembles random "white" light, which cloaks the
entire rainbow of colors in a bright blur.  Shannon showed that
the more a transmission resembles this form of noise, the more
information it can hold.

     Shannon's alternative to long and strong is wide and weak:
not fighting noise with electrical power but joining it with
noiselike information, not talking louder but talking softer in
more elaborate codes using more bandwidth.  For example, in
transmitting 40 megabits per second - the requirement for truly
high-resolution images and sounds - Shannon showed some 45 years
ago that using more bandwidth can lower the needed signal-to-
noise ratio from a level of one million to one to a ratio of 30.6
to one.  This huge gain comes merely from increasing the
bandwidth of the signal from two megahertz (millions of cycles
per second) to eight megahertz.  That means a 33,000-fold
increase in communications efficiency in exchange for just a
fourfold increase in bandwidth.

     Such an explosion of efficiency radically limits the need to
waste watts in order to overcome noise.  More communications
power comes from less electrical power.  Thus, Shannon shows the
way to fulfill Sculley's vision of universal low-powered wireless

     This vision of wide and weak is at the heart of the most
promising technologies of today, from the advanced digital
teleputer sets of American HDTV to ubiquitous mobile phones and
computers in so-called personal communications networks (PCNs).
Shannon's theories of the telecosm provide the basic science
behind both Sculley's dream and Hovnanian's video spectrum

     Shannon's world, however, is not nirvana, and there is no
free lunch.  Compensating for the exponential rise in
communications power is an exponential rise in complexity.
Larger bandwidths mean larger, more complex codes and
exponentially rising burdens of computation for the decoding and
error-correcting of messages.  In previous decades, handling 40
megabits per second was simply out of the question with existing
computer technology.  For the last 30 years, this electronic
bottleneck has blocked the vistas of efficient communication
opened by Shannon's research.

     In the 1990s, however, the problem of soaring complexity has
met its match - and then some - in exponential gains of computer
efficiency.  Not only has the cost-effectiveness of microchip
technology been doubling every 18 months but the pace of advance
has been accelerating into the 1990s.  Moreover, the chips
central to digital communications - error correction,
compression, coding and decoding - are digital signal processors.
As we have seen, the cost-effectiveness of DSPs has been
increasing - in millions of computer instructions per second
(MIPS) per dollar - some tenfold every two years.

     This wild rush in DSPs will eventually converge with the
precipitous plunge in price-performance ratios of general-purpose
microprocessors.  Led by Silicon Graphics' impending new TFP Cray
supercomputer on a chip, Digital Equipment's Alpha AXP device and
Hewlett Packard's Precision Architecture 7100, micros are moving
beyond 100-megahertz clock rates.  They are shifting from a
regime of processing 32-bit words at a time to a regime of
processing 64-bit words.  This expands the total addressable
memory by a factor of four billion.  Together with increasing use
of massively parallel DSP architectures, these gains will keep
computers well ahead of the complexity problem in broadband

     What this means is that while complexity rises exponentially
with bandwidth, computer efficiencies are rising even faster.
The result is to open new vistas of spectrum in the atmosphere as
dramatic as the gains of spectrum so far achieved in the

Attacking Through the Air

     Hovnanian's campaign into the spectrum began when a cable
company announced one day in 1985 that under the Cable Act of
1984 and franchise rights granted by local governments, it had
the right to wire one of his housing developments then under
construction.  Until that day, Hovnanian's own company could
package cable with his homes through what are called satellite
master antenna TV systems.  In essence, each Hovnanian
development had its own cable head end where programs are
collected and sent out to subscribers.

     When the cable company, now Monmouth Cable Vision, went to
court and its claim was upheld by a judge, Hovnanian sought
alternatives.  First he flirted with the idea of having the phone
company deliver compressed video to his homes.  In 1986, in the
era before FCC Commissioner Alfred Sikes, that was both illegal
and impractical.  Then he met Bernard Bossard and decided to
attack through the air.  An early pioneer in microchips who had
launched a semiconductor firm and eventually sold it to M/A COM,
Bossard was familiar with both the soaring power of computers and
the murky problems of broadband noise that have long restricted
the air to a small number of broadcast AM TV stations.

     Air delivery of cable television programming had long seemed
unpromising.  Not only was there too little spectrum available to
compete with cable, but what spectrum there was, was guarded by
the FCC and state public utilities commissions.  Nonetheless, in
the early 1990s "wireless cable" did become a niche market, led
by Microband Wireless Cable and rivals and imitators across the
land.  Using fragments of a frequency band between 2.5 and 2.7
gigahertz (billions of cycles per second), Microband, after some
financial turmoil, now profitably broadcasts some 16 channels to
35,000 New York City homes in line of sight from the top of the
Empire State Building.  As long as they are restricted to a
possible maximum of 200 megahertz and use AM, however, wireless
firms will not long be able to compete with the cable industry.
Cable companies offer an installed base of potential gigahertz
connections and near universal coverage.

     Having spent much of his life working with microwaves for
satellites and the military, Bossard had a better idea.  He
claimed he could move up the spectrum and pioneer on frontiers of
frequency between 27.5 and 29.5 gigahertz, previously used
chiefly in outer space.  That would mean he could command in the
air some half a million times the communications power, or
bandwidth, of typical copper telephone links, some ten times the
bandwidth of existing wireless cable, some four times the
bandwidth of the average cable industry coaxial connection, and
twice the bandwidth of the most advanced cable systems.

     The conventional wisdom was that these microwaves (above
about 12 gigahertz) are useless for anything but point-to-point
transmissions and are doubtful even for these.  For radio
communication, the prevailing folklore preferred frequencies that
are cheap to transmit long distances and that can penetrate
buildings and tunnels, bounce off the ionosphere or scuttle
across continents along the surface of the earth.  The higher the
frequency, the less it can perform these feats essential to all
broadcasting - and the less it can be sent long distances at all.

     Moreover, it was believed, these millimeter-sized microwaves
not only would fail to penetrate structures and other obstacles
but would reflect off them and off particles in the air in a way
that would cause hopeless mazes of multipath.  Multipath would be
translated into several images, i.e., ghosts, on the screen.

     Finally, there was the real show-stopper.  Everyone knew
that these frequencies are microwaves.  The key property of
microwaves, as demonstrated in the now ubiquitous ovens, is
absorption by water.  Microwaves cook by exciting water molecules
to a boil.  Microwave towers are said to kill birds by
irradiating their fluids.  Microwave radar systems won't work in
the rain.  Mention microwaves as a possible solution to the
spectrum shortage, and everyone - from editors at Forbes to gurus
at Microsoft, from cable executives to Bell Labs researchers -
laughs and tells you about the moisture problem.

     So it was no surprise that when in 1986 Bossard went to M/A
COM and other companies and financiers with his idea of TV
broadcasting at 28 gigahertz, he was turned down flat.  Amid much
talk of potential "violations of the laws of physics," jokes
about broiling pigeons and warnings of likely resistance from the
FCC, he was spurned by all.  In fairness to his detractors,
Bossard had no license, patent or prototype at the time.  But
these holes in his plan did not deter Vahak Hovnanian and his son
Shant from investing many millions of dollars in the project.  It
could be the best investment the Hovnanian tycoons ever made.

New Rule of Radio

     For 35 years, the wireless communications industry has been
inching up the spectrum, shifting slowly from long and strong
wavelengths toward wide and weak bands of shorter wavelengths.
Mobile phone services have moved from the 1950s radio systems
using low FM frequencies near 100 megahertz, to the 1960s
spectrum band of 450 megahertz, to the current cellular band of
900 megahertz accommodating more than 10 million cellular
subscribers in the U.S.

     During the 1990s, this trend will accelerate sharply.
Accommodating hundreds of millions of users around the world,
cellular communications will turn digital, leap up the spectrum
and even move into video.  Shannon's laws show that this will
impel vast increases in the cost-effectiveness of communications.

     In general, the new rule of radio is the shorter the
transmission path, the better the system.  Like transistors on
semiconductor chips, transmitters are more efficient the more
closely they are packed together.  As Peter Huber writes in his
masterly new book, The Geodesic Network 2, the new regime favors
"geodesic networks," with radios intimately linked in tiny
microcells.  As in the law of the microcosm, the less the space,
the more the room.

     This rule turns the conventional wisdom of microwaves upside
down.  For example, it is true that microwaves don't travel far
in the atmosphere.  You don't want to use them to transmit 50,000
watts of Rush Limbaugh over 10 midwestern states, but to
accommodate 200 million two-way communicators will require small
cells; you don't want the waves to travel far.  It is true that
microwaves will not penetrate most buildings and other obstacles,
but with lots of small cells, you don't want the waves to
penetrate walls to adjacent offices.

     Microwaves require high-power systems to transmit, but only
if you want to send them long distances.  Wattage at the receiver
drops off in proportion to the fourth power of the distance from
the transmitter.  Reducing cell sizes as you move up the spectrum
lowers power needs far more than higher frequencies increase
them.  Just as important, mobile systems must be small and light.
The higher the frequency, the smaller the antenna and the lighter
the system can be.

     All this high-frequency gear once was prohibitively
expensive.  Any functions over two gigahertz require gallium
arsenide chips, which are complex and costly.  Yet the cost of
gallium arsenide devices is dropping every day as their market
expands.  Meanwhile, laboratory teams are now tweaking microwaves
out of silicon.  In the world of electronics - where prices drop
by a third with every doubling of accumulated sales - any
ubiquitous product will soon be cheap.

     The law of the telecosm dictates that the higher the
frequency, the shorter the wavelength, the wider the bandwidth,
the smaller the antenna, the slimmer the cell and ultimately, the
cheaper and better the communication.  The working of this law
will render obsolete the entire idea of scarce spectrum and
launch an era of advances in telecommunications comparable to the
recent gains in computing.  Transforming the computer and phone
industries, the converging spirits of Maxwell, Shannon and
Shockley even pose a serious challenge to the current
revolutionaries in cellular telephony.

The New PC Revolution: PCN

     Many observers herald the huge coming impact of wireless on
the computer industry, and they are right.  But this impact will
be dwarfed by the impact of computers on wireless.

     In personal communications networks (PCN), the cellular
industry today is about to experience its own personal computer
revolution.  Just as the personal computer led to systems
thousands of times more efficient in MIPS per dollar than the
mainframes and minicomputers that preceded it, PCNs will bring an
exponential plunge of costs.  These networks will be based on
microcells often measured in hundreds of meters rather than in
tens of miles and will interlink smart digital appliances,
draining power in milliwatts rather than dumb phones using watts.
When the convulsion ends later this decade, this new digital
cellular phone will stand as the world's most pervasive PC.  As
mobile as a watch and as personal as a wallet, these PICOs will
recognize speech, navigate streets, take notes, keep schedules,
collect mail, manage money, open the door and start the car,
among other computer functions we cannot imagine today.

     Like the computer establishment before it, current cellular
providers often seem unprepared for this next computer
revolution.  They still live in a world of long and strong - high-
powered systems at relatively low frequencies and with short-
lived batteries - rather than in a PCN world of low-power systems
at microwave frequencies and with batteries that last for days.

     Ready or not, though, the revolution will happen anyway, and
it will transform the landscape over the next five years.  We can
guess the pattern by considering the precedents.  In computers,
the revolution took 10 years.  It began in 1977 when large
centralized systems with attached dumb terminals commanded nearly
100 percent of the world's computer power and ended in 1987 with
such large systems commanding less than one percent of the
world's computer power.  The pace of progress in digital
electronics has accelerated sharply since the early 1980s.
Remember yesterday, when digital signal processing (DSP) - the
use of specialized computers to convert, compress, shape and
shuffle digital signals in real time - constituted an exorbitant
million-dollar obstacle to all-digital communications? Many
current attitudes toward wireless stem from that time, which was
some five years ago.  Today, digital signal processors are the
fastest-moving technology in all computing.  Made on single chips
or multichip modules, DSPs are increasing their cost-
effectiveness tenfold every two years.  As radio pioneer Donald
Steinbrecher says, "That changes wireless from a radio business
to a computer business."

     Thus, we can expect the cellular telephone establishment to
reach a crisis more quickly than the mainframe establishment did.
The existing cellular infrastructure will persist for vehicular

     As the intelligence in networks migrates to microcells, the
networks themselves must become dumb.  A complex network, loaded
up with millions of lines of software code, cannot keep up with
the efflorescent diversity and creativity among ever more
intelligent digital devices on its periphery.  This rule is true
for the broadband wire links of fiber optics, as intelligent
switching systems give way to passive all-optical networks.  It
is also true of cellular systems.

     Nick Kauser, McCaw Cellular Communications' executive vice-
president and chief of technology, faced this problem early in
1991 when the company decided to create a North American Cellular
Network for transparent roaming throughout the regions of
Cellular One.  "The manufacturers always want to sell switches
that do more and more.  But complex switches take so long to
program that you end up doing less and less," says Wayne Perry,
McCaw vice-chairman.  Each time Kauser tried to change software
code in one of McCaw's Ericsson switches, it might have taken six
months.  Each time he wanted to add customer names above a 64,000
limit, Ericsson tried to persuade him to buy a new switch.  The
Ericsson switches, commented one McCaw engineer, offer a huge
engine but a tiny gas tank.  The problem is not peculiar to
Ericsson, however; it is basic to the very idea of complex switch-
based services on any supplier's equipment.

     When McCaw voiced frustration, one of the regional Bell
operating companies offered to take over the entire problem at a
cost of some $200 million.  Instead, Kauser created a Signaling
System 7 (SS-7) network plus an intelligent database on four
Tandem fault-tolerant computers, for some $15 million.  Kauser
maintains that the current services offered by North American
Cellular could not be duplicated for 10 times that amount, if at
all, in a switch-based system.  Creating a dumb network and off-
loading the intelligence on computer servers saved McCaw hundreds
of millions of dollars.

     The law of the microcosm is a centrifuge, inexorably pushing
intelligence to the edges of networks.  Telecom equipment
suppliers can no more trap it in the central switch than IBM
could monopolize it in mainframes.

     Kauser should recognize that this rule applies to McCaw no
less than to Ericsson.  His large standardized systems with 30-
mile cells and relatively dumb, high-powered phones resemble big
proprietary mainframe networks.  In the computer industry, these
standardized architectures gave way to a mad proliferation of
diverse personal computer nets restricted to small areas and
interlinked by hubs and routers.  The same pattern will develop
in cellular.

Could "Charles" Upend McCaw?

     Together with GTE and the regional Bell operating company
cellular divisions, McCaw is now in the position of DEC in 1977.
With its new ally, AT&T, McCaw is brilliantly attacking the
mainframe establishment of the wire-line phone companies.  But
the mainframe establishment of wires is not McCaw's real
competition.  Not stopping at central switches, the law of the
microcosm is about to subvert the foundations of conventional
cellular technology as well.  Unless McCaw and the other cellular
providers come to terms with the new PC networks that go by the
name of PCNs, they will soon suffer the fate of the minicomputer
firms of the last decade.  McCaw could well be upended by its
founder's original vision of his company - a PICO he called

     Just as in the computer industry in the late 1970s, the
fight for the future is already under way.  Complicating the
conflict is the influence of European and Japanese forces
protecting the past in the name of progress.  Under pressure from
EEC industrial politicians working with the guidance of engineers
from Ericsson, the Europeans have adopted a new digital cellular
system called Groupe Speciale Mobile (GSM) after the commission
that conceived it.

     GSM is a very conservative digital system that multiplies
the number of users in each cellular channel by a factor of
three.  GSM uses an access method called time-division multiple
access (TDMA).  Suggestive of the time-sharing methods used by
minicomputers and mainframes to accommodate large numbers of
users on centralized computers, TDMA stems from the time-division
multiplexing employed by phone companies around the world to put
more than one phone call on each digital line.  Thus, both the
telephone and the computer establishments are comfortable with
time division.

     Under pressure from European firms eager to sell equipment
in America, the U.S. Telephone Industry Association two years ago
adopted a TDMA standard similar to the European GSM.  Rather than
creating a wholly new system exploiting the distributed powers of
the computer revolution, the TIA favored a TDMA overlay on the
existing analog infrastructure.  Under the influence of Ericsson,
McCaw and some of the RBOCs took the TDMA bait.

     Thus, it was in the name of competitiveness and
technological progress, and of keeping up with the Europeans and
Japanese, that the U.S. moved to embrace an obsolescent cellular
system.  It made no difference that the Europeans and Japanese
were technologically well in our wake.  Just as in the earlier
case of analog HDTV, however, the entrepreneurial creativity of
the U.S. digital electronics industry is launching an array of
compelling alternatives just in time.

     Infusing cellular telephony with the full powers of wide and
weak - combining Shannon's vision with computer advances - are
two groups of engineers from MIT who spun out to launch new
companies.  Qualcomm Inc. of San Diego, is led by former
professor Irwin Jacobs and telecom pioneer Andrew Viterbi.  A
Shannon disciple whose eponymous algorithm is widely used in
digital wire-line telephony, Viterbi now is leading an effort to
transform digital wireless telephony.  The other firm,
Steinbrecher Corp. of Woburn, Mass., is led by an inventor from
the MIT Radio Astronomy Lab named Donald Steinbrecher.

     Like Bernie Bossard and Vahak Hovnanian, the leaders of
Qualcomm and Steinbrecher received the ultimate accolade for an
innovator: They were all told their breakthroughs were
impossible.  Indeed, the leaders at Qualcomm were still
contending that Steinbrecher's system would not work just weeks
ago when PacTel pushed the two firms together.  Now they provide
the foundations for a radical new regime in distributed wireless
computer telephony.

Signals in Pseudonoise

     Ten years ago at Linkabit, the current leaders of Qualcomm
conceived and patented the TDMA technology adopted as the U.S.
standard by the Telephone Industry Association.  Like analog
HDTV, it was a powerful advance for its time.  But even then,
Viterbi and Jacobs were experimenting with a Shannonesque

     A classic example of the efficacy of wide and weak, CDMA
exploits the resemblance between noise and information.  The
system began in the military as an effort to avoid jamming or air-
tapping of combat messages.  Qualcomm brings CDMA to the
challenge of communications on the battlefronts of big-city

     Rather than compressing each call into between three and 10
tiny TDMA time slots in a 30-kilohertz cellular channel,
Qualcomm's CDMA spreads a signal across a comparatively huge 1.
25-megahertz swath of the cellular spectrum.  This allows many
users to share the same spectrum space at one time.  Each phone
is programmed with a specific pseudonoise code, which is used to
stretch a low-powered signal over a wide frequency band.  The
base station uses the same code in inverted form to "despread"
and reconstitute the original signal.  All other codes remain
spread out, indistinguishable from background noise.

     Jacobs compares TDMA and CDMA to different strategies of
communication at a cocktail party.  In the TDMA analogy, each
person would restrict his or her talk to a specific time slot
while everyone else remains silent.  This system would work well
as long as the party was managed by a dictator who controlled all
conversations by complex rules and a rigid clock.  In CDMA, on
the other hand, everyone can talk at once but in different
languages.  Each person listens for messages in his or her own
language or code and ignores all other sounds as background
noise.  Although this system allows each person to speak freely,
it requires constant control of the volume of the speakers.  A
speaker who begins yelling can drown out surrounding messages and
drastically reduce the total number of conversations that can be

     For years, this problem of the stentorian guest crippled
CDMA as a method of increasing the capacity of cellular systems.
Spread spectrum had many military uses because its unlocalized
signal and cryptic codes made it very difficult to jam or
overhear.  In a cellular environment, however, where cars
continually move in and out from behind trucks, buildings and
other obstacles, causing huge variations in power, CDMA systems
would be regularly swamped by stentorian guests.  Similarly,
nearby cars would tend to dominate faraway vehicles.  This was
termed the near-far problem.  When you compound this challenge
with a static of multipath signals causing hundreds of 10,000-to-
1 gyrations in power for every foot traveled by the mobile unit -
so-called Rayleigh interference pits and spikes - you can
comprehend the general incredulity toward CDMA among cellular
cognoscenti.  Indeed, as recently as 1991, leading experts at
Bell Labs, Stanford University and Bellcore confidently told me
the problem was a show-stopper; it could not be overcome.

     Radio experts, however, underestimate the power of the
microcosm.  Using digital signal processing, error correction and
other microcosmic tools, wattage spikes and pits 100 times a
second can be regulated by electronic circuitry that adjusts the
power at a rate of more than 800 times a second.

     To achieve this result, Qualcomm uses two layers of
controls.  First is a relatively crude top layer that employs the
automatic gain control device on handsets to constantly adjust
the power sent by the handset to the level of power received by
it from the base station.  This rough adjustment does not come
near to solving the problem, but it brings a solution into reach
by using more complex and refined techniques.

     In the second power-control step, the base station measures
the handset's signal-to-noise and bit-error ratios once every
1.25 milliseconds (800 times a second).  Depending on whether
these ratios are above or below a constantly recomputed
threshold, the base station sends a positive or negative pulse,
either raising or lowering the power some 25 percent.

Dynamic Cells

     Passing elaborate field tests with flying colors, this power-
control mechanism has the further effect of dynamically changing
the size of cells.  In a congested cell, the power of all phones
rises to overcome mutual interference.  On the margin, these high-
powered transmissions overflow into neighboring cells where they
may be picked up by adjacent base station equipment.  In a quiet
cell, power is so low that the cell effectively shrinks,
transmitting no interference at all to neighboring cells and
improving their performance.  This kind of dynamic adjustment of
cell sizes is impossible in a TDMA system, where adjacent cells
use completely different frequencies and fringe handsets may
begin to chirp like Elmer Fudd.

     Once the stentorian voice could be instantly abated, power
control changed from a crippling weakness of CDMA into a
commanding asset.  Power usage is a major obstacle to the PCN
future.  All market tests show that either heavy or short-lived
batteries greatly reduce the attractiveness of the system.
Because the Qualcomm feedback system keeps power always at the
lowest feasible level, batteries in CDMA phones actually are
lasting far longer than in TDMA phones.  CDMA phones transmit at
an average of two milliwatts, compared with 600 milliwatts and
higher for most other cellular systems.

     A further advantage of wide and weak comes in handling
multipath signals, which bounce off obstacles and arrive at
different times at the receiver.  Multipath just adds to the
accuracy of CDMA.  The Qualcomm system combines the three
strongest signals into one.  Called a rake receiver and co-
invented by Paul Green, currently at IBM and author of Fiber
Optic Networks (Prentice Hall, 1992), this combining function
works even on signals from different cells and thus facilitates
hand-offs.  In TDMA, signals arriving at the wrong time are pure
interference in someone else's time slot; in CDMA, they
strengthen the message.

     Finally, CDMA allows simple and soft hand-offs.  Because all
the phones are using the same spectrum space, moving from one
cell to another is easy.  CDMA avoids all the frequency juggling
of TDMA systems as they shuffle calls among cells and time slots.
As the era of PCN microcells approaches, this advantage will
become increasingly crucial.  Cellular systems that spurn
Qualcomm today may find themselves in a quagmire of TDMA
microcells tomorrow.  Together, all the gains from CDMA bring
about a tenfold increase over current analog capacity.  In
wireless telephony above all, wide and weak will prevail.

     Like any obsolescent scheme challenged by a real innovation
- and like minicomputers and mainframes challenged by the PC -
TDMA is being sharply improved by its proponents.  The inheritors
of the Linkabit TDMA patents at Hughes and International Mobile
Machines Corp.  (IMMC) have introduced extended TDMA, claiming a
19-fold advance over current analog capacity.  Showing a
conventional cellular outlook, however, E-TDMA fatally adopts the
idea of increasing capacity by lowering speech quality.  This
moves in exactly the wrong direction.  PCN will not triumph
through compromises based on a scarce-spectrum mentality.  PCN
will multiply bandwidth to make the acoustics of digital cellular
even better than the acoustics of wire-line phones, just as the
acoustics of digital CDs far excel the acoustics of analog

     Riding the microcosmic gains of digital signal processing,
CDMA inherently offers greater room for improvement than TDMA
does.  Bringing the computer revolution to cellular telephony,
CDMA at its essence replaces frequency shuffling with digital
intelligence.  Supplanting the multiple radios of TDMA - each
with a fixed frequency - are digital-signal-processing chips that
find a particular message across a wide spectrum swath captured
by one broadband radio.

     With the advance in digital electronics, the advantage of
CDMA continually increases.  As the most compute-intensive
system, CDMA gains most from the onrushing increases in the cost-
effectiveness of semiconductor electronics.  Qualcomm recently
announced that it has reduced all the digital signal processing
for CDMA into one application-specific chip.

     For all the indispensable advances of CDMA, however,
Qualcomm cannot prevail alone.  It brilliantly executes the move
to digital codes, but proprietary mainframe computer networks are
digital, too.  As presently conceived, CDMA still aspires to be a
cellular standard using the same mainframe architecture of mobile
telephone switching offices that now serve the analog cellular
system.  In itself the Qualcomm solution does little to move
cellular toward the ever cheaper, smaller and more open
architectures that now dominate network computing and will shape

Hearing Feathers Crash Amid Heavy Metal

     Consummating the PCN revolution - with its millions of
microcells around the globe and its myriad digital devices and
frequencies - will require a fundamental breakthrough in cellular
radio technology.  In the new Steinbrecher minicell introduced
early this month at the Cellular Telephone Industry Association
show, that breakthrough is at hand.  The first true PC server for
PCN, this small box ultimately costing a few thousand dollars
will both replace and far outperform a 1,000-square-foot base
station costing more than a million dollars.

     Once again, in an entrepreneurial economy, crucial
innovations come as an utter surprise to all the experts in the
field.  Donald Steinbrecher began in the Radio Astronomy Lab at
MIT in the 1960s and early 1970s, creating receivers that could
resolve a random cosmic ray among a mass of electromagnetic
noise.  This required radios with huge dynamic range - radios
that could hear a feather drop at a heavy metal rock concert.  He
and his students solved this intractable problem by creating
unique high-performance receivers and frequency "Mixers."  These
could process huge spans of spectrum with immense variations of
power and translate them without loss into intermediate
frequencies.  Then, computer systems convert the signals from
analog to digital and analyze them with digital signal

     Moving out to begin his own company in 1973, Steinbrecher
and his colleagues made several inventions in the fields of radar
and digital signal analysis.  At first, most of their customers
were national security contractors in the intelligence field.
For example, Steinbrecher supplied the radios for the ROTHR
(remote over the horizon radar) systems that became famous for
their role in the war against airborne drug traffic.  Then in
1986, the company was asked if its equipment could work in the
cellular band.

     After cosmic rays and battlefield radar, the cellular band
was easy.  When he saw that the digital signal processors at the
heart of his systems were dropping in price tenfold every two
years, Steinbrecher knew that his esoteric radios could become a
consumer product.

     Translated to cellular, this technology opens entire new
frontiers for wireless telephony.  Rather than tuning into one
fixed frequency as current cellular radios do, Steinbrecher's
cells can use a high-dynamic-range digital radio to down-convert
and digitize the entire cellular band.  TDMA, CDMA, near or far,
analog cellular, video, voice or data, in any combination, it
makes no difference to the Steinbrecher system.  His minicell
converts them all at once to a digital bit stream.  The DSPs take
over from there, sorting out the TDMA and CDMA signals from the
analog signals and reducing each to digital voice.  To the extent
the Steinbrecher system prevails, it would end the need for
hybrid phones and make possible a phased shift to PCN or a
variety of other digital services.

     Hoping to use Qualcomm chipsets and other technology,
Steinbrecher could facilitate the acceptance of CDMA.  For CDMA,
the minicell provides a new, far cheaper radio front end that
offers further relief to the near-far problem and is open to the
diverse codes and fast-moving technologies of PCN.  For the
current cellular architecture, however, Steinbrecher offers only
creative destruction, doing for large base stations what the
integrated circuit did for racks of vacuum tubes in old telephone

     In essence, the new minicell replaces a rigid structure of
giant analog mainframes with a system of wireless local area
networks.  Reconciling a variety of codes and technologies, the
Steinbrecher devices resemble the smart hubs and routers from
SynOptics Communications and Cisco Systems that are transforming
the world of wired computer networks.

     Best of all, at a time when the computer industry is
preparing a massive invasion of the air, these wide and weak
radios can handle voice, data and even video at the same time.
Further, by cheaply accommodating a move from scores of large
base stations to scores of thousands of minicells per city - on
poles, down alleys or in elevator shafts - the system fulfills
the promise of the computer revolution as a spectrum multiplier.
Since each new minicell can use all the frequencies currently
used by a large cell site, the multiplication of cells achieves a
similar multiplication of bandwidth.

     Finally, the Steinbrecher receivers can accommodate the
coming move into higher frequencies.  Banishing once and for all
the concept of spectrum scarcity, these high-dynamic-range
receivers can already handle frequencies up to the "W band" of 90
gigahertz and more.

Boundless Bandwidth

     The future of wireless communications is boundless
bandwidth, accomplished through the Shannon strategy of wide and
weak signals, moving to ever smaller cells with lower power at
higher frequencies.  The PCN systems made possible by Qualcomm
and Steinbrecher apply this approach chiefly to voice and data.
Recent announcements by Bossard and Hovnanian extend the concept
to television video as well.  Last December, they disclosed that
their company, Cellular Vision, was already wirelessly delivering
49 cable television channels to 350 homes near Brighton Beach,
Long Island, in the 28-gigahertz band.  They declared a plan to
soon sign up some 5,000 new customers a month all over New York.

     Among engineers in cellular and cable firms, Cellular Vision
evokes the same responses of incredulity and denial familiar at
Qualcomm and Steinbrecher.  Like them, Bossard is resolutely on
the right side of the Shannon and Shockley divide.  In answer to
the multitude of qualms and objections and demurrals, all three
companies cite the huge benefits of more bandwidth.  Qualcomm can
assign some 416 times as much bandwidth to each call as a current
cellular or TDMA system.  Steinbrecher's minicell receivers can
process 4,160 times as much bandwidth as an analog cell site or
TDMA radio.

     Hovnanian achieves some 300 times the bandwidth of a
broadcast TV station and some three times the bandwidth of even a
typical cable head end.  For Hovnanian's so-called multipoint
local distribution system, the FCC has allocated a total of two
gigahertz between 27.5 and 29.5 gigahertz - one gigahertz for TV
and one gigahertz for experimental data and phone service.  This
large swath of spectrum allows Cellular Vision to substitute
bandwidth for power.  Using FM rather than the AM system of
cable, Cellular Vision gains the same kind of increased fidelity
familiar in FM radio.  Assigning 20 megahertz to each channel -
three times the six megahertz of an analog system - Cellular
Vision proves the potency of wide and weak by getting 20 decibels
- some 10 times - more signal quality.  These extra decibels come
in handy in the rain.

     With a radius of three miles, Cellular Vision cells are
about 100 times smaller than telephone cells.  Transmitting only
10 milliwatts per channel over a three-mile radius, the system
gets far better signal-to-noise ratios than the three-watt radios
of cellular phones or the multikilowatt systems of AM radio or
television broadcasts.  The millimeter wavelengths at 28
gigahertz allow narrowband high-gain antennas that lock onto the
right signal and isolate it from neighboring cells.  At 28
gigahertz, small antennas command the performance of much larger
ones (for example, a six-inch antenna at 28 gigahertz is
equivalent to a three-foot antenna at 4 gigahertz or a 300-foot
antenna at broadcast television frequencies).

     In Brighton Beach the receiving antennas, using a fixed-
phased-array technology, are just four inches square, and the
transmitting antennas deliver 49 channels from a one-inch
omnidirectional device on a box the size of a suitcase.  Between
cells, these transmitters can send programming and other
information through a conventional point-to-point microwave link.

Singing in the Rain

     So what happens in the rain? Well, it seems that Cellular
Vision does better than conventional cable.  When you have small
cells in geodesic low-power wireless networks using the full
computational resources of modern microchips, you have plenty of
extra decibels in your signal-to-noise budget to endure the most
violent storms.  Indeed, the 350 Brighton Beach customers of
Cellular Vision received continuous service during the November
1992 near hurricane in New York, which brought floods that
interrupted many cable networks for hours.  One competitive
advantage of Cellular Vision over cable seems to be less
vulnerability to water.

     Moving television radically toward the regime of wide and
weak, Bossard and the Hovnanians have changed the dimensions of
the air.  However, they cannot escape the usual burdens of the
innovator.  Any drastic innovation must be some 10 times as good
as what it replaces.  Otherwise, the installed base, engineering
momentum and customer loyalty of the incumbents will prevail
against it.

     Cellular Vision faces a wired cable system with some $18
billion in installed base.  Already deploying fiber at a fast
pace, cable companies plan to move within the next year toward
digital compression schemes that increase capacity or resolution
by a factor of between six and 10 (depending on the character of
the programming).  That means some 500 digital channels or more.
TCI, the leading cable company, has ordered some one million
cable converter and decompression boxes from General Instruments'
Jerrold subsidiary for delivery late in 1993.  In the U.S. cable
industry, Hovnanian faces an aggressively moving target.  Most
cable experts doubt he can make much of a dent.

     This view may be shortsighted.  Clearly, Cellular Vision -
and its likely imitators - can compete in the many areas with
incompetent cable systems, in areas yet unreached by cable or in
new projects launched by developers such as the Hovnanians.  In
the rest of the world, cable systems are rare.  Cellular Vision
is finding rich opportunities abroad, from Latvia to New Zealand.
Most of all, as time passes, Cellular Vision might find itself
increasingly well positioned for a world of untethered digital

     Such a cellular system could be adapted to mobile telephone
or computer services.  With a bit-error rate of one in 10
billion, it could theoretically transmit computer data without
error correction.  With one gigahertz of bandwidth, the system
could function easily as a backbone for PCN applications,
collecting calls from handsets operating at lower frequencies and
passing them on to telephone or cellular central offices or to
intelligent network facilities of the local phone companies.

     The future local loop will combine telephone, teleputer and
digital video services, together with speech recognition and
other complex features, in patterns that will differ from
neighborhood to neighborhood.  Easily customizable from cell to
cell, a system like Bossard's might well offer powerful

     In an era of bandwidth abundance, the Negroponte switch -
with voice pushed to the air and video onto wires - may well give
way to this division between fibersphere and atmosphere.  With
the fibersphere offering virtually unlimited bandwidth for fixed
communications over long distances, the local loop will be the
bottleneck, thronged with millions of wireless devices.  Under
these conditions, a move to high-frequency cellular systems is
imperative to carry the increasing floods of digital video
overflowing from the fibersphere.

     In any case, led by Qualcomm, Steinbrecher and Cellular
Vision, a new generation of companies is emerging to challenge
the assumptions and structures of the existing information
economy.  All these companies are recent startups, with
innovations entirely unexpected by international standards
bodies, university experts and government officials.  They are
the fruit of an entrepreneurial America, guided by the
marketplace into the microcosm and telecosm.

Why Imitate European Failures?

     Meanwhile, the European and Japanese experiences with
government-guided strategies should give pause to proponents of
similar policies here.  Thirty years of expensive industrial
policy targeting computers has left the Europeans with no
significant computer firms at all.  The Japanese have done
better, but even they have been losing market share across the
board to the U.S.

     In the converging crescendos of advance in digital wireless
telephony and computing, progress is surging far beyond all the
regulatory maps and guidebooks of previous years.  If the entire
capacity of the 28-gigahertz band, renewed every three miles, is
open to telephony and video, bandwidth will be scarcely more
limiting in wireless than it is in glass.

     In this emerging world of boundless bandwidth, companies
will prevail only by transcending the folklore of scarcity and
embracing the full promise of the digital dawn.  In an era of
accelerating transition, the rule of success will be self-
cannibalization.  Wire-line phone companies are not truly
profitable today; their reported earnings all spring from slow
depreciation of installed plant and equipment that are fast
becoming worthless.  As George Calhoun of IMMC demonstrates in
his superb new book, Wireless Access and the Local Telephone
Network (Artech, 1992), new digital wireless connections are
already less than one-third the cost of installing wire-line
phones.  For the RBOCs, aggressively attacking their own
obsolescent enterprises is their only hope of prosperity.

     As Joseph Schlosser of Coopers & Lybrand observes, self-
cannibalization will not appear to be in the financial interests
of the established firms; it will not prove out in net-present-
value terms.  There will be no studies to guarantee its success.
Executives will have to earn their pay by going with their gut.
As semiconductor and computer companies have already learned,
phone and cable companies will discover that self-cannibalization
is the only way to succeed in this era - the only way to stop
others from capturing the heart of your business.

     This is the lesson of the last decade.  When Craig McCaw
sold his cable properties and plunged into cellular telephony and
$2 billion of Michael Milken's junk bond debt, there was no way
to prove him right.  Today AT&T is preparing to launch him as a
rival to Bill Gates as the nation's richest man.  Yet McCaw
cannot rest on his laurels; the hour of the cannibal is at hand.

     In theory, the transition should not be difficult for this
resourceful and ingenious entrepreneur, who has long been a
leading prophet of ubiquitous wireless phones and computers - his
predicted personal digital assistant, "Charles."  But a company
that has paid billions for its 25-megahertz national swath of
long and strong frequencies faces especially acute dilemmas in
moving toward a regime of wide and weak.  As a man - and company
- that has made such transitions before, McCaw is favored by
history and by AT&T.  As a giant pillar of the new establishment,
though, McCaw may find it as difficult to shift gears as did the
computer establishment before him.  The stakes are even higher.
The next decade will see the emergence of fortunes in ever-
changing transmutations of PCN, digital video, multimedia and
wireless computers that dwarf the yields of cable and cellular.
The window of opportunity opens wide and weak.