Mr. Freeze and His Cool Intentions

Peter Thomas is the sort of guy you either love or hate. If you're a carrier you might love him, but if you're trying to sell a carrier new base stations, you could end up hating him. None of this is personal, of course, and is entirely to do with mobile and cryogenic technologies.

Thomas is CEO of Superconductor Technologies Inc., a cryogenic receiver front-end (CRFE) manufacturer that, oddly enough, calls sunny Santa Barbara, Calif., its home. CRFEs, which can be installed on existing mobile base stations to improve signal strength and network capacity, use extreme temperatures of less than 300 degrees below zero that freeze base station components. As a result, the components conduct electricity without the electrical resistance that usually creates noise and signal loss during wireless transmissions.

The quality that base station components possess following this process is called superconductivity, and the process itself is often called high-temperature superconducting (HTS). Although 300 degrees below zero may sound like a dangerously low temperature, it is actually warmer than the temperatures that other types of superconducting reach.

If this all sounds like a lot of frozen hairsplitting, just think of the HTS process this way: A signal from a handset comes into a base station and goes through a cryogenic filter and amplification system that eliminates noise. The signal is then transmitted to the receiver.

Carriers benefit from HTS in a number of ways, including improved network coverage and signal quality (and thus, service quality). Also, by making enhancements to existing base stations, carrier markets aren't overrun with new ones. That allows carriers to keep capital and operational expenses down at a time when they desperately need to do so, while also permitting them to improve their services to keep competitors at bay.

“I've been in telecom for twenty-eight years, and this is the first time all the business drivers in the industry have been pointing in this company's direction,” Thomas said. “It's pretty exciting.”

Thomas has actually only been with STI since 1997. Prior to that he was president and CEO of Ericsson North America, and held several key management positions at companies including cable telephony developer First Pacific Networks and Nortel Networks (Northern Telecom back in Thomas' day).

From these leadership posts, Thomas developed a keen perspective on the pressures carriers now face. “The carrier mentality traditionally has been to build out the footprint, and they have always had money to do it,” Thomas said. “Now they're cutting capital expenses, but they still have substantial needs to improve network coverage and capacity.”

Other challenges include increasing interference from other types of network services like specialized mobile radio. “Usage by public safety agencies with SMR has gone up [since Sept. 11, 2001], and Nextel [the leading SMR operator] is showing big increases in customers and traffic,” he said.

Out-of-band spectrum interference is troublesome because it “seeps in,” said Neal Fenzi, vice president of product management at STI. “It creates distortion that drives the noise floor up. Our unit preserves the bandwidth provided by the FCC and rejects everything else, providing a very low noise floor.” In tests over CDMA networks, STI's CRFE has reduced dropped and blocked calls by 40%.

“Carriers are looking at less expensive alternatives to manage the spectrum they have, rather than deploying new equipment to reduce dropped calls,” Thomas added.

Thomas said he has learned a lot from talking to his customers. In fact, STI credits a series of conversations with one of its customers for its evolution from an obscure little company doing strange things with cryogenics into a serious player with a cool solution to carriers' simmering network problems.

Thomas said STI's earliest business came from U.S. Cellular and Alltel, which used the technology for range extension in rural areas. In the fall of 2001, STI and Alltel began discussing a larger contract, but Alltel wanted STI's SuperFilter and more compact SuperLink Rx850 products to be less expensive. “We went back to our engineering guys and had them look at ways to decrease the cost of the production and the product design,” Thomas said. “The price came down, we went back to Alltel, and they ordered 1000 units.”

STI showcased its improved products to other carriers, and the response encouraging. The company walked away from both Verizon Wireless and AT&T Wireless with general purchase agreements.

With its opportunities expanding, late last year STI also acquired Conductus, one of its chief HTS competitors.

For every winner there has to be a loser, and though STI's technology is a good solution for some, it's a headache for others. Many of the bigger vendors that sell most new base stations to the industry, including Lucent Technologies and Nortel Networks, are unhappy that STI's technology could indefinitely delay carriers from buying new products, Thomas said. Consequently, STI only sells its CRFEs directly to carriers and has no OEM strategy thus far.

“It would be nice if the base station vendors were our customers in the first place, but the relationship is more confrontational than it is cooperative,” Thomas said. “They still see this as a niche solution that has the effect of deferring carrier capex.”

One official at a large base station vendor, who declined to be identified, said STI is creating the impression of conflict for its own competitive benefit. “Any base station supplier worth its salt has to look at re-using existing infrastructure before selling new units to a customer. You wouldn't keep that business otherwise.”

Still, as major infrastructure vendors become more focused on systems and software, and less focused on component technologies, the rift may open further.

Rich Conlon, vice president of sales and marketing at STI, said, “The people who understand our product best are the people in pain, and those are the carriers.” However, Conlon said STI might look into partnerships that could get its technology designed into next generation base stations.

Although large vendors may not be taking advantage of HTS technology today, they've ignored superconducting for decades, so their neglect is nothing new. Superconducting was first discovered in the early 1900s and theories about the effect of superconducting on radio transmissions were put forth as early as 1911. However, it was not until 1987 that IBM scientists in Zurich, Switzerland, proved that HTS worked with radio spectrum.

Curiously, Big Blue never followed through on its own innovation, but that didn't stop other companies from picking up the ball. Shortly thereafter, several start-ups built business models around IBM's innovation. “Superconducting was on the cover of Time magazine in 1988,” Thomas said.

STI sprouted in '87 when three venture capitalists looking to exploit the trend met a Nobel Prize-winning physicist who was interested in developing applications for the technology. It took a while before wireless networking made the list of potential uses. “By the early 1990s, some of the other potential uses for the technology fell by the wayside, and it became apparent that wireless filtering was the best application,” Thomas said. Thomas entered the picture a few years later because STI needed someone with a telecom background to steer the business in that direction.

Still, it took a few more years before superconducting technology became more than an industry footnote. Motorola's research and development group worked with STI on a project during the mid-1990s to develop a prototype CRFE. When the project was completed, STI thought orders for thousands of units would pour in. But once Motorola proved it worked, “the Motorola group just moved onto something else,” Thomas said.

Again, superconducting had somehow disappeared from another vendor's radar screen. But STI has built a strong business by taking advantage of that history of neglect — a fact that could one day make it one of the big boys, in much the same way that its technology has advanced from a niche into the mainstream.

“Peter brought a large company environment to a small company,” Conlon said. “He initiated the productization of the company, knowing we needed an application to develop the product around. Three or four years ago we were still a science project.”