The problem of two ends

For any wireless link to be of value, it must have two ends. This simple fact has far reaching consequences for innovative development in the industry.

The problem of two ends

Innovation in wireless mostly occurs in rather a different manner than in other areas. This is because there must be two ends to any wireless link for it to be of value.

So, for example, the innovation in music leading to the iPod could occur within a single company and culminate in the launch of a product which consumers could buy and immediately derive value from.

However, the innovation in technology leading to cellular telephony required both operators to build networks and consumers to acquire phones which work on those networks.

It is the 'two end' problem which generally requires wireless systems to conform to standards and for there to be multiple sources of supply, changing the nature of the manner in which new products can be introduced. This is not invariably the case for some systems such as garage door openers and cordless phones, consumers can acquire both ends of the link at the same time and from the same source and have little concern over standards. However, for most of the innovations listed here the two ends of the link are owned and operated by different entities.

Solving the 'two end' problem requires global standards and sufficiently harmonised spectrum. But this is not enough. It also needs one or more companies being prepared to subsidise the 'first end' of the link until it becomes widespread and the value of having a 'second end' becomes clear.

So is there anything that can be done, perhaps by governments, regulators or standards bodies, to assist the process of innovation in what is becoming one of the most important sectors in the industry?

One of the key calls is for radio spectrum policies that will assist in furthering innovation. Often regulators are asked to make available either more licence-exempt spectrum, or 'innovation playgrounds' - spectrum where those with new ideas can launch them for an initial trial with the idea of moving to a permanent home if the service is successful.

Lessons to learn

However, examples of successful innovations teach us two lessons. The first is that not all innovations occur in licence-exempt spectrum. Indeed, some of the most important - GPS, BlackBerry, Digital TV and the iPhone have occurred in licensed spectrum. Secondly, spectrum that is internationally harmonised is much more likely to lead to innovation, so the value of a 'playground' that is only available in the UK is likely to be limited. With inter-nationally harmonised bands at 2.4GHz and 5GHz where new ideas can readily be trialled, the value of additional licence-exempt spectrum in promoting innovation is far from clear.

Another point for the regulator to note is that many innovations take place over existing networks BlackBerry and wireless Internet over the cellular network and possibly video telephony in the future.

Standards bodies need to develop single global standards as new ideas emerge. However, equally there is tension here with the idea of a competitive market where many innovative new ideas emerge.

Preventing this might lead to standards that are not as good as they might be. Enabling it might lead to a period of competitive tension which slows the emergence of an application.

Government is a very large purchaser of equipment and services. It could, by mandating the purchase of a particular technology or application, provide enough of a market stimulus to set it on the path to success. To some degree, this is what occurred with GPS. For example, if the government mandated contactless ID within cellphones for all employees this would likely seed the market sufficiently for widespread innovation in contactless applications to occur. There has been much discussion of the role of government as an 'intelligent buyer', predominantly in the context of its ability to stimulate industry in its own country. But just as with standards, there is a risk that government selects the wrong application or technology which either results in a less than optimal solution for all, or a waste of resources, or both.

The world of wireless is an exciting one where many innovations occur. The fact that some succeed and some fail is a good indication that sufficient risk-taking is occurring.

The number of innovations over the last decade and the likely number to come over the next decade are good evidence of a thriving eco-system. The key lesson is that most innovations suffer from the 'two end' problem and without a good strategy this will not succeed.

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