In the old daysthat
is, up until about thirty years agotechnological innovation and
business building were achieved in places where the physical mattered
more than the intellectual. Cleveland and Pittsburgh grew because of
their proximity to oil and coal fields, because they were conveniently
located near rail and water transportation, and because of an abundance
of unskilled laborers ready to do the dirty work required by their factories.
In this old economy,
places like San Diego were where you went to vacation or retire, or
to get shipped out for military service. Any kind of real technological
innovation was thought of as unlikely because no one in their right
mind would want to buckle down in the lab when the waves were breaking
off of La Jolla.
And when Irwin
Jacobs arrived in San Diego in 1966, after seven years teaching electrical
engineering at the Massachusetts Institute of Technology, he faced those
kind of expectations. He had given up a prestigious teaching position
at M.I.T. for a professorship in computer science and engineering at
the University of California at San Diego, which was then only six years
old. His MIT colleagues scratched their heads at his move, and Jacobs
himself has said that one of his primary motivations was a good deal
on real estate. We (his wife and four children) decided that if
we were going to make the move before retirement, the sooner the better,
because the land prices would only go up, Jacobs told Fortune
magazine last year.
move to the west coast would have a huge impact on not only San Diego
but also on the worldwide application of wireless technology. Now 67,
Jacobs is the CEO of wireless giant Qualcomm. San Diego, once considered
too laid-back for serious business, is now one of the top clusters of
high-tech businesses in the country, according to the Council on Competitiveness.
The main reasons for the distinction is San Diego's proximity to
brain power at the U.C.S.D. campus, the numerous biotech research facilities,
military research contracts, and of course, $4 billion Qualcomm.
And as the world
races toward the next generation of wireless technology (the third generation
or 3G), and all the billions of dollars in revenues that
3G will generate, the world of wireless technology is keeping a careful
eye on Jacobs and Qualcomm in San Diego. Wireless communications on
telephones and palm pilots are ready to take the next quantum leap where
high-speed Internet accesswith video applications and instant
worldwide communication from a mobile phoneis a reality on every
continent. But even though the technology is available, there are still
the logistics of sorting out competing platforms and the difficulty
of obtaining licensing from governments around the globe. Winning the
race to be the dominant company implementing the lucrative technology
isn't going to be easy.
It is much like
the Betamax-VHS battle over video recorders two decades ago. On the
one side is Qualcomm, which favors the CDMA2000 platform, which uses
existing radio frequencies and would support older phones (CDMA stands
for code division multiple access, a technology that breaks data into
packets and which Qualcomm pioneered in the 1980s). On the other side
is WCDMA (wideband code division multiple access), led by the Finnish
wireless company Nokia Oyj. The two platforms have their roots in the
same technology, and there is much debate over which is technologically
superior. One major difference is that WCDMA requires operators to buy
more airwaves, while CDMA can use spectrums they already own.
Finding a worldwide
platform has been a dogged pursuit for the telecom industry worldwide.
Whoever wins this battle needs to sign up governments to favor their
platform, get the mobile carriers to sign on, and make their services
affordable. If all this sounds extremely complicated and competitive,
it is. At this point in time, 3G is being rolled out in a few countries,
but until a worldwide platform dominates, the real promise of 3G wireless
technology will go largely unfulfilled.
And into this battle
for access to more information strolls Jacobs, a man who would be as
well known as Bill Gates if he weren't so reserved. Jacobs has
championed CDMA technology since the late 1980s, showing how CDMA's
code packet-based technology was superior (it uses radio spectrums frugally)
to the well-established time packet data platforms. It has been a crusade
for Jacobs, who admits he does not particularly like public speaking
and does not relish being the point man for pushing CDMA2000 around
the world. But Jacobs has always believed in the importance of brain
power, and the former professor is passionate about the superiority
of his company's invention. People have referred to this
as a religious war, he said in a recent interview. I have
always tried to keep it rational. (Jacobs would not comment for
this piece, citing the sensitive timing of the current negotiations
over his platform's acceptance).
But if anyone were
to bet on which platform will dominate, a bet on the risk-taking, hard-charging
Jacobs would be a good one. Qualcomm is not so much a high-tech manufacturer
as much as it is a company that leverages its brain power and turns
it into patents. The patents result in licensing agreements, and royalties
are earned from them. (Qualcomm has more than 100 such agreements with
wireless technology companies). Most of Qualcomm's revenues come
from supplying mobile phone chip sets, which it contracts others to
make. But the rest is from royalties, which in fiscal year 2000 accounted
for $705 million, about 25 percent of the company's $2.8 billion
in annual revenue.
In many ways, Qualcomm
operates as a think tank, where 7,000 employees create intellectual
property. Some analysts think that the royalties from the CDMA2000 technology
could eventually net Qualcomm and Jacobs $20 billion a year. Although
that's no sure thing, the numbers are staggering. Jacobs has long
valued intellectual property over manufacturing as he built his company.
And had he not started out as a research scientist, the business model
for Qualcomm might have been very different.
in academia and his plucky rise from a lower middle-class family illustrate
the two sides to his personal stamp on his company: his credo that the
best science should always win and his willingness to take on the giants
of the telecom industry. Born in New Bedford, Mass., his father held
a series of jobs (taxicab driver, insurance salesman, electrician's
apprentice) before owning a small restaurant. In the early fifties,
Jacobs's guidance counselor told him there was no future in science
and engineering, and suggested he study hotel management at Cornell,
so that he might work in a business similar to his father's. After
18 months at Cornell, he switched to electrical engineering and received
his doctorate from MIT in 1959.
He earned $5,500
a year at MIT before moving to U.C.S.D. In 1972, he and two other colleagues
formed Linkabit, a technology consulting company. Some of the early
contracts Linkabit worked on were for satellite research and coding
for the military. The company was also an early player in the development
of the Internet, getting an assignment from ARPAnet (a precursor of
the Internet) to get European universities, phone companies, and government
agencies to tie into the fledgling network. He sold Linkabit in 1980,
and stayed on as a consultant until 1985. In that year, he formed Qualcomm.
The impetus for
Qualcomm was the work on CDMA Jacobs had done for Linkabit. He had worked
on antijamming techniques for the military, and the CDMA technology
allowed the military to weave multiple data messages over a slim stream
of radio bandwidth. Jacobs began looking for civilian applications,
eventually coming up with an application called Omnitracs, a way for
trucking companies to use satellite technology to track their semi-tractor
trailers as they crisscrossed the country.
And from there,
Jacobs has pressed hard for the packet-based transfer of data over the
time-transfer method. Two early successes were AirTouch and Sprint,
which signed up in 1993 and 1995, respectively. As of 2000, Qualcomm's
CDMA technology was still in third place with 13 percent of the worldwide
market, but has proven to be the easiest way to move data quickly, and
provides a cheap and easy way to move to the more lucrative 3G services.
But as the world
waits for 3G technology to be implemented, there are many problems for
Qualcomm and the rest of the wireless companies looking to take advantage
of the new technologies. First, the collapse of the high-tech stock
market has made investment money more difficult to come by. (Like most
high-tech companies, Qualcomm's stock has been battered during
the past year). Likewise, the spectrums licensed by governments around
the world have been slow to be made available. And many analysts even
question whether companies can make money on the 3G investments because
they will have to charge high prices for the service. They point to
the failures of wired high-speed access, which is still trying to find
the right market at the right price.
industry, like every other chunk of the communications sector, is suffering
major, major waves of anxiety, said Reed Hunt, former chairman
of the Federal Communications Commission and a senior advisor at McKinsey
& Co., a technology consulting firm. Where is the spectrum
going to come from? How are they going to get the money to invest and
build the infrastructure?
But the sheer numbers
of potential users will make the 3G battle worth fighting. In the United
States, 110 million Americans use cell phones for voice transmissions,
but only 2.5 million use the wireless Web, according to the FCC. Worldwide,
wireless firms have gone from 90 million subscribers in 1995 to 727
million by the end of 2000, according to the International Telecommunications
Union, which expects 1 billion subscribers by 2003.
And the fight over
the competing platforms is likely to be bloody. Qualcomm is concentrating
heavily on China, where $2 billion worth of wireless equipment was sold
last year. But the effort in China shows how politics and propping up
local telecom companies will influence decisions as much as which platform
functions best. With 105 million cellular subscribers, China could provide
the critical mass to tip the scales to CDMA2000 or WCDMA. But since
1994 Qualcomm has lobbied the Chinese government hard on behalf of Qualcomm's
technology, only to have negotiations start and stop with maddening
frequency depending upon the latest Sino-American relations and local
companies China wants as Qualcomm's partners.
have used CDMA as a political football, Terry Yen, an official
with Beijing-based CDMA Development Group (a Qualcomm partner) told
Newsweek. I can't say the Clinton administration cared specifically
about the technologyit was part of a bigger message of engagement.
I think that worked against us because China knew America cared about
this issue. They've viewed CDMA as a way to signal their displeasure
with U.S. policy or events.
is further along than its competitors in China, having signed licensing
agreements with two Chinese telecommunications equipment makers in July.
Qualcomm has also announced the opening of a CDMA development center
in China. The center will support the transfer of hardware and
software technologies for product development and manufacturing, as
well as implementation methods to licensed manufacturers, carriers,
and government bodies in China, Jacobs said in a company press
release. Through our CDMA University and Technology Transfer programs,
the center will support localized research and development in China.
And in his approach
in China, the former professor is still using the template that worked
well for him in both academia and private business. Because Jacobs prizes
brain power, whether in San Diego or China, he realizes whoever competes
to the fullest in development of new technology will have a leg up on
the competition, regardless of the vagaries of international politics
or the stock market. And he realized the export of such brain power
is a key for the Unites States' economic and strategic growth.
Pointing to a U.C.S.D.
study that adult education extension courses are booming, and one third
of the 400,000 adult learners in the University of California system
are taking science and technology courses, Jacobs wrote in the San Diego
Union Tribune that higher education is lagging behind the needed technological
education to support innovation.
have grasped something that federal policymakers must keep in mind:
We cannot afford to drop out of the global innovation race, Jacobs
wrote. We must restore America's primacy in science and technology.
We must give American workers the skills they need throughout their
lives to perform high-knowledge, high-value jobs. We must not sacrifice
long-term investments in economic prosperity for short-term political
And this may indeed
be Jacobs's holy war. His lessons in academia and business have
taught him that regardless of the fights in market share and international
politics, pure and practical research is what is valued in the new economy.
It's what he has learned in the classroom and the boardroom, and
as Qualcomm continues to push for more application in the wireless world,
he is using that experience to fight on behalf of brain power, on behalf
of innovation with purpose.
McGraw is a freelance writer based in Fort Worth, Texas.