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Measurement Criteria


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Measurement Criteria

  1. 1. • Deliverable Number-IRG: 65 • Deliverable Name: Mobile WiMAX, 3G LTE and xMax: Potential Mobile Broadband Technologies • Region for which Award is given: Europe • Manager: Sharifah Amirah • Analyst: Luke Thomas Award Description The Frost & Sullivan Award for Technology Innovation is presented to the company that has demonstrated technological superiority within its industry. This Award recognizes the ability of the company to successfully develop and introduce new technology, formulate a well-designed product family, and make significant product performance contributions to the industry. Research Methodology To choose the recipient of this Award, the analyst team tracks emerging and existing technologies, as well as R&D developments. This is accomplished through interviews with major market participants and extensive secondary research. Also considered are elements such as product launches, customer acceptance, penetration rates, and time to market. Finally, competitors are compared and ranked for relative position. Frost & Sullivan then presents the Award to the company that received the number one industry rank. Measurement Criteria In addition to the methodology described above, specific criteria are used to determine the final competitor rankings in this industry. The Award recipient has excelled based on one or more of the following criteria: • Technology innovation contrasted against competitors • R&D expenditures • New product/process introduction • Price premium • First to market • Adoption rate • Penetration rate IRG:65 ©2007 Frost & Sullivan Manager: Sharifah Amirah, Analyst: Luke Thomas
  2. 2. 2007 Frost & Sullivan European Award for Technology Innovation xG Technology: Company Overview xG Technology is an IP-centric, broadband communications company, which was founded in 2000 by three partners: Richard Mooers, Roger Branton, and Joe Bobier in Florida, USA. The company, listed on the London Stock Exchange’s Alternative Investment Market (AIM) is listed under the symbol XGT. Based on a price of US$12.75/share (as of June 6, 2007), the current market cap of xG Technology is approximately US$1.56 billion. Owners of a disruptive technology, xG decided to choose an even more disruptive model for the company’s patented technology as it will debut its initial vertical market application as a wireless VoIP (Voice over IP) service and base station+handset product line that will be sold through independent local carriers. The company plans in the long term to ultimately transition to a chip supplier. As evidence of the company’s growing body of IP, it currently has 9 patents granted and 18 pending in the U.S. as well as internationally. xG has also come out with their first generation handset which will accompany the initial mobile VoIP launch and will be a tri-mode phone offering Metro mobile VoIP, home/office/hotspot WiFi, and wired Ethernet calling. By Q3 2007 there will be a redesigned and minituarized version of the first generation handset available and by Q1 2008 the second generation handset, a smartphone variant, will appear. xG Technology’s Patented Technology xG’s technological prowess is based on a breakthrough communications technology called Flash Signal, which handles the transmission, reception, modulation, and encoding of data. Flash Signal uses a process that the company (or more specifically, its resident inventor and Chief Technology Officer, Joseph Bobier) has discovered and patented called “single cycle modulation”. Single cycle modulation encompases a variety of modulation techniques, and is implemented when individual sinusoidal (a type of wave) cycles of RF energy are modified to carry one bit of information. This proprietary modulation method differs from rival IRG:65 ©2007 Frost & Sullivan Manager: Sharifah Amirah, Analyst: Luke Thomas
  3. 3. technologies which use tens to hundreds of thousands of waves to convey that same bit of information. The Flash Signal technology allows vast efficiency gains to be achieved and results in increased RF signal range, leading to a reduction in infrastructure required to cover a given service area. xG Technology’s Sustainable Competitive Advantage As mentioned earlier, xG’s sustainable competitive advantage is its proprietary single cycle modulation, which differs from conventional approaches where tens to hundreds of thousands of RF cycles are required to convey a single bit of information. Because each additional cycle requires commensurate power output, xG’s technology allows dramatic efficiency gains to be achieved. The result is that xMax can transmit substantially more information at long ranges than other technologies at similar power,or the same range at substantially reduced power requirments. This reduction in RF power output is especially important for mobile devices that rely on batteries to operate since it will improve battery life. Field performance results have shown xMax capable of wirelessly sending high speed data 3 times farther on average than other approaches at equal transmit power, height and frequency. By increasing the range and power efficiency of wireless signals, xG’s Flash Signal technology allows operators to deploy broadband services using far less infrastructure in terms of CAPEX and OPEX to wirelessly cover a given area. Possibly even more importantly the physical reduction in network infrastructure, coupled with increased capacity, facilitates rapid deployment and decreased time to market. This makes xMax the only low cost, rapid deployable, high data rate network. As far as the power efficiency resulting from single-cycle signals, tests have shown that an xG base station transmitting full-motion video uses 3 million times less power than a typical 802.11 access point. More recently, its mobile VoIP base station had passed all the tests necessary in the very first attempt without any reconfiguration and successfully attained the Federal Communication Commissions (FCC) certification. The firm’s reduced infrastructure cost allows for substantial cost savings to be offered to subscribers. The initial market offer will feature unlimited local calls, IRG:65 ©2007 Frost & Sullivan Manager: Sharifah Amirah, Analyst: Luke Thomas
  4. 4. unlimited nationwide long distance, unlimited xMax VoIP-xMax VoIP, unlimited home, office, public hotspot WiFi calling, unlimited wired Ethernet calls, unlimited text messaging, unlimited push-to-talk, all for a flat rate of $40/month. Market Deployments and Business Model xG is currently in active negotiations with potential partners on several international fronts. In March 2007, the company announced an exclusive territory trial agreement with Telefonica Mexico. The company has also signed an agreement with National Grid Wireless, a major UK-based telecommunications infrastructure company. xG is also in talks with operators for substantial technology testing and territory agreements in a number of areas including the Near East, Africa, and Eastern Europe. Additional details on these developments will be released as they become available. In the domestic US market, xG will launch its first vertical market as a national mobile VoIP/broadband service, operating in the unlicensed 902 to 928MHz. xG will build a national brand presence through a select network of local service providers across the US. with initial xMax deployments planned by end of Q2 2007. Companies interested in reserving a market as an xG dealer commit to a territory fee to secure the market(s) they are interested in. xG will derive revenue from the sale of base stations and handsets, as well as an annuity stream paid by dealers operating an xG network, as a proportion of the monthly fee they are paid by their customers (the end user). xG intends to follow a different strategy for international markets, where it will seek joint venture partners having extensive histories in the wireless telephony and data markets. Because xG’s network capabilities allow for multiple carriers to share the same network infrastructure, they would not compete with incumbents but effectively lease what would by then be the world’s first 4G network. This would allow xG to take advantage of the local incumbent’s brand and customer base. It is expected that substantial upfront license fees will be charged on an annual basis over multi-year joint-venture contracts. In return, xG will accept a lower share of recurring revenues. IRG:65 ©2007 Frost & Sullivan Manager: Sharifah Amirah, Analyst: Luke Thomas
  5. 5. Conclusion xG’s short-term business model focuses on introducing their Flash Signaling technology into the high-profile mobile VoIP application. This is only the first vertical market for its technology. Once they have demonstrated the performance gains made possible by its technology, the company’s short-term vertical strategy should be viewed as an interim step toward driving long-term horizontal chip demand. xG’s core technology is PHY (physical level) and adapatable to almost any type of communication, both wired and wireless. Thus it could represent a complementary solution to 3G mobile and /or WiMax technologies. To that extent, there is the possibility of a future alliance with these and similar groups. In Q1 2008 the company will offer broadband data access service, and in Q2 2008 it expects to offer a mobile video (IPTV) application, taking advantage of anticipated higher orders of modulation and data rates. The near future will see continual new market launches in the U.S. under the auspices of the Domestic Dealer Program. This will include rollout of previously contracted markets covering 130 communities across the country (57 million subscribers) as well as an expansion of territories and new independent service provider partners. xG’s long-term business model is to become a fabless semiconductor manufacturer - delivering its core intellectual property in the form of a semiconductor chip. These chips will be sold horizontally across wired and wireline markets. The company estimates that there are nearly 6 billion RF devices produced annually that could benefit from the vast range, battery life, and data rate improvements that its breakthrough technology delivers. Its targeted customers in the future stage of the company’s business model are design houses, original design manufacturers (ODMs) and original equipment manufacturers (OEMs). IRG:65 ©2007 Frost & Sullivan Manager: Sharifah Amirah, Analyst: Luke Thomas
  6. 6. Proposed roadmap for xG’s products and services are as follows: - Q2 2007: Mobile VoIP Handset & base station product launch with mobile VoIP service Q3 2007: New handset designs, and an international calling option added to the xMax Mobile VoIP service. Q4 2007: Wireless desktop modem; software upgrade for 4G mobile broadband internet access (full voice + data package), higher data rates attained. Q1 2008: Generation II Blackberry-type smartphone handset. Q2 2008: Video (IPTV) available – mobile “triple play” bundle. Mobile users will continue to demand data-rich appliactions at affordable prices. However, the existing cost infrastructures of mobile providers are too prohibitive to allow such lower costs to be passed on to their subscribers. The success of smaller companies offering flat-rate, unlimited calling has shown that subscribers want simple, predictable, affordable calling plans. The cost efficiencies inherent in xG’s technology will make flat-rate mobile plans with unlimited calling services (domestic as well as international) and advanced features (broadband data access, IPTV,etc.) the standard offering to mobile subscribers. Frost and Sullivan gives immense credit to xG Technology for accomplishing feats that have left their competitors well behind. What make the firm stand out of from its competitors is their non-complacent attitude and drive to seek improvement and perfection. It is this inimitable characteristic which Frost and Sullivan have identified in xG Technology that truly signifies their ability to offer such an innovative technology to its customers, which is well exemplified with the huge market cap they have attained in such a limited timeframe. Frost & Sullivan firmly believes that xG Technology will revolutionize the way people communicate in the near future by providing them with cost-effective and value-added services, which will benefit the end-user ultimately. Due to these factors, the company is the worthy recipient of the 2007 Frost & Sullivan Award for Technology Innovation in the European market. IRG:65 ©2007 Frost & Sullivan Manager: Sharifah Amirah, Analyst: Luke Thomas
  7. 7. IRG:65 ©2007 Frost & Sullivan Manager: Sharifah Amirah, Analyst: Luke Thomas