making waves in washington - tam harbert

42 November 2003 • Electronic Business http://www.eb-mag.com

HEN RALPH PETROFF SAWwhat ultra-wideband (UWB)

technology could do for wirelesscommunications, his life took an

unexpected turn. Petroff and histwo brothers had just sold their suc-

cessful pollution-control business inHuntsville, Ala. He was going to relax, perhapsdo some angel investing. But once he saw thetechnology UWB pioneer Larry Fullerton wasdeveloping, Petroff caught the entrepreneurialbug all over again.

UWB is nothing short of the reinvention ofradio, says Petroff. Whereas traditional radio usesa carrier signal tuned to a specific frequency, UWBuses short digital pulses spread across a frequencyspectrum. Originally designed for the military, thetechnology can be used as radar to detect peoplethrough walls or rubble, as a position locationdevice to pinpoint items with more accuracy thanglobal positioning satellite (GPS) technology or asa highly secure communications method capableof carrying more data at lower power levels thanexisting wireless technologies. (For more on thetechnology, see “Unleashing UWB,” September2003, page 62.)

Fullerton was an independent inventor whohad been tinkering with UWB since the early1970s. By 1996 he had built prototypes thatdemonstrated many of the technology’s capabili-ties. “The toys he had built in his garage just blew

our minds,” says Petroff. But then Fullertonstarted ticking off the risks he faced in commer-cializing the technology. At the top of the list: con-vincing the U.S. Federal Communications Com-mission to change its regulations to allowultra-wideband to operate in the unlicensed spec-trum. Petroff’s face fell with a sad realization:This is going to take someone five years and $100million to pull off.

Petroff was not far off in his estimation, andTime Domain, the Huntsville-based company hisfamily formed with Fullerton, became a chiefforce in lobbying the FCC to approve UWB. ButTime Domain was not alone. Several other UWBstartups worked for more than five years againstformidable obstacles to gain FCC approval forthis obscure technology that some observers saymay revolutionize the wireless industry. “Long-term, this technology will compete with Wi-Fi andperhaps ultimately with cellular,” says DavidHoover, an analyst with Precursor, an indepen-dent investment firm.

The story of ultra-wideband shows how diffi-cult it can be to get a new technology through theregulatory hoops, especially if its only backersare small startups, and how much the technologyand business strategies can change in the process.It provides a useful case study of the costs, thebenefits and the dangers of lobbying for approvalof a new technology. In an age of exploding wire-less technology innovations, more and more

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By Tam Harbert

R E G U L A T I O N

MAKING WAVES IN

WASHINGTONHow some scrappy little ultra-wideband

companies fought to gain FCC approval andlearned some hard lessons along the way

W

Regulatory issuessurrounding ultra-widebandwere among the toughestencountered by 29-year-veteran of the FCC JuliusKnapp because its footprintspread across every radioservice in the spectrum


companies are spending more and moretime convincing not only the FCC butalso Congress and other parts of thefederal government of the potential oftheir technology.

The UWB companies started outthinking their biggest job was convinc-ing the FCC, but they quickly foundthemselves waging war with the Depart-ment of Defense as well as large, estab-lished companies, such as Sprint andCingular, that feared potential competi-tion from the technology. The start-upswere united in their desire to get UWBapproved, but ultimately each companypursued a slightly different strategy, onethat often promoted its own competitiveedge. Against formidable odds, they suc-ceeded in getting UWB approved forcommercial use, but in the wake of thebattle, some compa-nies were left deadon the battlefield andothers had to dra-matically alter theirbusiness strategies.

The survivingcompanies learnedsome hard lessons.Not surprisingly,spending lots ofmoney and hiringpower brokershelps. Disappoint-ingly, superior tech-

nical arguments don’t necessarily win,even at a presumably technicallysavvy agency such as the FCC. Andperhaps most important, federal agen-cies move much more slowly than thefast-paced technology industry. Com-panies and their innovations can liter-ally die waiting for the government tomake up its mind. It helps to havepatient investors. It also helps to havea Plan B, because a slight nuance ofthe final regulations can derail yourbusiness strategy.

Good technology, good timingThe UWB companies get credit for pre-senting a good case to the government.“This is a case where that industryreally took the time to develop the storyin technical terms, in business terms andin policy terms,” says Kevin Werbach,who was the FCC’s counsel for newtechnology policy in the mid-1990s. Henow runs his own consulting firm, TheSupernova Group. But the startups alsohad a very good story to tell, at a timewhen the FCC was all ears to hear it.The commission was already lookingfor better ways to use the existing spec-trum, and ultra-wideband offered manyadvantages. “It was the advantages ofthe technology that got the attention ofthe FCC,” says analyst Hoover. “It wasan easy sell.”

Up until the mili-tary, aviation, GPSand cellular industriesgot wind of it, that is.The military, whichhad used UWB foryears in top-secret spygadgets, had no desireto see it commercial-ized. The Departmentof Transportationand the Federal Avia-tion Administrationwere afraid it wouldinterfere with aircraft

radar. And the major commercial enti-ties—global positioning satellite (GPS),cellular and personal communicationsservice (PCS) companies—already usingthe spectrum feared not only possiblesignal interference but also the competi-tive threat of UWB.

Specifically, the UWB companieswanted the FCC to change its Part 15regulations to allow UWB to operate inthe unlicensed spectrum. Part 15already allowed many devices, such aslaptops and microwaves, that emit low

levels of electromagnetic energy to oper-ate in the unlicensed spectrum. UWBemitted the same low levels, except thatthe emissions were intentional. On thesurface, it seemed to be a fairly simpleregulatory change, says Petroff.

Since about 1996, the UWB star-tups had been quietly showing thetechnology to the FCC, which immedi-ately saw its potential. But it wasn’tuntil the FCC issued a notice of inquiryin 1998, asking for public comment onallowing UWB in the unlicensed spec-trum, that the startups realized howpowerful the opposition was going tobe. The commission was deluged withclose to 1,000 filings, many from com-panies that were already entrenched inthat part of the spectrum.

“This one was particularly tough,”says Julius Knapp, deputy chief at theFCC’s Office of Engineering and Tech-nology. The 29-year FCC veteran wasintimately involved in the UWB case.Whereas most regulatory changes per-tain to only a portion of the spectrumand thus affect only a handful of inter-ested parties, he says, “UWB’s foot-print spread across every radio servicein the spectrum.”

So UWB startups learned their firstlesson: how their opponents could usetactics to slow down an already slowregulatory process.

The FCC was set up in 1934, whenmost technical innovation came fromthe labs of government or large corpo-rations, notes Martin Rofheart, CEOof XtremeSpectrum, one of the UWBstartups. But today’s innovations oftencome from startups that depend ongetting their technology to marketquickly to survive. The slow regulatoryapproval process, which in the case ofUWB took years, introduces uncer-tainty into the market. There’s also aproblem with the complexity of newtechnologies such as UWB. Althoughthe FCC has technical expertise, it is“deep but not broad,” says Rofheart.Others put it more bluntly: The FCCdoesn’t pay well enough to attract top-notch technical talent, says BobFontana, CEO of UWB company Mul-tispectral Solutions Inc. (MSSI).

That puts small companies at a dis-advantage. Large companies have lob-

“When a big company wants to slow you down, it simply floods the

docket.”—Martin Rofheart, CEO, XtremeSpectrum

http://www.eb-mag.com Electronic Business • November 2003 45

bying staffs that understand the needsof the FCC and can spend a lot of timepreparing background papers to helpeducate its staff. “The single biggestmistake companies make is that theydon’t appreciate how little informationactually gets into the building at theFCC,” says Werbach. The agency can’teven afford to subscribe to technicalnewspapers or send staff to tradeshows, he says.

Knapp doesn’t dispute this.Although the FCC staff does travel tosome events and subscribe to some pub-lications, “the criticism is that there hasnot been enough of that, and we aretaking steps to remedy it.” Specifically,FCC Chairman Michael Powell hasasked Congress for more funding. Pow-ell also is working to upgrade the tech-nical skills of FCC engineers by estab-lishing an “FCC University.”

Big corporate lobbying staffs alsohave what Rofheart calls “institutionalknowledge.” They’ve worked with theFCC for years. They know how theprocess works and how to get to theright people. They also know how tojam up the system.

“When a big company wants to slowyou down, it simply floods the docket,”says Rofheart. “The FCC process is soopen to the public that the ability of peo-ple to throw sand into the process isalmost inexhaustible,” Petroff agrees. Bylaw, the FCC must review every filing,and the UWB filings were filled withreams of highly complex equations. “Forsomeone who doesn’t have a real work-

ing knowledge of this stuff, it’s very diffi-cult to judge who is right,” says Fontana.

Hired gunsHow do new companies get access to“institutional knowledge”? They hire it,

of course. Time Domain spent lavishlyon lobbying, perhaps because thePetroffs had been so successful withtheir former company, ADS Environ-mental Services, and already wieldedsome political influence. (On the day ofhis EB interview,Ralph Petroff hadjust attended a $500-a-plate Republicanfund-raising event foran Alabama fresh-man Republican con-gressman hosted byVice President DickCheney.) Competi-tors say TimeDomain spent asmuch as $50 million,but Petroff says thatit was closer to $20

million. Public records show that from1998 to 2002, Time Domain spentabout $3 million directly on lobbying.(See table, “Time Domain LobbyingCosts,” this page.) That’s small changecompared to what UWB’s opponentsspent but significant for a small com-pany with a new technology. In additionto direct lobbying fees, the companyspent about $15 million to conductinternal technical tests and send staff totechnical conferences and to Washing-ton, Petroff estimates. Third-party testsand FCC filings cost another $4 millionto $5 million, he adds.

“Time Domain deserves 99 percentof the credit for the FCC approval,” saysBruce Watkins, CEO of Pulse-Link, aUWB company that is targeting thewireless LAN market. “Of all the moneyspent on lobbying, 90 percent or morewas from Time Domain.” Not only didTime Domain hire high-powered lobby-ists but Petroff also used his leveragewith Alabama’s congressional represen-tatives, says Watkins. What’s more, thecompany helped conduct a grassroots

campaign to publicize the benefits andpotential of UWB to certain groups thatcould benefit from it. This prompted awave of filings from groups such aspolice and firefighters, says Watkins,which bolstered UWB’s case.

Probably the mostpowerful lobbyisthired by Time Domainwas Dick Wiley, a for-mer FCC chairmanwho now runs one ofthe top communica-tions law firms in thenation, Wiley Rein &Fielding. But TimeDomain also followeda common practice ofspreading its businessamong several lobby-ing firms, to ensure

getting access to Democrats as well asRepublicans. It retained Thomas HaleBoggs Jr., chairman of the law firm ofPatton Boggs and the son of HaleBoggs, onetime Democratic majorityleader of the House of Representatives.It also hired Gregory Simon, who hadbeen Vice President Al Gore’s chiefdomestic policy adviser.

“The real strategic value of the lob-byists is in opening doors to policymakers,” says Petroff. “Former FCCchairmen and people like that are veryhelpful in arranging access to the pol-icy makers.” Indeed, between 1996and 2002, Petroff says, he made 153trips to Washington, D.C. “I made somany trips to Capitol Hill that I actu-ally had to register as a lobbyistmyself,” he says.

This access frustrated MSSI’sFontana. His company had been doingUWB work for the military since themid-1980s, most of it classified.Fontana questioned the validity of someof the technical claims Time Domainmade but had a hard time getting a

“Former FCC chairmen and peoplelike that are very helpful in arranging

access to the policy makers.”—Ralph Petroff, CEO, Time Domain

0

200

400

600

800

1,000

1,200

TIME DOMAIN LOBBYING COSTSin thousands of $

1998 1999 2000 2001 2002SOURCE: CENTER FOR RESPONSIVE POLITICS


meeting with the chairman of the FCC.He finally went through his representa-tives in Congress to request a meeting.“At one point, I asked an FCC staffer,‘How much money do I really need toget into the FCC?’” he says. “If you canget the right lobbyist to get you into thehigh levels of the FCC, it’s amazingwhat a few million bucks can get you.”

Knapp counters that the FCC isaccessible to everyone. “We look at thearguments solely on their merits,” hesays. “It doesn’t matter to us whether acompany makes the argument on itsown or hires someone to do it.”

XtremeSpectrum also lobbied, butnot on as grand a scale. Records showthat it paid a few thousand dollars toThe Cohen Group, the lobbying firmof former Secretary of DefenseWilliam Cohen. It also hired a coupleof attorneys, including Michelle Far-quar, a former FCC staffer. And itbrought on board a full-time govern-ment-relations person, Veronica Hag-gart, who had worked on the govern-ment-relations staff of Motorola, aninvestor in Xtreme.

Xtreme spent a lot of time andenergy looking for the right people to

represent the company, says Rofheart.“If you get that right, you can assemblea proxy for the institutional knowledgestartups lack,” he says. But Xtremetried to make its case primarily withtechnology, not politics, he stresses.

Peace talksWhere Time Domain tended to blusterat its opponents—Petroff accuses theFAA and the military of “chicken-little-ism,” because they warned that UWBmight interfere with aircraft radar—Xtreme played the diplomat. It did not

dismiss the objections against UWB butlistened to them.

“We saw the handwriting on thewall that, absent some compromise, wewould never get the rules out,” saysRofheart. The fact is that one of theFCC’s prime mandates is to protect thespectrum. Powerful parts of the govern-ment and industry were claiming thatUWB was going to cause interference.“We were asking for permission tooperate in the unlicensed spectrum,”says Rofheart. “It was incumbent uponus to ensure that we would not interferewith anybody.”

So Xtreme talked with the UWBopponents about their concerns, tryingto understand as much about them aspossible. Through those discussions,Xtreme realized that a prime concernwas that UWB’s power level wouldcause interference. Xtreme then wentback to the drawing board and investi-gated whether it could tweak its chip sothat it still performed with lower powerlevels. It could. “We were willing to gothe extra mile to assure the incumbentspectrum holders,” says Haggart,Xtreme’s vice president of strategic rela-tions. Indeed, one of the most effectivetactics of UWB proponents was to rec-ognize and respond to their opponents’objections with good, scientific analy-ses, says Knapp.

Other UWB companies disagreedwith Xtreme’s approach. “When itreally got down to the wire, we had dif-fering views on what the power levelsshould be,” says Haggart. This wasbecause some UWB companies wereaiming at markets that would requirehigher power levels than Xtreme’s.

One UWB company was so conserv-ative in its recommendations that italienated the other UWB companies.MSSI’s Fontana, who had worked onmilitary projects for almost 20 yearsand most of whose business was still inthe military, concurred that UWB

“We looked at how the rules were done, and then wedecided on multiband. I would never have thought about it

if the FCC hadn’t ruled that way.”—Roberto Aiello, CEO, Staccato Communications

Lessons in lobbying

• Be prepared for the process to take much longer than you expect. There is nosuch thing as a 12-month product life cycle in the government.

• Hire someone—an attorney, lobbyist, former FCC staffer—who knows howthe FCC works and can get you access.

• Prepare a solid argument that explains how your technology works, how itwill benefit society and why it will not interfere with existing services in thespectrum.

• Identify the incumbent spectrum users, and be ready with good technicalanalyses to counter their objections.

• Garner political influence, and be prepared to use it. Hire high-powered lob-byists. Talk with members of Congress and government officials to win theirsupport.

• Keep your business strategy flexible enough to accommodate final regula-tions that aren’t perfect.—T.H.


would cause interference under certainconditions. Although he wanted to seethe technology commercialized, he says,he wanted to keep UWB completely outof the lower frequency ranges, for fearof possible interference problems.

“I felt that the statements beingmade by the UWB proponents werefalse,” he says, and he sided with someof the technical data presented byUWB’s opponents, particularly the

National Telecom-munications andInformation Admin-istration (NTIA)—agovernment bodycharged with safe-guarding the spec-trum used by the U.S.government—andthe GPS IndustryCouncil. His viewsprompted one UWBproponent to dubhim “the ultra-wide-band anti-Christ,”says Fontana.

Indeed, some of MSSI’s competitorssay that Fontana’s position was promptedby competitive concerns. “I don’t thinkMSSI wanted other VC-funded compa-nies in this space,” harps one.

Competitive lobbyingBut Fontana says that UWB’s oppo-nents had some valid points. GPS oper-ates in the 1.5-GHz range, and GPSvendors rightfully feared interferencefrom UWB. There was a simple solu-tion, he believes. “Back then, had theUWB industry as a whole said, ‘We willstay out of the GPS band,’ then we’dhave had it done in two years and we’dall be making products today,” saysFontana. But some UWB companies,particularly Time Domain, were lobby-ing for rules that allowed operation atlower frequencies. Fontana believes that

that is because Time Domain’s particu-lar type of UWB technology is geared tooperate in those frequencies.

Meanwhile, at least one companycould not hold out any longer. In 2001Fantasma Networks failed to raise asecond round of funding. “With FCCapproval, there is a decent chance thatFantasma would have been funded,”says Petroff.

By the time the FCC finally issued

regulatory approvalfor UWB, in Febru-ary 2002, “we weregasping for life, aswere some otherUWB companies,”says Pulse-Link’sWatkins. Althoughthe regulations wereless than perfect forevery UWB vendor,they all claimed to behappy with the rul-ing. “Some of us justwanted to get some-

thing approved, so we could get moreventure capital,” he adds.

Ironically, the existence and wordingof the regulations may be causing someof the biggest UWB promoters to adjusttheir business strategies. Time Domainhas split into two companies: a spin-offcalled Alereon will develop and marketchips for the personal-area networking(PAN) market while the rest of TimeDomain concentrates on the militarymarket. Competitors say that that splitwas the result of the final FCC regula-tions. Petroff denies this. Now that theFCC regulations are in place, the realcompetition is beginning, he notes, and“everyone likes to take potshots at themarket leader.”

Some UWB companies also havesuggested that the substance of the FCCregulations seems to support one partic-ular modulation standard, called multi-

band OFDM, which is gaining supportas an IEEE standard for the UWB PANmarket. But XtremeSpectrum’s chip,which is already on the market, usesdual-band modulation. If multibandOFDM becomes the standard, “my feel-ing is that Xtreme will go out of busi-ness,” says Fontana.

Such are the arrows that stick in thepioneers’ backs. In fact, Roberto Aiello,former CEO of the now defunct Fan-tasma, launched a new UWB companyright after the FCC regulations wereapproved. Although his first companydied as a result of regulatory uncer-tainty, his new company—StaccatoCommunications—has had the advan-tage of knowing the regulations from itsinception. In fact, he says, his companydecided to support the multiband mod-ulation technique after reading the FCCregulations carefully. “We looked athow the rules were done, and then wedecided on multiband,” he says. “Iwould never have thought about it if theFCC hadn’t ruled that way.”

In fact, the very definition of UWBchanged dramatically between theFCC’s initial notice of inquiry, whichreferred to UWB as “pulse-width sys-tems,” and its final report and order, inwhich “there were no constraints onwhat modulation was to be used,”notes Fontana.

“When we write the rules, we tryto make them flexible,” says Knapp.“The UWB rules we adopted did notsatisfy everybody, but they will allowthis industry to grow and to providenew products and services.” Maybejust not exactly the products and ser-vices the UWB companies originallyenvisioned.

Xtreme’s Rofheart doesn’t agree withAiello’s assessment of the FCC regula-tions. And the company maintains thatit has a Plan B if the standard goesagainst dual-band modulation butwon’t say what it is. What companyofficials do say is that they plan tomaintain the same flexible stance theybelieve helped them make the FCC reg-ulations a reality.

“The market is huge. There is plentyof room for competition,” saysXtreme’s Haggart. “We never thoughtwe’d have the market to ourselves.”

“Some of us just wanted to getsomething approved, so we could get

more venture capital.”—Bruce Watkins, CEO, Pulse-Link


Now you tell meSo what lessons have these companieslearned from their adventures in lobby-ing? First, be prepared for a long siege.“It’s extraordinarily difficult to effectchange,” says Petroff. “I learned thehard way that it is much easier to stopsomething in D.C. than it is to startsomething.”

Second, “institutional knowledge” iscritical. Xtreme’s Rofheart credits hisFCC-savvy attorneys with providinghim with that knowledge and alsopreparing him for how long the regula-tory process was likely to take. “We gotthe timing right,” he says. Others thatdid not get the timing right, such asFantasma, fell by the wayside.

Third, innovative technology and asolid explanation of why it will notinterfere with other signals are essential.However, good science gets you only sofar. Any clever company can bend tech-nical data to suit its needs. “Every oneof these technical analyses rests on theassumptions that the individual com-pany wants to make,” notes the FCC’s

Knapp. You’ve got to play politics, aswell. “In the end, technical argumentsaren’t useful, because it’s all about pro-tecting your own backyard,” notesAiello. In fact, the FCC rules ended upkeeping UWB out of the GPS spectrum,but it wasn’t because technical argu-ments won the day. Rather, it wasbecause of political pressure from theNTIA and the GPS industry, saysFontana.

Finally, be flexible enough to adjustyour business strategy to suit the reali-ties of the final regulations. If a goodcompromise is when no party getseverything it wanted, then the UWBregulations are an excellent compro-

mise. Companies are now rejiggering tobring products to market that meetboth the FCC regulations and their ownneed for revenues.

Despite all the money, time, effortand frustration, most of the UWB com-panies say they would do it all again.“This is a technology that really did jus-tify all the efforts to make it happen,”says Petroff. “It’s going to pay off in somany fields.”

What’s your favorite method of dealingwith regulatory agencies? Send yourthoughts to [email protected].

Tam Harbert ([email protected]) isnational editor at ELECTRONIC BUSINESS.

“If you can get the right lobbyist to get you into the high levels of the

FCC, it’s amazing what a few millionbucks can get you.”

—Bob Fontana, CEO, Multispectral Solutions

making waves in washington - tam harbert

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