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The January 24, 2005 Issue Provided by System Dynamics Inc.
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CES 2005--The Right Time for Standards

Our discussions at CES with participants in powerline networking, UWB and MIMO [see the following article] got us thinking about the right time for standards. In each of these areas, we met people with very different views. Broadly speaking, they fell into two camps:

  • The majority think companies should work together collaboratively to develop standards, fighting out battles over technical issues in an open democratic process. Once the issues have been fully aired and the standards are completed and published, everyone should go off to develop interoperable chips and products, bring them to market, and compete fiercely with each other for market share. Any company that doesn't work this way isn't being a "good citizen".
  • The minority feel that technical ideas need to be tested in the marketplace before they get codified as standards. These companies--typically venture-funded startup semiconductor companies--often don't have the luxury of existing revenue streams and sufficient funding to wait for the standards process to run its course. They fear they'll be crushed by the larger players if they wait to go head-to-head with them. They feel they'll improve their position in the standards game if they can get their chips into products and prove them in the market before standards are locked into place.

There's a lot to be said for both positions. Standards have become the way of life in the IT business; people have forgotten the old days when Ma Bell and IBM ruled the world and set all the standards internally. The huge success of wireless networking is a result of years of collaborative efforts through the IEEE 802.11 Working Group and the Wi-Fi Alliance. The equally huge success of broadband access--both cable modems and DSL--is the result of collaborative efforts between service providers, semiconductor companies and equipment vendors to establish common global standards.

But there are arguments on the other side:

  • Ethernet--the first widely successful networking technology--started as a specification released by Digital Equipment Corporation, Intel and Xerox. This de facto standard became the basis for IEEE 802.3, after Ethernet products had been on the market for years. To this day, people refer to it as "Ethernet" rather than "802.3".
  • Today's DOCSIS cable modems, based on standards established through an initiative at CableLabs, are installed in millions of homes. But the DOCSIS effort was based on several proprietary and mutually-incompatible cable modems that had already been installed in many homes. While the DOCSIS modems are arguably better than any of the proprietary ones (and some would disagree) and undoubtedly an order of magnitude cheaper, they leveraged the field experience and pulled together the "best practices" of existing proprietary products.
  • As the IEEE 802.11g standards process was bubbling along, several semiconductor companies brought out chips based on their view of what the standard would be; these appeared in consumer products as "turbo" versions of 802.11b. Broadcom was first to market with a "54g" chipset based on a draft of 802.11g that became the basis for the final standard. Linksys was enormously successful with its "draft 802.11g" products based on the "54g" chips.

Today we're seeing smaller companies moving ahead of existing standards efforts, trying to get products to market before standards are set in stone and incumbent semiconductor companies can take advantage of their market leverage:

  • DS2 is bringing its 200 Mbps powerline networking chips to market, and getting them integrated into BPL and home networking devices. A Sponsor Member of the HomePlug Alliance, DS2 has decided to go to market with a chip set that is not compatible with the (yet to be released) HomePlug AV standard. [See the article on powerline networking above and Faster Powerline: An Interview with DS2 (BBHR 12/20/2004).]
  • Freescale is bringing its 110 Mbps UWB chips to market, trying to get them integrated into consumer products. A founder of IEEE 802.15.3a and the WiMedia Alliance, Freescale has decided to go to market with a chip set that--while still in the running for 802.15.3a--is not compatible with the majority views on UWB as expressed in the WiMedia and Wireless USB decisions. [See the article on Freescale above.]
  • Airgo has brought its MIMO chips to market and has gotten them into leading-edge wireless networking products. A member of IEEE 802.11n and the Wi-Fi Alliance, Airgo has chosen to get its technology to the market early and get ahead of the standards process. Judging from the tone of press releases from the Wi-Fi Alliance, this has not made its other members happy. [See the article on Airgo above.]

In our discussions at CES, many people complained that DS2, Freescale and Airgo weren't playing the game by the well-known rules. One we respect said that if DS2 were located in Silicon Valley (rather than Valencia, Spain), they'd do things differently. All the MBOA members are upset with Freescale and Motorola for continuing to fight for DS-UWB in 802.15.3a rather than giving in to the majority view with good grace.

We're strong believers in these next-generation networking technologies--we've written about them in this newsletter over the past five years. And we're strong believers in standards. Most successful products reach mass-market volumes only after standards are established and accepted. Consumers are less confused by conflicting technology claims, and individual products work well together. Competition for market share is based on added features, pricing and packaging--not the underlying technology. Many remember how wireless home networking failed to take off while the "Home RF" and "802.11" camps fought for market share: consumers sat on their hands-and products sat on the shelves-until "Wi-Fi" won the battle.

After talking with many players on both sides at CES, we've come to see the current situation a little differently. DS2, Freescale and Airgo have come to market early with products that aren't standards based. It's certainly true that they are trying to gain an edge on their (mostly larger) competitors: they all saw what Broadcom did with "54g" and they're trying to emulate it.

To us, the key question is the proper timing for standards. Working out the specifications for next-generation chips that power consumer products is pretty tricky. Having lots of smart engineers meeting together in committee rooms every few months is not the only way to work out what should be in these specifications--it's far from clear that it's the best way when nobody has had any experience with the advanced applications these chips enable.

We think there's a strong counter-argument for getting a sense first for what consumer markets really want and need. The best way to learn about new applications is to get chips into real products and get the products into real user's hands. Then--and only then--will the chip and product companies really know what should be in the chips--and can establish standards based on that understanding.

Chip companies can't bring products to market directly. They depend on other companies to create products to sell to end users: consumers and (in the case of DS2) power companies. These products--like many of those we saw at CES--represent innovative applications, many never before been used in consumer homes. Some may succeed; some may fail.

Interoperability is important. Networking products especially need to interoperate with each other.

But there's a right time for standards, and now may be too early for some of these.

We're cheering for the companies that dare to come to market early and take the risk of subjecting their chips to the acid test in consumer homes. We hope everybody will have the opportunity to learn from their experience.

( www.cablelabs.com ) ( www.broadcom.com ) ( www.ds2.es ) ( www.homeplug.org ) ( www.freescale.com ) ( www.airgowireless.com )