Steve Perlman: pCell’s wireless tech is real, and it will change the world (interview)

Above: The 12-person Artemis Networks team.

Image Credit: Artemis Networks

VentureBeat: Looking past the initial rollout — I know you were targeting San Francisco, though now it seems like it might come to New York first — it sounds like pCell could have some profound applications for the developing world.

Perlman: It’s going to be transformative for the developing world. Let’s say in the 1990s, if you wanted to get a landline installed in some countries that don’t have a lot of infrastructure, it’d be very difficult. But, when cellular came to those areas, you could get a cellular phone that same day and it’d work. So in a lot of those countries, they have no real wireline infrastructure, they immediately made the leap to cellular. But moving data over cellular is another story, because now you’re talking about significant backhaul infrastructure. It ain’t cheap. Even Europe is still taking it’s time investing in LTE. The only place where there is significant LTE deployment right now is in the U.S., Japan, and [South] Korea. The rest of the world is largely 3G, if that.

Just as analog cellular brought telephony to the developing world, perhaps [pCell] can bring broadband data to the developing world. Wouldn’t that be wonderful? We, for example, can set up antennae in Sydney, and deliver service to the middle of the outback. Or we can set them up in Nairobi, and deliver service to the middle of Africa somewhere. Now you can have a farmer in Africa, who, say, needs to build a bridge for some reason. They can go and communicate with an expert in the developed world through Skype or something. It opens up knowledge, trade, medical assistance and so forth. The power of providing long distance connectivity on this scale has just never existed. Google’s Loon project is a wonderful idea for the same reason, but you need Google’s wealth and size to have that many stratospheric balloons. And I’m not sure what the capacity is; they sort of characterized it as 3G-like service. But how about delivering broadband service to areas that have no infrastructure, no balloons flying around, wherever you are?

VentureBeat: I’m curious what the reception has been like from the venture capital community and also from the established carrier community — the folks you could potentially challenge or partner with.

Perlman: When we showed it working on systems that were more efficient than LTE systems, but were still lab equipment — a tablet with a proprietary radio — people didn’t quite understand it. I think it’s fair; it was difficult to believe we could rapidly get acceptance of this, because you need the devices out there.

I don’t know what it is about the iPhone — we show demos on Android phones too, and people like them — but when we show a bunch of iPhones working together, simultaneously streaming HD video, there has not been a single meeting we’ve ever had that has not resulted into an intense and rapid follow-up. As in, we meet with someone, and within a week or two, the CEO flies a long distance to meet a 12-person company in San Francisco.

VentureBeat: CEOs of which companies?

Perlman: Of major carriers that I have [non-disclosure agreements] with. So it’s just been insane. Kudos to Apple for the cachet associated with that little beast. Now everyone gets it: My iPhone works everywhere and always has broadband. When you show them YouTube and Vimeo, that’s what gets them interested. People want to see it for real.

But the funny thing about that iPhone is it has a lot of stuff it doesn’t really need for the pCell system. If pCell had existed 10 years ago, I don’t think there would have been LTE, I think we would have entirely jumped ship from cellular. I tried to show simulations from Matlab about why we would be running into the spectrum wall, and nobody believed it until the end of 2012.

Then they come and see our stuff, and it works with the stuff they’re already selling — sure, there are carriers who have infrastructure, and there are carriers who don’t. Even the carriers who have infrastructure still see this as way less expensive, and the ones who don’t have infrastructure as a godsend, because every dollar they make they have to pay whoever the fiber carrier is in that area. So, these guys are paying a tax to the biggest guys they’re competing against. Now we say you don’t have to pay a tax to the guys that are bigger than you — it really doesn’t take too much for them to understand the value of that.

VentureBeat: So you’re interested in licensing this technology, not an acquisition? What if AT&T came to you tomorrow and offered $200 million for everything?

Perlman: Maybe you just pulled $200 million off the top of your head. I think this would probably be worth $10 billion to an AT&T-sized company. If it were for sale and we hired investment bankers, I suspect they’d go a little higher. But be that as it may, the main thing is we spent 10 years of our lives getting this thing to work. What I’ve learned the hard way is incumbents, just because of the priorities they have and the triages they have to make, they sometimes would rather sit on a technology that disrupts the established structure, rather than have something deployed. Very often I’ve found that companies know they can’t move quickly to go and take advantage of some new technology because of their internal inertia. They’re like, ‘So if we go and let this new technology into the ecosystem, the smaller guys have an advantage over us, because they’re more fleet-footed.’ We’re very conscious of that, so whatever we do with anybody, whatever the business terms may be, we will always make sure there is some sort of performance requirement that they have to deploy the thing. It can’t be something that they just sit on.

Microsoft is most famous as a fast follower. I was a president of Microsoft; I reported to [Bill] Gates and then [Steve] Ballmer. I saw the machine in action. They are the market leader — well, back then they were — and when there was disruptive change, it created risk. At that time, trying to mitigate that risk was in the best interest of the shareholders. So we would develop new things and they would go, ‘Oh, well, we don’t really want to fund those.’ And I’m like, ‘[venture capitalists] would fund this, why won’t you?’ They didn’t answer this way, but they ended up demonstrating this over several years of watching this in action: They just didn’t want to go and do something that was not following quickly. It was way less expensive and way less risky to let someone else innovate, than to rapidly come into the same space and do the same thing with Windows or Office connected to it.

You have these situations that exist in business: where a large company is highly incentivized to not allow innovation, and will pay to go and purchase innovation if that’s the best way to stop it. I’ve seen that happen with the work that I’ve done, and I’m just not interested in that. I work way too hard.

VentureBeat: What’s the biggest challenge going forward? Proving that pCell works?

Perlman: First of all, we’re hoping that there is close scrutiny. When people have sincere and informed questions about the technology, we want to hear them! We didn’t go through all this trouble just to create some hoopla. I don’t need any of that. We’ve been very happily working on this thing for many, many years, and we don’t need to go and invest that time unless it’s real. Of course it’ll have refinements as we learn new things and do deployments and discover things — we’ve been doing that for 10 years, I don’t see why we wouldn’t keep doing that.

One big challenge that we have is cultural. You can’t just think, let’s just deploy this thing in Russia. No, you’ve got to think about the way people conduct business in Russia. You’ve got to be respectful of how things are allowed to put into place, but not so respectful of it that if it violates your own values — you know, we’re not going to go bribe people in order to go deploy in Russia. We’ll have to find a way to find some middle ground with them if that is the way things get done there.

But there’s a bigger challenge: We are in an era of incrementalism. We may not notice it, but if you’re in the business of inventing disruptive things, it’s readily apparent. If you look at the consumer electronics show, every booth was talking about innovation, innovation, innovation. Well, you’ve got a higher resolution screen. You’ve got slightly faster processor. You’ve got a little better battery life. To me, the definition of invention is if you do something entirely new — you know, it’s orthogonal to the way things are done. Or, if you’re looking at something in an established field — say, communications — it’s got to be about a tenfold improvement, then I would view that to be an invention.

So the tough thing about living in this era of incrementalism, it’s like Detroit in the 1950s. The people that pioneered the information age — and the parts that power it like the microprocessor, Apple computer, and so on — they’ve either retired or, in the case of Steve [Jobs], passed on. There’s only really Larry Ellison still running the show; the other guys have passed the baton to other people. And almost by definition, the people that take over these large organizations are not as pioneering in the things they do. They tend to be more incremental. We saw it with the automobile industry: there were people who tried in the 1950s to do disruptive things, and were really just shut out or squashed.

Now it’s very difficult to fund disruptive things. It’s very difficult to get large companies to do disruptive things. That said, when disruptive things happen — when an iPhone happens — then you take a ‘too big to fail,’ like BlackBerry, and it collapses. So there’s plenty of evidence about the value of disruption, and also the risk if you don’t respond to a disruptive opportunity. Even so, the DNA in command of most of the large organizations and most of the dollars in the world right now is very incremental.

So pCell is crazy disruptive. It is disruptive in the sense that it’s really advanced science and mathematics. It’s disruptive because of super awesome hacker coding — I haven’t seen code written this efficiently since Bill Atkinson’s QuickDraw for the Macintosh. Think of the value of QuickDraw: it launched desktop publishing. Ok, this just launched a whole new type of communications for wireless — plus some secret stuff that’s even bigger. I wonder if anyone is going to figure it out…