Companies Pay the Price
Companies Pay the Price While that lack of support has cost the agency and its labs funding, technology companies--and their customers--are the ones that ultimately pay.Fantasmas case is unusual. It faced not only a bear market, but also claims by other powerful interests--among them the Federal Aviation Administration, the Department of Defense and the global positioning system industry--that ultrawideband would interfere with air traffic radar or GPS receivers. It has been more than two years since the FCC began to look at those claims. But, in part because of the lack of equipment and expertise at the labs, the FCC is in no position to resolve the interference arguments before the end of the year. In comparison, "regulatory approval in Europe may be done by the second quarter next year, and they just started on the process three months ago," said Jeff Ross, director of corporate development at Time Domain, the company that holds many of the key patents for ultrawideband. "When a new technology comes out, companies dont know how to make it well and the labs dont know how to test," said Kenneth Nichols, chief of the FCCs laboratory division. "Those devices are most likely to have problems." Yet it is not just new technologies that suffer. Even routine applications for approval of mobile telephones can take weeks, as the harried engineering staff plows through backlogs of paperwork. It can take six to eight weeks for a new model to be approved--in a market where the average product life is 12 to 18 months and most of the profit is made in the first months of sales. By contrast, the Europeans last year adopted the Radio and Telecommunications Terminal Equipment Directive, which allows for an industry self-certification plan for most telecommunications and mobile devices. Manufacturers can issue a Suppliers Declaration of Conformity (SDOC) attesting that the new product meets uniform European standards, and then bring the product to market in all 15 member countries of the European Union without government approval. Instead of premarket testing, the European Commission relies on market surveillance to catch companies whose products dont meet the specs. A form of the SDOC process is allowed in the U.S. for some products where the technology is mature, such as PCs and digital devices that dont include transmitters. All a company needs to do is bring the device to an FCC-approved private testing lab, which can certify compliance with the rules. The SDOC process also applies to devices that are directly plugged into the public switched phone network. But few mobile devices destined for the U.S. market can be sold using self-certification. Some may be certified by one of the 15 or so private Telecommunication Certification Bodies (TCBs) approved by the FCC, but many must be directly approved by the FCC--either by engineers examining and accepting test data provided by the manufacturer or, in a handful of cases, by FCC engineers conducting the tests. That, coupled with a shortage of engineers, has led to a big backlog of applications. Industry executives such as the TIAs Seiffert claim there are some 650 products waiting for approval. That figure is disputed by the FCCs Nichols. Last June, Nichols said, the labs had about 700 applications pending, "which the industry felt was unacceptable." But a deliberate program to clear the backlog has slashed that number by more than half, he said. Still, at the end of April, the FCC said there were 271 products waiting for approval, including 126 applications filed during the month. On average, it takes 42 days to approve the wireless and cell phone products. Thats 12 days longer than the 30-day goal, and just a few days shy of when "we start getting lots of complaints from companies," said Bruce A. Franca, acting chief of the FCCs Office of Engineering and Technology. And those figures are good only when the engineers dont have questions about the test results the companies have filed for review. A single question--often asked because a company has failed to provide all the needed information in the correct way--might add a week or two to the process; several questions could add months. "We have tracked the process, and the actual time for certification is directly proportional to the number of questions that are asked," Ericcsons Groh said. "We try to produce perfect applications, to minimize the number of questions." "Theres a tension here," Franca said. "We have to do our job, but the applications have to come in and the checks have to clear, so [the engineer] doesnt see the application for a week or so. Our goal is to meet that 30-day timeframe."
"The combined risks were too high to raise money in this capital market," said Roberto Aiello, Fantasmas founder and chief technology officer. "And the regulatory uncertainty was the highest perceived risk by the potential investors."