Clint McClellan, senior director of strategic marketing at Qualcomm, says mobile devices have become so sophisticated that video is going to be the next big development. Users will be able to watch TV programs on their phones. (photo/lambertphoto.com)

From a nationwide small-screen video network to ever-smarter cell phones and anywhere, anytime satellite Internet connections, San Diego is solidifying and expanding its place as a leader in worldwide wireless telecom innovation. The 37,000-employee industry added 2,800 local jobs in 2004 and is headed for more growth this year.

Qualcomm’s $800 million MediaFlo project is the most visible example of how San Diego’s 200 telecoms and investors are influencing the wireless world’s direction. In testing this year with commercial service expected in 2006, MediaFlo will support 50-100 channels for viewing on cell phones in the United States.

But in an industry where most local firms have 50 or fewer employees, Qualcomm is not alone. And it is not the only large player. From its Scripps Ranch castle-on-the-hill campus, Nokia this year will turn out a dozen or so new CDMA phones, many with as much computing power as a desktop computer of 1998.

As the larger telecoms spin off entrepreneurs, investors smell opportunity. At Mission Ventures, Ted Alexander is backing one company working to put a television tuner into handsets. Another local firm has devised the equivalent of a poor man’s GPS mapping system, one that for a few extra bucks each month will guide a cell phone user to a designated address.

At a practical business level, local technology is turning cell phones into functional substitutes for laptop computers during short trips of one to four days from the office.

“It used to be you had your home phone, office phone and pay phones. In between you were in no man’s land,” says Clint McClellan, senior director of strategic marketing at Qualcomm. “Now we are at the point with mobile devices you can do e-mail wherever you are and be more productive.”

The handhelds — some can support Word, Excel and other common business software — can keep the information lines open and reduce the catch-up time when the businessperson returns to the office.

As Qualcomm’s chip designs become more powerful — the company expects to sell 218 million to 228 million phones containing its chips in 2005 — wireless operators like Sprint and Verizon will have more features to sell.

“What is really exciting are all the consumer devices,” says McClellan. “Video is going to be the next big push. We are making it feasible to watch TV programs on your phone.”

Certainly it is unlikely someone will watch “Gone With The Wind” on a cell phone. Rather, Qualcomm is more enthusiastic about offerings such as specially produced sports highlights shows and repackaged programming from the television networks. “The key is (the phones) are always on and always with you,” McClellan says.

As consumers stare longer at their phones’ screens, the picture needs to get better and conversely use less power. Qualcomm last year invested $170 million to buy the remaining portion of Iridigm Display Corp., a San Francisco company with technology that accomplishes both goals. “With an LCD display (common today) when you are in bright sunlight, you can’t see it,” says McClellan. “With Iridigm, you can.”

Another feature coming to a phone near you is a phone with TV-out cables. “We have had some guys out here playing video games on TV” using their phones, McClellan says.

The Less The Merrier

Consolidation of the wireless industry will drive innovation by freeing up bandwidth, says Larry Paulson, vice president of business strategy for Nokia in San Diego. (photo/lambertphoto.com)

The consolidation of the wireless industry — AT&T Wireless is merging into Cingular, Sprint is buying Nextel and Verizon has a deal to acquire MCI — will drive innovation by freeing up bandwidth, says Larry Paulson, vice president of business strategy for Nokia in San Diego.

That additional bandwidth will allow telecoms to take more advantage of the growing computing power of phones and offer more services. Paulson also expects handsets to become more versatile in how they communicate.

Another factor benefiting San Diego’s telecom market is the room for growth worldwide. One example in the United States is family plans offered by companies such as Verizon and Cingular where it can cost as little as $9.95 a month to add a spouse or child to an existing contract.

Paulson says a “lifestyle of separation” where people are working more and their children are more active, makes it attractive for each family member to have a phone. “The whole thing adds up that you can be in touch, and should be in touch for practical purposes,” he says.

As the young become skilled with the phones’ features, the use of data is growing, but not as developers once expected. “You have heard ‘data’ talked about in our world for a long, long time,” Paulson says. “But it isn’t data like we thought. It is ring tones, instant messaging, settling a bar bet, whatever.”

The San Diego Nokia office is responsible for the Finnish firm’s CDMA activities world- wide. Paulson has employees working for him in China, India, Singapore, Canada and South America. Of the 40 to 50 phone models Nokia will produce this year for worldwide distribution, the San Diego office will turn out 10 to 15.

Paulson, a veteran of 18 years with Nokia, has been in San Diego for the last seven and watched the local industry grow. “When I arrived we had 200 employees in Sorrento Valley; now we have more than 1,000,” he says. “It has been a great situation all the way around. A good strong environment for developing wireless. A good labor pool. A good situation.”

Following The Smart Money

Mission Ventures is one of San Diego’s oldest and most respected venture firms. Among its wireless industry investments are Networks in Motion. The firm is working on a sort of poor man’s OnStar where software will work with the phone’s built-in GPS to help the user navigate in real-time to a specific address, all at a cost of a few dollars a month. A second company, which the firm has not yet publicly identified, is developing a television tuner for cell phone handsets.

Ted Alexander, a general partner with Mission Ventures, has spent the last 7 1/2 years seeking out compelling investments. For many reasons, he says San Diego companies are at the forefront of wireless innovation. “First and foremost, it is the defense industry heritage,” Alexander says. “It is an unfair advantage that the Bay area lacks and Boston lacks.” In addition, Alexander points to the significant number of regional government research institutes and a solid base of companies that are of a size and maturity where spinoff ventures are to be expected.

Still, wireless developers hoping to catch Alexander’s attention will need more than just promising technology. Rather, the former naval engineer wants companies with a product and business plan that works today. “When you try to predict the future you can make mistakes,” he says. “If you have a good technology team with a product that has real value, you can make it; people will still buy your product. If the wind is at your back and the market is roaring, you can be wildly successful.”

Continuing Innovation

Among the more intriguing roles San Diego technology will play this year is in the nationwide rollout of satellite-delivered Internet. In a few months, WildBlue Communications will start selling a $49.95 a month product aimed at homes and small businesses in rural areas where tying into a cable or DSL line is not possible. Carlsbad-based ViaSat Inc. is supplying WildBlue with more than $33 million in satellite broadband equipment and ground systems. The effort may be the best, and last, hope for the long-touted satellite Internet connection services that have so far been mostly a bust.

A Global View

Naser Partovi, managing director at Enterprise Partners, believes San Diego is becoming the capital of wireless. He says mention San Diego in China, for example, and people say, ‘Oh yes, I am going to San Diego to do something.’ (photo/lambertphoto.com)

Globe-trotting investor Naser Partovi is tech-savvier than most — his traveling gear includes a wireless handset that taps into Internet networks for low-cost, long-distance phone calls.

When it comes to the international wireless sector in Asia and Europe, Partovi says the people he meets know San Diego and are expecting to do business with San Diego.

“You see a lot of people who have come to San Diego from those countries, who have studied here and worked here and then gone back,” says Partovi, a managing director at Enterprise Partners. “Even in China when you mention San Diego they say, ‘Oh yes, I am going to San Diego to do something.’”

At the least, that international fame has made San Diego a capital of wireless. “I would think it is becoming The capital,” says Partovi. “If you include all of Southern California, it certainly already is the capital.”

Partovi notes that top international wireless companies such as Nokia, Ericsson, LG and Kyocera have major R&D centers in San Diego and that the industry is expanding. “Even with the growth, wireless is still in its infancy,” he says. “Because of that it is a good environment for venture capital and investing.”

Last year, Partovi led investments in two San Diego wireless companies. One, Quorum, is building a single-chip radio for a handset that can handle all the various alphabet soup of wireless technologies, from GSM, EDGE and WiFi to Bluetooth and WiMax. A second company is SkyMobile Media, which is building an operating system that will greatly boost the amount of software that can work on a phone. Today that capability is limited to pricier phones.

For good reason, San Diego companies look beyond the North American market when developing wireless products. “For most wireless companies, your first customers are going to be in Asia,” says Partovi. “In Japan they go through three cell phones a year. In China, you see a big lineup outside a store of everybody who wants to get in and buy a cell phone. They are $150 for somebody whose income is $600 a month. And (Chinese phone users) buy one every eight months.”

Timing might be San Diego’s biggest hole card in advancing the region’s wireless fortunes.

“This city and this region have become a leader in telecom by being at the right place at the right time,” says Partovi. “We have the right infrastructure in place, the right number of legal firms, venture firms and most important, the talent, the entrepreneurship and the management. We could not have done this 20 years ago.”