xG, a company which claims a revolutionary wireless technology, has received an innovation award from Frost & Sullivan. But can it really roll out its network, or is it taking advantage of "wireless illiteracy" and claiming the impossible?

xG's Flash Signal technique has been awarded Frost & Sullivan's 2007 European Award for Technology Innovation - even though xG has made claims which appear to break the Shannon Limit for communications, and would therefore be impossible.

The award got us looking at xG again. We spoke to the company itself, as well as to Frost & Sullivan, and to scientists who doubt xG's claims.

xG, we find, is downplaying the scientific claims, in favour of a story about networks and services. That's still a fairly fantastic story: xG claims it's possible to build a cellular network massively cheaper than the current operators. But is it stretching the rules of economics, or those of physics?

Just a network roll-out?

"A hundred handsets arrive next week," says Frank Peake, assistant chief operating officer and head of sales and marketing at xG, "after July we'll get 1000 to 1500 a week." These are the "tri-mode" handsets with which xG says its partners will roll out a mobile VoIP service across the US. They are dual-mode Wi-Fi/cellular handsets from Lund IP of Sweden, which have had their cellular component replaced by an xMax radio (the third mode is a wired Ethernet connection).

There are promises of a more advanced handset designed by Cambridge Consultants, and available by the end of the year, and smartphones coming in 2008. But xG is promising a handset launch this year followed in October by a wireless broadband modem, designed for home users, to install themselves indoors, with no antennas.

The voice service is promised in Florida from August, from xG's neighbour, service provider Far Reach. Peake says others will quickly follow: "There will be a controlled roll out in late summer, and more aggressively starting ten markets a month starting in November." There are plenty of local independent operators ready to go for it, he says. Smaller operators were lured in when the Telecom Act opened up the US phone network in 1996, but now they are being squeezed back out. New rules in 2005 eliminated a cap on the rates at which big operators could resell services, and reduced their margins, so they are looking for alternatives.

The actual service will cost about $39.95 for unlimited calls in the US, with an international plan to be determined. The handsets themselves will cost xG $285, and will be subsidised to a very low price, says Peake.

This sounds a good comparison with cellular operators like T-Mobile, where $39.99 gets you 1000 cellular minutes a month, but only if it's delivered with comparable coverage. Without an xMax signal, it's just a very ordinary, non-cellular, Wi-Fi phone, and you can have one of those for less than $39.99 a month, from operators including Vonage.

Peake says coverage is no problem. xMax networks can be built far more cheaply than other networks, he says - and that claim takes us right back to xG's contentious promises. xG says xMax networks are cheaper, because an operator needs fewer base stations - and that, xG says, is because xMax can send its low power signals much further, and carry more data.

xG has never backed these claims up with full explanations of how xMax works, or third party demonstrations proving it, and it doesn't intend do that now. We have to take it on trust, until the network proves it - or doesn't.

Or is this snake oil?

But is that really the case? Some scientists say we can disprove xG's claims right now. One of xG's promises is to send a bit of data on every cycle of a radio signal. It also claims to use 1000 to 100,000 times less power than competing systems. According to Professor Ben Friedlander of the University of California, Santa Cruz, this contradicts Shannon's Law (also known as the Shannon-Hartley Theorem, a fundamental physical limit to how much data a given channel can carry.

"I am distressed to see how prevalent is 'wireless illiteracy', even in the wireless business," said Friedlander. On his blog, he explains: "Current systems are power efficient, i.e. they operate close to the power constraint [imposed by Shannon]. In other words, to deliver a given data rate they require a transmit power which is close to the minimum required power. This does not mean that further power reductions are impossible, only that such improvements must be small, because there is not much room left. Reducing the required power by, say, a factor of five, may be possible, albeit very difficult.

"So when one evaluates a claim such as 'xMax can use 1,000 to 100,000 times less power than comparable transmission technologies', one can say with outmost certainty that this claim is false. One does not need to know a single thing about how xMax works in order to reach that definitive conclusion."

xG has carried out demonstrations, but when results were measured, they were all within the Shannon limit. As Friedlander says, the results were "entirely credible." The downside is, they were also "entirely unremarkable", casting doubt on xG's promise of colossal coverage at low power. If the eventual base stations are equally unremarkable, we wonder if it can deliver the coverage it needs.

Peake denies that xG needs its technology to violate any physical laws. It will all be clear, he says, when the company is in a position to reveal all: "There will be a lot of headslapping when we open it up," he says. The technology is still backed by Professor Stuart Schwartz of Princeton University, he reminds us: "He helped us a lot with the math. He wouldn't throw away a career on this."

And, about this award?

Apart from the technology, xG faces other questions. If its technology is so good, why has it chosen to start in the highly competitive market for mobile VoIP? And why is xG's only real announced partner (apart from agreements to test the technology in Mexico), a neighbouring ISP in Florida?

"Voice is it," says Peake. "Eighty percent of all cellular revenue is voice. Everything else is cute and nice, but people are not buying it."

Answers like these were enough to satisfy Frost & Sullivan, and win an award: "The company decided to choose a disruptive model for its patented technology," says research analyst Luke Thomas. His colleague, promotions co-ordinator Sandra Holze, explains further: "We have fully acknowledged the pre-commercial nature of xG and will be monitoring the technology closely, as we do with other emerging technologies." The award, she says, is "based on our review of emerging and existing technologies, as well as R&D developments… accomplished through interviews with major market participants and extensive secondary research."

Frost & Sullivan's judgement is not foolproof, however. In 2004, it gave a Wi-Max technology innovation award to Gaiacomm, an outfit touting a bizarre "Earth-friendly" 4G technology, which Frost & Sullivan applauded for its "ability to provide increased signal speed and accessibility from literally anywhere on the planet."

The company's own website makes claims as extravagant as xG's, promising "data rates up to 100 Tbit/s" and a target of "one-tenth the cost of 3G." Instead of single cycle modulation, it put its trust in unused spectrum, in the Terahertz range, which it claimed could "transmit a signal of any strength to all parts of the planet up to and including inner space and outer space," opening up "a form of sub-space communications."

Gaiacomm doesn't seem to have ever made the kind of practical promises that xG is making, and looks pretty much dormant now. In reality, Terahertz radiation mostly has a short range, and commercial companies in the field expect it to be mostly limited to imaging, not communications.