Qualcomm contributes little to 3G: Ericsson
Thu Nov 17, 2005 12:04 PM ET
Printer Friendly | Email Article | Reprints | RSS
By Lucas van Grinsven, European Technology Correspondent
BARCELONA (Reuters) - Sweden's Ericsson AB, the world's top mobile telecoms network maker, said the royalties charged by Qualcomm (QCOM.O: Quote, Profile, Research) for its technology did not stand comparison to its modest contribution to 3G telephony.
Ericsson (ERICb.ST: Quote, Profile, Research), together with Nokia (NOK1V.HE: Quote, Profile, Research), Broadcom (BRCM.O: Quote, Profile, Research) and others, said three weeks ago they had filed complaints asking the European Commission to investigate and halt anti-competitive behavior by Qualcomm.
Ericsson's Chief Financial Officer Karl-Henrik Sundstroem told an investor conference organized by Morgan Stanley that Qualcomm was charging the same royalty rates for patents it holds in third generation (3G) WCDMA mobile technology as for the CDMA technology it has invented.
"They're charging the same for WCDMA as for CDMA where they have 80 percent of the essential patents. But in WCDMA they only have 15 percent," Sundstroem said.
Ericsson has swapped its rich WCDMA patent portfolio with that of Qualcomm in a cross-licensing deal with virtually closed wallets, but smaller players in the WCDMA market without their own WCDMA technology will be forced to pay to use it.
"(On top of the Qualcomm royalties) then we (Ericsson, Nokia and others) have to charge for our technology. That's the problem, because it means handsets will become too expensive. We want cheap handsets. That drives infrastructure (investments)," Sundstroem said.
"Qualcomm is not sticking to fair, reasonable and non-discriminatory terms demanded by the standard. You sign for that when you put your technology into a standard," he added.
ESSENTIAL PATENTS
Mobile market analyst Michael Thelander estimates Qualcomm has about 20 percent of the essential patents claimed for WCDMA, the mobile phone technology for better voice and faster data communications such as video.
It is the successor of the GSM standard used by two out of every three mobile phone users. Most of the remaining mobile phone subscribers are on CDMA networks.
Qualcomm is by far the dominant chip maker for CDMA phones and charges royalties for companies such as Nokia which want to make their own CDMA chips. In WCDMA, where Qualcomm has many more chip competitors, it charges the same royalty rates.
Analysts estimate Qualcomm charges royalties of around 4.5 to 5 percent of the wholesale price of a phone. The company itself says it charges "low single digits."
Sundstroem said 3G will only take off if handset prices drop to levels of $150 or lower.
Qualcomm maintains its royalties are fair and reasonable and made available to all players on the same terms.
President Steve Altman of the San Diego-based firm told Reuters last week the accusations were without merit, pointing at rapidly falling prices of WCDMA handsets. The company said it had already found a $124 WCDMA handset in the market, although in a limited production run, built with a Qualcomm chip.
The average price of the lowest 10 percent of WCDMA phones has dropped to an estimated $217 in the third quarter from $436 in the fourth quarter of 2003.
"We have a market place that is very vibrant with competitors in China, Japan, Korea, United States and Europe," he said.
AI
