Qualcomm Inc (QCOM)

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3G LTE Radical Plan

http://www.3g.co.uk/PR/March2006/2709.htm

1st March , 2006
Europe Germany : The European Telecommunications Standards Institute (ETSI) is working on a radical plan to restrict Intellectual Property Rights for patents essential to all components of the next version of the 3GPP-based radio standard - Long-Term Evolution (LTE).

The plan - being driven by mobile operators - is designed to get all relevant patent-holders to sign up to a pre-agreed cumulative cap of approximately 5% for royalties on the cost of all LTE equipment.

ETSI is also considering an ex ante approach to declaring relevant patents, which is designed to eliminate the possibility of any new royalty claims pertaining to LTE equipment being lodged in the future, a situation which has escalated the actual cost of buying and licensing technology for existing WCDMA equipment.

"ETSI is now acting to address the current situation in which IPRs are widely seen as being unfair, unreasonable and discriminatory," says Gavin Patterson (inset), Principal Analyst at Informa Telecoms & Media. "By adopting either an ex ante approach, capping royalties or both of these proposals, we will see a more clearly defined cost structure for those buying and licensing LTE technology in the future," he says.

LTE will be based on many elements that will be included in Release 7 of the 3GPP standard, primarily OFDM and MIMO, although CDMA technology will be removed from Radio Layer 1 of LTE. Draft specs for Rel. 7 are due to be frozen in June this year.

"It is unlikely all vendors will agree to IPR capping," says Patterson. "Nevertheless, by removing CDMA from the LTE standard it also removes perhaps the most vocal opponent to royalty capping and proportionality - Qualcomm."

At the end of last year, Ericsson, Nokia, Texas Instruments, Broadcom, NEC and Panasonic each filed separate complaints with the European Commission requesting that it "investigate and stop Qualcomm's anticompetitive conduct" in the licensing of essential patents for WCDMA technology.

None of the complainants doubts that Qualcomm owns essential IPRs to the WCDMA standard, but they claim it has not contributed as much to that standard as it did to the development of CDMA and cdma2000 and, therefore, should not charge the same royalty rates for WCDMA as it does for CDMA and cdma2000.

The EC is expected to publish an initial decision on the complaints within the next few weeks, and is widely expected to order a more detailed investigation, which could take a few years to complete.

With some 40 companies already believed to be holding essential WCDMA IPRs, the industry push toward multiple radio-access technologies and multimode handsets could see the number of essential IPRs skyrocket. "Estimates for cumulative royalties for WCDMA are between 25% to 30% and the mobile industry could spend US$80-100 billion on WCDMA-IP-royalty payments up to 2017," says Patterson.

It is against this backdrop that operators within ETSI have accelerated discussions on IPR so that agreement is reached before an LTE workplan is created by 3GPP and are prepared to delay finalisation of standards until IPR is solved.

The Third Generation Partnership Program (3GPP) hopes to complete initial studies and have a workplan created for LTE in time for the TSG plenary meetings in June this year, although this may be delayed until September, with relevant specifications to be developed by June 2007 and the standard hopefully frozen by end-07.

Gavin Patterson is a Principal Analyst at Informa Telecoms & Media and has been closely following developments across the mobile industry since 1997. Gavin has built up a wealth of experience covering everything from the development of regional markets and operator strategies to the evolution of data networks and fixed/mobile convergence.