Europe and Japan’s leading wireless network equipment vendors have launched what looks like a joint bid to unsettle Qualcomm Corp’s position as the leading recipient of 3G patent royalties.
Nokia Corp, Siemens AG, LM Ericsson Telefon AB and NTT DoCoMo Inc have exceeded Nokia’s plea last May to cap cumulative royalties on WCDMA technology to 5% of the equipment cost, agreeing to take them below the 5% mark.
The Euro-Japanese axis plans to license patents at rates proportional to the number of patents held by each company, distributing revenues evenly. The most notable absentee is Qualcomm Inc, despite the fact that the company appears to be the largest single holder of WCDMA patents. The 5% cap is thought to be lower than Qualcomm receives for patents on both its in-house-developed cdma2000 technology and its interests in WCDMA.
With royalty rates falling below those for GSM network equipment, the move is expected to help drive down the cost of 3G network implementation. This will be good news for hard-pressed mobile network operators, many of which are laboring under the costs of 3G licenses.
Speculation is also rife that the conspirators may be able to offer WCDMA systems without paying any royalties to Qualcomm. While it is difficult to know for sure whether this is desirable, it may be possible. According to Riitta Mard, communications manager with Nokia Networks, the partners and other companies that appear ready to sign up to the initiative – including Sony Corp, Fujitsu Ltd, Mitsubisihi Electric Corp, Matsushita Electric Industrial Co and NEC Corp – hold more than half of all WCDMA patents between them.
This could make life difficult for Qualcomm’s WCDMA ambitions unless it can reach an accord with the alliance, especially if does not fall into line on the proposed royalty rates. It could also swing operators that have not yet committed to a 3G standard towards WCDMA. Cdma2000 has found considerable favor from non-aligned operators due to its greater maturity (as largely the work of one company) and relative ease of implementation.
The aim is to persuade Qualcomm [to join the initiative], said Mard. We believe 5% is a good level for the patent holders and should benefit the market [both] equipment vendors and customers.
Either way, it is almost certain to damage Qualcomm’s bottom line. Royalties are a highly lucrative business for Qualcomm, accounting for $198.9m in revenue and a pre-tax profit margin of 88% in the company’s third quarter 2002.