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Had it not been for Sprint’s decision to sign-up with Qualcomm when it was getting started on Sprint PCS, Qualcomm would not be the behemoth that it is today. Think of it as a decision that rivals IBM’s decision to go with Intel processors instead of […]

Had it not been for Sprint’s decision to sign-up with Qualcomm when it was getting started on Sprint PCS, Qualcomm would not be the behemoth that it is today. Think of it as a decision that rivals IBM’s decision to go with Intel processors instead of Motorola silicon and using Microsoft’s DOS on its PCs. I made this point in my story of Qualcomm for Business 2.0. It was the kingmaker.

Strangely enough, as mobile broadband becomes a reality, Sprint finds itself in the same position. Investors Business Daily says Sprint is experimenting with mobile WiMAX, IPWireless and Qualcomm’s technologies.

“Most of the world is unhappy with Qualcomm,” said Barry West, Sprint’s chief technology officer. “They feel that its licensing model is egregious. “No one else is in our position right now … We have all the assets. We have a vision of wireless interactive multimedia services.”

This is the first time anyone this senior from the CDMA/EVDO camp has openly criticized Qualcomm. South Koreans companies are also complaining about Qualcomm, and are pushing WiBro hard. Sprint, it seems might be turning up the heat on Qualcomm. I think it is more of saber rattling than anything. We have already heard reports that Sprint-Nextel is going to use the MediaFLO system.

From the way I understand is that the Qualcomm’s royalty structure doesn’t really effect the carriers at all. The profits come from the pockets of equipment makers and device makers. However, a lot of people forget that the royalty revenues of Qualcomm are quite small in comparison with its chipset business, which is the yoke it uses to drive down prices of “handsets.”

They sell highly integrated chipsets, that Asian vendors can use to churn out handsets by millions. It is essentially the same tactic Intel has used to get fat off the PC-land. Knowing how Qualcomm works, I am sure they have a contingency plan in place.

“Sprint often tries many technologies,” Jacobs said. “In the end, we tend to see eye to eye about what the technology road map should be.” One of Qualcomm’s reasons for buying Flarion was getting its hands on key OFDM patents. Since WiMax is partially based on OFDM, Qualcomm could ask makers of WiMax gear to pay royalties. Qualcomm hasn’t said whether it plans to do that. “We do believe we have IP (intellectual property) in WiMax,” said Jacobs.

In other Sprint news, Martin Geddes says that Sprint Local could become a major headache for the Bell operators. I think so to. Marry it to some of the other smaller local phone companies, Qwest and SureWest. That is one hefty competitor.

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By Om Malik

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  1. The most interesting issue with respect of Qualcomm royalties (…South Koreans companies are also complaining about Qualcomm, and are pushing WiBro hard…) and its adquistion of Flarion and its key OFDM patents, is that SK Telecom made an ¨Strategic Investment in Flarion¨back in 2002. It seems every knew the value of such technology long time ago but it seems Qualcomm was the only one to be in the right place at the rigth time again

  2. Nokia is betting on DVB-H, a rival to MediaFlo. I guess CDMA operators will be stuck with Qualcomm for some time to come.

    http://beta.news.com.com/Tight+squeeze+for+mobile+TV/2100-1039_3-5886537.html?tag=nefd.top

  3. Interesting points regarding QC. One comment:

    “From the way I understand is that the Qualcomm’s royalty structure doesn’t really effect the carriers at all.”

    … however, the carriers buy the handsets and thus end up paying the ~$40-80 per handset that QC is charging the handset manufacturers. This then either drives up the subsidy that VZ, Sprint and SKT pay to acquire subscribers, or the price subscribers end up paying for their CDMA phones. Net-net, CDMA phones have a $40-80 QC tax that GSM phones avoid! This disadvantages CDMA as a technology from the initial subscriber acquisition cost perspective, which it then must make up for in the long run with lower operating costs (and does, at least partially).

    QC is collection of devilishly smart folks with sharp teeth. Reminds me of a company in Redmond several years back.

    QC also historically pulled some ‘clever’ moves to get carriers to drop EVDV – which they didn’t control as strongly from a patent perspective – and to go straight to EVDO – which they do control.

  4. This “MobileTV” skirmish could develop into a full scale war if Verizon Wireless pick the Crown Castle option which is based upon DVB-H technology.

    I’m struggling to beieve VZ would turn against Qualcomm and is probably a negotiating tactic.

  5. Andy Abramson Tuesday, October 4, 2005

    Sprint is not the first to speak out about Qualcomm.

    At the Bridgeport Networks Mobile Ignite Summit earlier this year KDDI’s spokesperson said simiar things.

  6. kddi is pretty much irrelevant stateside.

  7. the DVB-H is a technology which is so woefully late and is going to be hampered. no chipsets, which means not enough handsets. the interesting part about qualcomm is that they control the ecosystem and can push it through much harder than say a Nokia or any other company.

  8. Jesse Kopelman Thursday, October 6, 2005

    IPWireless is WCDMA, which means Qualcomm has a stake in it, albeit a reduced one. There is no way Flarion would have only gone for $600M if their patents were critical to using OFDM (since you need OFDM for WiMax and WiFi). One must conclude that there are viable WiMax implementations that will give Qualcomm no royalty stake.

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