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Summary:

If you can’t beat them in the open market, then you get the authorities involved. That is a routine tactic which we have seen time and again used against Microsoft. Well, now, the same tactic is being used against Qualcomm. Eight months after I wrote my […]

m5000 made by HTC for OrangeIf you can’t beat them in the open market, then you get the authorities involved. That is a routine tactic which we have seen time and again used against Microsoft. Well, now, the same tactic is being used against Qualcomm. Eight months after I wrote my piece on Qualcomm, and its far reaching control of the wireless industry, six major wireless players – Broadcom, Ericsson, NEC, Nokia, Panasonic and Texas Instruments – are accusing San Diego-based Qualcomm for abusing its W-CDMA patents. They have filed a complaint with European Commission.

Specifically, the vendors accused Qualcomm of offering lower royalty rates to handset vendors that buy chipsets exclusively with Qualcomm and refusal to license key technology patents to other chipset vendors on fair terms.


From the way I see it that most of these vendors for the first time have had to compete with Qualcomm, that has a take-no-prisoners approach to business. They will have a tough time proving their case, given that there are many vendors such as Freescale who are not part of the complaint. I remember, at the time of the writing of my story, Ericsson was kicking butt in 3G, NEC was holding its own, Texas Instruments was late to the party, and Broadcom was no where in sight. Business Week writes:

Gartner analyst Alan Brown says total royalties for W-CDMA phones likely amount to 8% to 10% of their selling costs. And Qualcomm’s share is roughly half of that, figures analyst Albert Lin of American Technology Research in San Francisco. That means the total intellectual-property burden of a 3G phone approaches $50 — making it tough to deliver phones priced less than $250 at retail.

In a response to the complaint, Qualcomm issued a statement

The many new handset market entrants, working in cooperation with QUALCOMM, threaten the market shares of these entrenched manufacturers and their component suppliers. The action appears to be nothing more than an attempt by these licensees to renegotiate their license agreements by seeking governmental intervention.

I agree, for I suddenly see that service providers such as Orange and Vodafone are using devices made by no-name white label manufactures like HTC, or South Koreans like Samsung and LG Electroncis. Even in Japan where NEC and Panasonic have enjoyed a pretty decent market share, other players are muscling in.

The interesting aspect of this complaint is that it is being filed in Europe and not in Asia and United States, where Qualcomm actually has a dominant footprint. I also find it interesting that the complaining parties repeatedly have said that they have more than enough intellectual property in the W-CDMA standards to blunt Qualcomm. From what I understand, the more important play for Qualcomm is CDMA2000, where it has more IP.

  1. I assume that they believe that it will be a more favorable venue (especially since quite a few of them are European companies). Several of these companies did very well under GSM, which they helped write, and got the EU to pass laws stating that GSM was the only permissible standard. Now, GSM is very good, and that standardization led to things like good cross-country roaming and the like.

    But, standardization also had its downsides. Qualcomm (and others) continued to research new ideas while the GSM makers sat on their hands a bit and were satisfied with it. And so they were able to demonstrate CDMA and make it practical, and what’s more make it obvious that 3G standards, whether W-CDMA or CDMA2000 or whatever, would have to be based on a CDMA air interface. Yes, Qualcomm’s sitting there holding some impressive patents and ideas that they perfected while working on it, but I didn’t see Nokia and Ericsson playing all that nice when it was 2G GSM ruling the world and they held all the cards.

    Qualcomm made a huge investment and bet on CDMA, and they’re reaping the rewards.

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  2. In short, CDMA is such a huge technological improvement over TDMA as an air interface, that the GSM companies had to swallow their pride and go with it. Is Qualcomm squeezing them for every penny? Well, yes.

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  3. Charlie Sierra Sunday, October 30, 2005

    Well, in just a short year from now, the power of QCOM will be a major topic of discussion in the more significant environs of Hollywood, Madison Ave. and finally DC.

    Of course, by then it will be too late to stop QCOM, who has consistently outsmarted and out-performed it competitors. (Let’s not forget that Nokia could’ve bought Flarion, only pride stood in the way)

    PS. What will they have to say wrt OFDM? Intel has lots of money and ambitions, but will anybody believe them if they claim QCOM is an overbearing monopolist?

    Irony must drive the news busienss.

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  4. charlie i could not agree more. i think these follks have been totally outsmarted by qualcomm and basically are hoping that the european commission is going to help them out. it is interesting to see how they had the same chances, failed to execute. i remember all those past litigations against qualcomm when w-cdma standards were being written, and the whole cabal could not keep them out despite trying pretty hard. it is exactly the same thing they are trying to do again.

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  5. Jesse Kopelman Monday, October 31, 2005

    As a counter point, before Qualcomm bought Flarion they were actively getting in touch with munis and urging them to wait for Sprint and Verizon rather than trying to build their own WiMax network. Even post acquisition, this probably hasn’t changed since Flarion’s technology is not suitable for the TDD frequencies accessable to smaller players (like munis).

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  6. Qualcomm play the ineptitude of the US Patent Office and then use that to protect their market control of CDMA. That contributed to the proliferation of GSM, which, as people have said on this site, is inferior to CDMA.
    Qualcomm did not invent Code division multiplexing, but I expect that is what they frequently try to claim. If taking Qualcomm to court and bringing them down a peg or 2 allows the proliferation of better technologies in the wireless area, then I’m all for it. Qualcomms recent acquisition of Flarion is very ominous for the industry as it was gaining traction as the preferred technology for the next-gen networks, whether that will continue now that Qualcomm are in control is dubious.
    IMHO the other players are just trying to ensure that they are not frozen out of this market.
    Beaten in the ‘open’ market, Om? I think the US patent system makes a mockery of that!

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  7. [...]     No wonder why Om thinks that Qualcomm is the next monopoly. [...]

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  8. [...] First Nokia and the gang sue Qualcomm over WCDMA. Now Qualcomm sues Nokia over GSM. Law is the only recession proof profession or what! [...]

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  9. this is kenny asking of something about a monopolist

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  10. Hey Om. The EC has now (10/1/2007) taken Qualcomm to court for many of the same reasons. You called it then. It rings true now. I share your views, http://www.teletips.net/blog/2007/10/4/the-european-commission-vs-qualcomm

    Thanks

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