Very old article (May 20, 2002 ), but interesting. John
NOKIA SUPPORT FOR ROYALTIES FAILS TO WIN OVER CRITICS
Kelly Carroll
May 20, 2002 12:00 PM
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When Nokia announced support earlier this month for a cap on royalty rates for 3G patents after initially rejecting the idea two years ago, the company claimed its current intentions were based on encouraging industry growth and innovation. With few of its competitors rallying behind the proposal, though, Nokia's plea could be tied more to the realization that it will not be able to manufacture wideband CDMA terminals on its own.
When the 3G Patent Platform Partnership (3G3P) effort was in its formative stages in 2000, it had tried to rally industry support for a 5% cumulative cap on royalties for essential patents of 3G infrastructure. Nokia, along with Ericsson, Lucent Technologies, Motorola and Qualcomm, declined to support the partnership's efforts at that time. Ericsson and Qualcomm continue to disagree with a 5% cap. Nokia officials did not return repeated phone calls seeking comment on its efforts to resurrect the initiative.
Ericsson agrees with Nokia that patent royalties must be set at a healthy level. But the company has taken the stance that the market should decide on whether a 5% cap is necessary.
“We believe it is very important that the total royalty level for WCDMA be competitive — this is not a new belief,” said a spokesman for Ericsson. “We welcome this view from Nokia, but we believe we cannot put a specific cap on it. Any individual company cannot do that. If you look at it from the perspective that this cap is crucial to the rollout of 3G, our belief is that this is far from the truth. The cost of 3G infrastructure is more dependent on volumes than royalty costs.”
Though Nokia certainly has the right to suggest that the industry support the proposal, making it stick without participation from other big players will be difficult.
“This is really an old proposal, and I was surprised by this endorsement,” said Mark Roberts, wireless equipment analyst for First Union Securities. “What might be behind this is the company's realization that they are not going to be able to manufacture WCDMA phones and have them priced competitively with cdma2000.”
Because Nokia does not possess the same expertise in CDMA as it does in GSM, it likely needs to get its hands on intellectual property. That also would explain why patent-rich Qualcomm remains adamantly opposed to a 5% cap.
Qualcomm was the first to end its relationship with 3G3P, ditching the group's efforts before it started because of the 5% cap. The company is not likely to waver, either.
“We will not agree to any such arbitrary cumulative limit on royalties,” said a spokeswoman for Qualcomm.
Qualcomm licenses its essential WCDMA intelligence to more than 50 companies — including Nokia — and sees no reason for modifying those agreements. In addition to WCDMA, Qualcomm has licensed cdma2000 to more than 100 companies.
“Most WCDMA licensees are participating in the cdma2000 market, which has over 7 million subscribers now. Royalty rates haven't been an impediment to widespread adoption of that technology,” the spokeswoman said.
WCDMA and CDMA patent holder Nortel Networks is not convinced Nokia's proposed percentage makes sense, either. Because Nortel typically aligns with larger players and none of them have joined the group, the company is skeptical of Nokia's intentions, said Mark Whitton, general manager of the GSM Americas division for Nortel.
“There is not much industry support for this, and we don't know what the point is,” he said. “Everybody does agree, at the very general level, on fair and open patent licensing. But I don't know if 5% is the right number.”
3G3P continues its efforts and recently announced that its platform for evaluating, identifying, certifying and licensing essential patents for 3G systems will be launched in the next several months. According to 3G3P officials, there are about 50 companies that were involved with defining the platform.
Nokia's intentions may be driven by a desire to encourage industry growth and fulfill its own manufacturing needs. Or it may be as simple as the fact that WCDMA development and deployments have been costly and slower than anyone anticipated.
“The fact is that there have been delays and concerns with the cost surrounding 3G, and operators have been reticent to make a move,” said Paul Marshall, senior analyst with The Yankee Group. “The underlying market is supply-driven now. It no longer is a hype market.” |
