An interesting take on CDMA/HDR from Korea....
CDMA Race for Wireless Internet Looms Large
2000 01/14(±Ý) 18:26
By Yang Sung-jin
Korea Times correspondent
San Diego, California _ Qualcomm Inc., the world's leading CDMA (code division
multiple access) technology developer, is the darling of investors on the U.S. stock
market, propping up the so-called ''New Economy.''
Its stock price soared about 2,000 percent last year thanks largely to greater sales and
profits coming from the fast integration of CDMA-based mobile technologies.
Therein lies the rub for Korean mobile service providers and handset makers. In return
for licensing CDMA technologies from Qualcomm, Korea has so far paid around
$500 million in royalties to the San Diego company.
Korean firms believe the royalty rate is too high and unfair, in consideration of the
enormous contribution they made in the process of commercializing CDMA
technologies.
Qualcomm, however, is not buying the argument and maintains that rates imposed on
Korean firms are fair and square.
''We have 60 companies licensed worldwide in CDMA technologies and we believe
the rate applied to Korean firms is equitable and not too high,'' Qualcomm Chairman
and CEO Irwin M. Jacobs told Korean reporters Wednesday during a press
conference at the company's headquarters.
Jacobs emphasized that the current royalty rates are relatively small compared with
other contract partners, hinting that Qualcomm has no intention of lowering the rate in
the future.
Yet resentment runs high in Korea where companies shelled out $148 million in
royalties to Qualcomm during the year by June, 1999, alone.
In addition, of the 35 million subscribers served by Qualcomm's CDMA worldwide,
Koreans users account for 24 million, the biggest share.
Korean media and industry observers have repeatedly criticized Qualcomm, saying the
rate is too high and Qualcomm is taking more money than it deserves from Korea.
The royalty dispute took on an international angle as Qualcomm refused to pay 20
percent of the fees it secured from domestic PCS (personal communications service)
carriers.
Qualcomm and ETRI (Electronics and Telecommunications Research Institute), a
state-run research center, signed a joint development agreement in 1991.
ETRI argues that Qualcomm has to pay the 20 percent share of the royalties regarding
PCS, but Qualcomm said the agreement does not applied to PCS, souring
relationships and heating up the royalty dispute.
Jacobs said Qualcomm will work with ETRI to hammer out the royalty dispute
amicably through an international arbitration process and added that a new royalty rate
_ presumably lower _ will be applied to new CDMA technologies and equipment.
One of the new CDMA technologies is HDR (high data rate), which is capable of
supplying reliable and cost-effective wireless Internet access to consumers.
HDR, which was developed by Qualcomm and successfully field tested late last year,
provides a peak data rate of up to 2.4Mbps in a standard 1.25MHz channel
bandwidth. Optimized for package data services, HDR incorporates a flexible
architecture based on standard IP (Internet protocol).
More significantly, HDR optimizes the voice and data spectrum separately, allowing
CDMA service providers to offer wireless Internet service via mobile phones.
Already, KT Freetel, a Korean PCS provider, has announced it will adopt the HDR
technology to offer wireless Internet services to its subscribers when it signe
a deal to receive direct investment worth $200 million from Qualcomm late last year.
Considering the highly competitive mobile market in Korea, other service providers
are expected to follow suit or find a comparable alternative.
Either way, the royalty issue is likely to resurface as it remains to be seen whether
Qualcomm will lower the royalty rate for HDR.
Curiously, Qualcomm Chairman Jacobs believes that there are much more important
issues than the royalty dispute for Korean CDMA makers and service providers.
''Qualcomm has invested a lot into CDMA technologies development and has taken a
risk. Korean companies also took a risk and in return secured an advantage in
exporting CDMA handsets and systems,'' Jacobs said.
The same risk-taking logic will be applied to HDR technology which will reshape the
wireless Internet market, he noted, adding that Qualcomm is betting the company on
HDR.
The global fixed and wireless telecommunication markets are changing rapidly,
rendering today's winners vulnerable to tomorrow's fast-moving competitors.
Therefore, if Korean companies adopt HDR and move swiftly, they can beat other
competitors, which eclipses the royalty issue, Jacbos argues.
The stakes are higher than they seem. Although Samsung, LGIC and Hyundai outpace
other foreign CDMA manufacturers, the HDR field is unknown territory where
competitors could seize an initiative.
Particularly worrisome for Korean makers are Japanese manufacturers such as
Kyocera which bought Qualcomm's handset manufacturing unit in a bid to make
inroads into the U.S. mobile market.
With better R&D infrastructure and design know-how, Japanese manufacturers could
wage a fierce battle with Korean counterparts on the global CDMA handset and
system markets.
At the press conference, Jacobs often referred to the relationships between Qualcomm
and Korean companies as ''win-win.''
That soothing phrase may not assure Korean firms which must stage a ''winning'' game
with other global competitors _ after paying huge royalties and pouring enormous
investment into risky mobile projects.
sjy@koreatimes.co.kr |
