DR JACOBS vs THE KOREANS
Just one of the many stories from today's telecomtv.com
telecomtv.com
Eric - It's by Grahame Lynch, who I seem to remember you thought highly of (?)
CDMA patent holder Qualcomm is in
a fight with the South Korean cel-lular
industry that could imperil the
future direction of the cdma2000 evolu-tionary
path. The gripe of the South
Koreans is simple – they are annoyed
that Qualcomm has granted royalty rates
of 3% to Chinese CDMA manufacturers
when they pay royalties of nearly 6%.
They – and by they, I’m talking about
parliamentarians and captains of indus-try
– say that Qualcomm is discriminating
against them.
Of course Qualcomm is – and from one
point of view, doing so quite unfairly.
Qualcomm simply wouldn’t be around if it
wasn’t for Korea. Back in the early 1990s,
it was South Korea that bucked the
world’s preference for GSM and TDMA by
backing CDMA as its preferred digital
standard. Korean vendors and operators
were the first to turn CDMA into a mass-market
technology, and indeed, took and
overcame many of the risks inherent in
being on the bleeding edge. CDMA
deployments in the US and Japan didn’t
gain momentum until years later.
The Korean argument, as expressed in
letters from a parliamentary committee
chairman and industry association head
to Qualcomm CEO Dr Irwin Jacobs, is
simple. It wants to play on a level field in
the Chinese market by having its royalty
rate halved. Jacobs’ response is clear –
the differential isn’t so big that Korean
smarts shouldn’t be able to overcome
the cost disadvantage. What’s more,
Korean manufacturers would also have
to agree to pay higher royalties on
exports to the Americas and elsewhere
to make up the difference.
BANKING ON CHINA
Jacobs, who has been singularly
obsessed with getting into China, is play-ing
a risky game here. CDMA in China is
being deployed as the secondary net-work
of a secondary carrier in a market
that, relative to its wealth, is already
may not be worth the losses in Korea.
The Koreans are already looking
beyond Qualcomm. Two of the three
new Korean 3G networks have elected
to go with the European-Japanese
WCDMA standard. The Korean govern-ment
has ordered manufacturers not to
renew license agreements with
Qualcomm. And the Koreans have also
made moves to help China develop its
own TD-SCDMA standard, which seeks
to bypass the royalty claims of both
cdma2000 and WCDMA.
PLAYING A HIGH-RISK GAME
If Jacobs loses the support of Korea,
the whole future of Qualcomm-driven
standards such as cdma2000 and BREW, a
multimedia environment analogous to
Java and WAP, may be at risk. Incredibly,
one of Jacobs’ letters to the Koreans slaps
them for not hyping up their CDMA data
offerings sufficiently and handing a pub-lic
relations advantage to NTT DoCoMo.
Jacobs seems so confident in the superior-ity
of his preferred CDMA standards that
he seems oblivious to reality. While derid-ing
the delays in WCDMA deployment,
he seems ignorant of the reality that at
least one proposed cdma2000 launch in
Japan has also been delayed for lack of
handsets. He also erroneously told the
Koreans that they had already gained
US$1.5 billion of CDMA orders in China –
a claim he later retracted.
Ultimately, Qualcomm needs Korea
more than Korea needs Qualcomm.
South Korea is still the world’s largest
CDMA market and is already the most
significant early adopter of next-genera-tion
CDMA platforms. It would be a big
setback for cdma2000 if Korea aban-doned
Qualcomm. It would then be a dis-aster
if Korea threw its considerable eco-nomic
weight behind alternative stan-dards
such as TD-SCDMA and WCDMA.
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