Broadcom had it right. They charged what the market would bear [and a bit more besides]. Broadcom charged more for one poxy little obvious patent than Qualcomm charges for all of their horde of patents which breach the laws of physics and enable amazing 3G cyberspace to be delivered at low cost anywhere.
< I don't however agree with the recent revisionism that says the FRAND rate is "necessarily" a low rate. Only that is it fair and reasonable which of course still allows the market to assess different valuations to different innovations, depending on how much value is added to the final product(s). >
Do you think it would be reasonable for Qualcomm to charge in the same way that Broadcom did?
If patents are essential for a standard, then each company with one or many essential patents to that standard has as much ability to deny the standards body their reqvest to use the company's patents as do the others. That doesn't mean each company has equal value for their essential patent or patents.
Nokia for example, enjoying huge market share in GSM, had an interest in stopping 3G in which they would be just one of a horde of suppliers. They had a huge existing legacy system GSM cash flow to protect. Qualcomm on the other hand had no business in Europe and not much anywhere else, so was much more keen to get 3G going to get the customers buying and cash flowing. So it made sense for Qualcomm, with a vastly more sophisticated patent base, to sell it more cheaply than would Nokia sell their 3G enabling technology. Broadcom had no reason to do other than really stick it to Qualcomm until they squealed. Broadcom wasn't enabling anything - they weren't selling anything. They were just extracting what the market would bear for a poxy little obvious patent which the legal system declared was valid and being used by Qualcomm.
Qualcomm blundered and the value was captured in spectrum sales instead of by QCOM shareholders. Also, the W-CDMA price-fixing, anti-competitive cartel should have had their reqvest to use Qualcomm technology denied and all 3G should have been CDMA2000 variety. There was no redeeming merit in W-CDMA.
FRAND is a crock of nonsense. They are words which sound nice but mean nothing. The outcome is a price fixing Kremlin approach by the likes of Neelie Kroes and her Kroes Klutz Klan. They will decide that Qualcomm rates are too high [of course].
Mqurice
PS: Yes, there are limits on what royalty can be charged, but it's a competitive world and the royalty rate optimization isn't related to current gross margins. Nokia is making a LOT more than 10% gross margin. The royalty Qualcomm can charge is more than the current gross margin. Gross margins are just the outcome of competitive pressures. If Qualcomm charged $100 per handset instead of 4%, then Nokia and others would just have to add that onto their production costs. It wouldn't affect their gross margins. They would just increase their retail prices and sell fewer devices. Spectrum would fall in value. |
