Stolen from the Motley Fool Board: (Part 2 to follow)
Subject: Testimony before Congress 01 (6/4/98)
Date: 6/4/98 3:35 PM Pacific Daylight Time
From: Horselist
Message-id:
Renby, Ajit, Chaz, Mike and all, I would like to share the following information with you. Please enjoy your reading.
Excerpt from house.gov
Testimony of John Major
Executive Vice President, QUALCOMM Incorporated
Before the House Subcommittee on Technology
June 4, 1998
ÿ
Thank you, Chairwoman Morella, Congressman Barcia and members of the
Subcommittee for the opportunity to testify before you today on the subject of
third-generation wireless standards.
Headquartered in San Diego, QUALCOMM develops, manufactures, markets and
operates advanced communications systems and products based on its proprietary
digital wireless technologies. One of these technologies, Code Division Multiple
Access or CDMA, is now marketed around the world under the trade name cdmaOne.
CdmaOne is an American invention, and is the fastest growing digital wireless
standard in the world. Less than three years after its first commercial
deployment in Hong Kong, cdmaOne is the dominant digital technology in the
United States, Korea and Mexico, and has been deployed throughout Asia, Latin
America, Africa, Russia and Eastern Europe, with commercial launches in Japan
and Australia later this year.
QUALCOMM, along with other CDMA equipment manufacturers, has worked with the
CDMA Development Group, a trade industry organization representing 91 CDMA
operators and manufacturers, on a third-generation version of cdmaOne that will
be known as Wideband cdmaOne. Wideband cdmaOne has been submitted to various
standards bodies around the world for consideration and eventual
standardization. Wideband cdmaOne will allow consumers to send and receive more
than 2 Mbps of data and access the Internet, while continuing to enjoy the best
voice quality of any digital wireless technology.
QUALCOMM believes in certain principles with regard to the process of setting a
third-generation standard.
First, we believe that the world's standards bodies, under the auspices of the
ITU, should move toward a converged third-generation standard that respects
existing second-generation investments made by wireless operators around the
world by insuring backwards compatibility with those systems, and allows for
world-wide roaming;
We believe that the third-generation standards process should recognize and
respect the intellectual property rights of patent holders;
We believe that markets, rather than governments, should guide the timing and
deployment of third-generation services;
And, we believe that standards and technology decisions should be made based on
what is best for wireless customers and operators, not what is best for wireless
manufacturers or governments. We believe in full and fair competition among
technologies. We do not believe in protectionism or in industrial policy that
places manufacturers ahead of consumers.
QUALCOMM is not alone in espousing these principles. They represent the
historical approach that the US Government and US standards bodies have taken
with respect to wireless telecommunications standards. Chairman Kennard's
responses to the questions you posed, Chairwoman Morella, are consistent with
these points.
Recent actions of the European Commission, the European Technology Standards
Institute (ETSI) and others promoting the W-CDMA standard do not meet these
principles. In January of this year, ETSI announced its decision to submit a
European version of a third-generation CDMA standard to the ITU, known as
W-CDMA, which adopts many of the features of the CDMA air interface, but has
been made intentionally incompatible with cdmaOne.
A small group of manufacturers and their partner governments whose actions are
motivated by industrial policy rather than consumer choice appear to be
operating in concert, outside of the ITU consensus-building process, to set
preemptively a standard for third-generations service. These efforts would place
the majority of US operators and manufacturers at a competitive disadvantage in
the global wireless market.
QUALCOMM believes that all parties can and should work together toward a
converged third-generation standard that treats existing investments fairly and
provides significant benefits for operators and consumers. I want to assure this
Committee that QUALCOMM takes its obligations as a corporate citizen in this
global market very seriously. Our senior management is willing to devote its
personal time and attention to finding a sound solution for the introduction of
a third-generation standard that will benefit everyone. We welcome discussions
with both companies and governments involved in the process. The obstacles to
this goal are not insurmountable, but our common task will be easier if the
European Commission and European manufacturers reconsider the philosophies that
have restricted their markets to competition and limited consumer choice.
Historical Perspective
Before I continue, let me provide a bit of background on the wireless standards
process that will help you better understand our current dispute.
Around the world, standards are developed by wireless manufacturers, operators
and, in countries other than the United States, government regulators. In
addition to ETSI and the Association of Radio Industries and Businesses (ARIB)
in Japan, major standards bodies involved in the development of third-generation
standards include the Telecommunications Industry Association (TIA) and
Committee T1/P1 in the United States, and the TTA in South Korea. The ITU also
sets standards, but frequently attempts to coordinate the standards decisions of
these regional groups.
In 1982, the European Conference of Posts and Telecommunications (CEPT)
administrations formed a committee known as the Groupe Speciale Mobile (GSM) to
develop a second-generation pan-European cellular system. The main reason for
the CEPT action was that its member countries were using a number of
incompatible analog cellular standards. It is important to remember that the GSM
was not trying to develop an advanced cellular system; it was only trying to
develop one that would facilitate pan-European roaming. Innovative technologies
that offered significant technical benefits, such as CDMA, were rejected because
the European planners concluded that such systems were not mature enough to meet
the planned 1991 target date for GSM. The operators from the CEPT countries
signed a Memorandum of Understanding, later called the GSM MoU, in which they
all agreed to deploy the new GSM standard in the same frequencies to facilitate
roaming between European countries. In 1989, CEPT transferred the GSM committee
to ETSI. ETSI completed the specifications of the system in the late 1980s and
the commercial service was initiated in 1992.
Once Europe had its common cellular standard, it changed the game from
legitimate technical standard setting activities to an exclusionary industrial
policy that would enable European manufacturers to market GSM around the world
from a protected home market base. The first thing it did was to redefine the
term GSM. The new name was Global System for Mobile communications. It then
changed the nature of the GSM MoU, expanding the membership to include all
operators "committed to building and implementing GSM-based systems and
government regulators/administrations which issue commercial mobile
telecommunications licenses," and broadening its scope and objective to promote
GSM as a standard around the world.
More significantly, it embarked on policy of denying competitors to GSM entry in
the European market. Nowhere was this policy more evident than in the emerging
personal communications services (PCS) marketplace. When the various European
governments began allocating spectrum for PCS, each had the opportunity to allow
the new operators to offer service using any available technology including
CDMA. Did they encourage ETSI to open its process to consider new technologies
such as CDMA? Did they even allow the new operators to use non-ETSI
technologies? They did neither. Instead they urged ETSI to upband the now old
GSM technology to the new frequency band and mandated that the new operators use
this upbanded GSM technology.
Why? Europe already had met its goal of pan-European roaming by deploying GSM
for cellular systems. The introduction of PCS was intended to foster competition
among service providers. What better way to foster competition than allow
multiple operators to offer services through multiple technologies? The reason
was that Europe did not want to allow a non-European technology to compete with
GSM. Such competition would have weakened the position of the GSM manufacturers
who would no longer have a protected market at home from which to export
European technology.
By contrast, the United States welcomed competition between digital standards.
TIA standardized GSM for the United States in a few short months. There was no
consideration of protecting the US market from European technologies. The only
consideration was to give the new PCS service providers a wide choice from among
available standards. Today, American consumers benefit from a choice between
cdmaOne, GSM and a third digital option, TDMA. Several other technologies were
also standardized in the United States, but have not seen the same market
success as cdmaOne, GSM and TDMA, including one that was given a huge tax-payer
subsidy in the form of a Pioneer's Preference award yet was never deployed
commercially.
Although the goal of pan-European roaming has been met, ETSI and the European
Community once again are insisting on a single standard for Europe - one that is
incompatible with competing standards like cdmaOne and TDMA. This closed
unilateral standards process ignores and squelches efforts to standardize
non-European technologies for third-generation.
Guiding Principles
At the beginning of my testimony I mentioned some principles that QUALCOMM
believes should guide this process. Let me explain each in turn:
Fairness
It is important that operators that have made investments in their current
generation system have an evolutionary migration path to third-generation. The
W-CDMA approach, unfortunately, fails to provide such a path for cdmaOne and
TDMA operators - including the majority of US cellular and PCS operators and
dozens of others in Asia, Latin America, Africa, Russia and elsewhere. Were
W-CDMA to become the single third-generation standard, and these operators
wanted to provide global roaming for their customers, they would literally have
to rip out the guts of their existing systems and purchase new equipment
compatible with the new standard - coincidentally manufactured by the dominant
European manufacturers.
By contrast, the Wideband cdmaOne approach espoused by QUALCOMM and the vast
majority of US telecommunications equipment manufacturers would present cdmaOne,
TDMA and GSM operators with a clear and fair migration path to third-generation
service. Those who currently deploy IS-95 CDMA will simply add on to their
systems. Operators deploying TDMA or GSM could retain their existing networks
and affordably adopt a cdmaOne interface that will allow them to migrate into
third-generation CDMA.
In an attempt to cast aspersions on the Wideband cdmaOne backward-compatibility
emphasis, the Europeans have characterized their approach as "revolutionary" as
opposed to "evolutionary." Certainly for Europe, the switch to CDMA is
revolutionary. For those who have already embraced cdmaOne, however, a
third-generation standard based on W-CDMA provides few system capabilities that
exceed those currently offered by cdmaOne and its anticipated enhancements.
Certainly, the W-CDMA chip rate proposed offers no improvements to the one
currently used in cdmaOne and offered in Wideband cdmaOne. In fact, the W-CDMA
chip rate reduces system capacity and prevents backward-compatibility with
current cdmaOne systems. This supposedly "revolutionary" European approach
effectively precludes more than half of the world from their "revolution" by not
providing a migration path to the next generation. We believe an inclusive,
evolutionary approach will better serve consumers the world over.
Intellectual Property
Another consistent principle of US policy has been that, simply put,
intellectual property matters. Congress has consistently protected the
intellectual property rights of all companies and has recently taken steps to
protect American companies from software infringement and outright piracy around
the world.
Intellectual property is at the center of the third-generation debate as well.
QUALCOMM holds more than 130 patents relative to CDMA, has approximately 400
patent applications pending around the world, and has licensed 55 companies to
manufacture equipment based on this standard. The only major manufacturer of
wireless equipment in the world who has refused to obtain a license is Ericsson.
Now, the European manufacturers profess that they are developing a variant of
CDMA, which: 1) will provide technical benefits that Wideband cdmaOne will not;
2) will be less costly to consumers because it will not infringe upon QUALCOMM's
patent rights to the same degree as Wideband cdmaOne. These claims are untrue.
The W-CDMA standard offered by ETSI provides no technical advantages to Wideband
cdmaOne and will only raise the cost to consumers. The reason is that W-CDMA
will not provide an evolutionary path for current cdmaOne systems and those
cdmaOne operators will have to deploy entirely new third-generation systems
rather than leverage existing investments in second generation equipment.
Moreover, QUALCOMM has equal claims to intellectual property in both W-CDMA and
Wideband cdmaOne, which means that there is no economic justification based on
intellectual property for choosing one standard over the other.
The Europeans refuse to discuss the technical merits of the Wideband cdmaOne
proposal, choosing instead to frame the debate in terms of QUALCOMM's
intellectual property rights. Their claim is that we are holding hostage
third-generation development with our intellectual property rights in CDMA. The
Europeans' intellectual property argument is merely a red herring, though,
because QUALCOMM is prepared to license our intellectual property on fair and
reasonable terms for third-generation standards that achieve compatibility with
cdmaOne without sacrificing capacity and quality. We have outlined to both ETSI
and ARIB the specific conditions that will achieve this goal and allow us to
license our intellectual property for a third-generation standard.
We would hope that the integrity of intellectual property and the WIPO process
will continue to protect innovators and their inventions. Moreover, we hope that
the standards organizations involved in the development of a third-generation
standard will follow their own policies respecting intellectual property rights.
Big Government
The broader question, of course, is why the European Community is, in effect,
making exclusionary decisions in 1998 about technology deployments that will not
occur until after 2000.
It has been observed that governments rarely make good technology choices. A
decade ago, European governments decided unilaterally to build the future of
data networking on Integrated Services Digital Network (ISDN) and not on the
Internet. They are still playing catch-up with the rest of the world. Japan
selected an HDTV standard well before the market for that technology had
developed. HDTV-MUSE, as a result, was a disaster. In mobile phones, the
Japanese again moved quickly and unilaterally to select standards that were
incompatible with the rest of the world, in order to gain the early edge in
technology. Those standards are largely abandoned today.
The message of these mistakes is that standards should respond to markets, not
the other way around.
Spectrum policy is another tool that is being used by European governments to
enforce adherence to a GSM third-generation standard. Largely due to the
spectral inefficiencies of GSM, the European Community believes that
third-generation service will require the allocation of new spectrum to
prospective operators. In the United States, the FCC believes that
third-generation service can be accommodated in existing spectrum, largely due
to the advantages in spectrum efficiency offered by CDMA.
Europe, predictably, is moving quickly on new spectrum auctions - the United
Kingdom announced two weeks ago that they plan to auction third-generation
spectrum beginning in early 1999 - well in advance of the IMT-2000 deadline, let
alone the commercial deployment of third-generation services. In this rush to
assign new spectrum, even pro-competitive regulators have bought into a
"Catch-22" logic that blunts competition. For example, the Radio Authority in
the United Kingdom announced that it will not grant a license to any carrier
that plans to use a non-ETSI-approved technology that does not permit
European-wide roaming. Of course, if would-be new entrants sought ETSI approval
for an alternative technology, they would be rejected. New entrants face enough
difficulties without taking on this additional problem. So, they don't.
Regardless of which technology one prefers, I think the Subcommittee would agree
that the granting of new spectrum by governments ought not to be used as a
device to exclude technologies from the European marketplace. Unless someone
stands up to complain, however, that is exactly what the European nations are
prepared to do.
Next Steps
Europe will no doubt continue to race far ahead of consumers in their attempts
to seal off much of the third-generation market to not only QUALCOMM, but to
every operator and manufacturer in the world who is not willing to deploy
European technology. The result would be bad for US wireless manufacturers and
operators and for innovation in the wireless industry.
As I mentioned earlier, QUALCOMM remains hopeful that all parties - including
standards bodies in Asia, the Americas and elsewhere - can agree on a converged
third-generation standard that treats existing investments fairly and provides
significant benefits for operators and consumers. QUALCOMM has engaged
manufacturers, operators and government officials around the world in pursuit of
this goal.
We would ask the Congress and relevant federal agencies - principally the FCC
and the US Trade Representative - to monitor carefully the evolving
third-generation discussion, and insist that the world community follow some of
the basic principles I have outlined here today.
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