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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: matherandlowell who wrote (54991)	9/3/2006 5:43:34 PM
From: Maurice Winn	Respond to of 196972

<the GSM royalty rates to new competitors would surely argue that the 5% number is well within a reasonable rate.> GSM is vastly inferior to CDMA, so its use to customers is far less valuable. Therefore, CDMA should be paid a hugely bigger royalty than GSM is paid. A reasonable price would be the cost-effectiveness of the transmission of bits through the aether. "Reasonable" in the way that most people think of how things should be priced = on a cost basis. CDMA is about 10 times as effective as GSM. So, the royalty could reasonably be 160%. But that would mean it's no cheaper, so to make it sell, it would need to be reduced to perhaps 80% [half price]. A reasonable price should be based not on the cost of a technology, but on how much consumers are prepared to pay. Even governments have figured out that the way to sell spectrum is not by sharing it out to their friends or to beauty contest winners, but by "what the market will bear" aka the highest bidder. It cost nothing to produce spectrum. It just exists. Pulling out some economics jargon, the price should minimize the consumer surplus and maximize profits. Any less is depriving shareholders of money they should have and transferring that money to intermediaries between QCOM and the consumer as they will charge the price for phones and service to minimize the consumer surplus and maximize their profits. Any less also transfers wealth to spectrum owners who allow subscribers to buy the services. If the spectrum is owned by the government [having not been sold], the government captures a good chunk of the unclaimed royalties. If the spectrum has been sold, the profits from the gains in efficiency by going to CDMA are captured by the owner, which is usually the service provider. I don't see why QCOM should transfer wealth from QCOM shareholders to governments [for spectrum] or service providers [by way of cheaper phones]. Governments auction the spectrum and maximize their income. Service providers don't give the phones away - they sell them at as high a price as they can [whether they charge for the phone in the minute rates or as an upfront lump sum is irrelevant]. The subscribers will NOT be getting the benefit of lower royalty rates, even if QUALCOMM charges zero. They will be charged what the market will bear for phones and minutes. The very least that would be a reasonable rate would be to match GSM rates. Having established a reasonable price, say 57% royalty, licensees should be treated fairly. One should not have to pay 70% and another 40% unless of course there is a countervailing issue such as the 40% licensee agreeing to buy all QCOM's ASICs, use BREW and go with Globalstar too. Mqurice

To: matherandlowell who wrote (54991)	9/3/2006 6:33:53 PM
From: quartersawyer	Respond to of 196972

the GSM royalty rates to new competitors would surely argue .... What are those rates today... and does that matter? The supposed range for outsiders was between 29% for outsiders early on to 0% in China until... X. That was then. If the comparison between gang of five historically high 2GSM royalties and Qualcomm's WCDMA claim is "market precedent" there is no case, but the complaints are not that simple. 5% for cdmaOne was surely low by comparison, but this is about 5% for the dense structural timbers underlying WCDMA vs. the big lightweight raft of add-ons from the GSM builders accepted as "essential", and there seems to be no precedent. (which is why Qualcomm set up a way of doing business so fair and reasonable that all the players signed on).