Mika:
In my opinion there are multiple intertwined issues and agendas.
My premise is as follows. Ericsson was surprised that QC made
CDMA work and that the technology proved so commercially
successful so quickly. Belated recognition of this fact left the
company behind competitively, so Ericsson formulated a strategic,
response, i.e. W-CDMA, and put its huge marketing
resources behind the proposal as a migration path for GSM.
Ericsson's problem, of course, is that W-CDMA incorporates a
substantial component of Qualcomm's intellectual property and
the latter concluded that it was not in its interest to license
its IPR for a competing standard. Let's face it, the IS-95 community has been in a dogfight with Ericsson even when armed with a superior
CDMA air interface...why would it want to facilitate Ericsson's
competitive response?
Now let's attempt to consider the various agendas. Several large
U.S.-based wireless operators, Airtouch and BellAtlantic come to
mind, have a huge investment in IS-95 infrastructure and want to
see this investment protected. Airtouch as one of the largest
international wireless providers, operating IS-95, GSM and
IS-136 networks, would like to offering inter-continental
roaming and other high-end services. One can easily understand
why these carriers would like a converged standard. But also
recognize that IS-95 carriers already have a built-in, low cost
migration path to 3G ("IS-95C) that has already demonstrated data
rates up to 1.2mbps.
While I expect you will view the following as controversial, it
seems clear to me that the GSM community has recognized the
limitations of the current TDMA-based air interface and this
supposition is supported by Ericsson's W-CDMA proposal.
Unfortunately, regardless of whether they end up with W-CDMA,
cdma2000 or some compromise in between, GSM-based carriers
will need to replace their RF infrastructure in order to deploy
CDMA. Now consider the following points carefully. If a "pure"
Qualcomm standard were to prevail, the existing IS-95 community
gains a material advantage over GSM providers since the former
has a low cost upgrade alternative while the latter must spend
heavily to replace TDMA-based infrastructure equipment and
handsets. This is a particularly onerous outcome from U.S-based
GSM operators who are competing head-to-head with IS-95
providers. Obviously, one way to mitigate this dislocation is to
create an entirely new CDMA standard, say W-CDMA, that
forces everybody who wants to be compatible to upgrade
their equipment. Under this scenario, nobody gets an advantage
AND the vendors get to sell even more equipment.
Qualcomm, Lucent and particularly their North American customers strenuously want to avoid this outcome and that is why, in my opinion, the U.S. government is involved.
Back to Ericsson's agenda. Which outcome would you imagine the
company prefers:
(1) a new CDMA standard ("W-CDMA") is created. This
standard incorporates Ericsson IPR, reducing the company's
royalty costs relative to its competition. Leveraging its large
installed base, W-CDMA is deployed (and therefore
commercially successful) immediately in Europe and parts of
Asia. The IS-95 community is either shut out of these regions or
must fund parallel R&D to develop compatible equipment. In the
latter case, IS-95 vendors lose much of the time-to-market
advantage afforded by a direct IS-95 compatible 3G solution and,
conversely, Ericsson faces a diminished threat to its franchise.
(2) the Qualcomm proposal prevails (cdma2000). Ericsson is
required to sign a standard license agreement and begin a several
year R&D process to bring out compliant equipment. As the GSM
community begins to upgrade, Lucent, Qualcomm and other IS-95
vendors enter the European market and take customers that were
previously loyal exclusively to Ericsson. ERICY loses
marketshare, and as the tricky development process lags, sees its
revenue decline and earnings collapse. Mr. Christer-Nilsson
begins searching for a new place of employment.
(3) A converged standard is created that incorporates much, but
not all, of the Qualcomm proposal. All vendors must conduct
further development to bring equipment to market, which limits all
participants' time-to-market advantage. In exchange for the
expanded market opportunity, Qualcomm can afford to reduce
royalty rates for ALL licensees and it has succeeded in protecting
its IS-95 customers. Ericsson will have lost its European
hegemony, but it will have largely insulated itself from disaster
while navigating a tricky technology transition. While sub-optimal, life goes on for all participants.
In case (3) standardization allows for massive scale in equipment
production, so the capital costs of wireless deployments decline
much faster than in the multi-standard world. Cheaper equipment
fuels broader deployment, and the world transitions away from
wireline (which continues primarily as a data conduit) to
wireless. Wireless operators are particularly interested in this outcome.
Ericsson would, of course, prefer alternative #1; Qualcomm
alternative #2. I believe to my very core that the scope and
duration of this Holy War has resulted from Ericsson's desire for
alternative #1 and dread fear of alternative #2. Can you imagine
the frustration, perhaps even rage, that Ericsson management must
feel as they see this little San Diego-based company mucking up
their carefully sculpted plans?
If you understand how compelling alternative #1 is, then you will
get why DoCoMo's recent strategic shift is so important. If there
were any way in hell for Ericsson to do W-CDMA, as designed,
it would do so. That there are any negotiations at all indicates that
Qualcomm must hold IPR critical to Ericsson's agenda, else
in my opinion, W-CDMA would go forward with or without ITU
approval. Wars have been fought over less...
Best regards,
Gregg |
