Korea Re-examines 3G Strategy
SEOUL -- South Korea's Electronics and Telecommunications Research Institute (ETRI), has filed arbitration proceedings against US manufacturer, Qualcomm, over royalty payments for intellectual property rights (IPRs) relating to CDMA technology. The action coincides with moves by the country's wireless industry to consider W-CDMA as an alternative to cdma2000, regarded as the natural migration path to next generation services for IS-95 networks.
According to ETRI, an agreement it established with Qualcomm in 1991 to jointly develop CDMA services in Korea has “broken down”. ETRI president, Dr Seon Jong Chung, said, “We tried to renegotiate but failed... So ETRI made the decision, along with the government and related parties, to approach this the legal way.” He added ETRI had authorised three law firms, one in South Korea and two in the US, to bring the issue before the International Court of Arbitration and possibly a court in California where Qualcomm is based. Qualcomm confirmed it received notification last month that arbitration proceedings had been filed.
According to Dr Hyuckjae Lee, vice president of ETRI, under the royalty-sharing arrangement, Qualcomm should provide the institute with 20 per cent of the monies it receives in royalty fees from Korea's four CDMA manufacturers. However, it is reported that last February, just 10.4 per cent, representing US$ 8.4 million was paid, while ETRI says it should have received US$ 15.56 million. ETRI believes the agreement should include rapidly expanding sales in the domestic PCS market, but Qualcomm argues the agreement does not cover this.
Qualcomm could not comment specifically on the action, but said it is hopeful the matter can be resolved without legal proceedings going further.
With 11.8 million mobile subscribers, South Korea represents 70 per cent of the world CDMA market, and was the first country to commercialise CDMA-based digital cellular services in 1996.
According to Bill Bold, vice president of government affairs for Qualcomm, “South Korea is an important market and has played an incredibly valuable role in the development and success of CDMA technology.”
However, the dispute may be both a cause and effect of the country's current thinking on its choice of third generation mobile technology. Lee said the South Korean government is carefully considering which of the competing proposals to use -- cdma2000 or W-CDMA -- and will look closely at what other countries adopt. “Both systems might be used in Korea.” He added that Korean manufacturers and ETRI are engaged in developing IPRs of their own in the CDMA area.
Lee also maintained that backward compatibility is not such a big issue for Korea as it is for the US. “Korea is relatively small geographically, so our operators can forget their old systems,” he said.
The country's manufacturers, heavily dependent on export markets, are also looking at W-CDMA technology in terms of their position in the world mobile market. Indeed leading handset supplier, Samsung Electronics, has been targeting Europe's GSM markets since April 1997, and is now stepping up this campaign with October's launch of its new SGH-600 handset.
This year the company expects to ship nearly six million CDMA handsets, compared to one million GSM handsets. The GSM figure is expected to rise to over three million next year. Samsung has also received an order from China for 500,000 GSM handsets.
Hee Joon Park, president and CEO of Samsung Information and Communications, said, “At the moment we're heavily engaged in cdma2000 in terms of schedules etc. But we are studying the UMTS [W-CDMA] front, especially on the handset side, with more expected on the systems side. We need to stay with the possibility of both technologies becoming a world standard.”
He noted that overseas markets are increasingly important for Samsung pointing out that South Korea only has a population of 45 million. Samsung's UMTS research and development is said to be around one year behind that of cdma2000 on the handset side.
According to Ronald Foerster, senior vice president and managing director of Qualcomm Europe, the company still aims to achieve a convergence of standards, and is pushing for this within European standards body, ETSI. “We would like to avoid legal action because it distorts the industry and slows things down,” he said.
Meanwhile, Qualcomm and Microsoft have entered into a joint venture to create a company, Wireless Knowledge, aimed at providing data services on an OEM basis to carriers in early 1999. The services will be accessible to all digital wireless networks including those based on CDMA, GSM, and TDMA technologies. -- AB
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