US threat to new EU mobile phone system

Date: 23/07/1998

By Peter Chapman

EUROPE's money-spinning position at the top of the mobile phone technology league is under threat amid a bitter dispute with a US firm over patents for the next generation of kit.

The continent's mobile firms want Europe's Universal Mobile Telecoms System (UMTS) to develop seamlessly out of the current generation of EU-developed GSM digital services which are sold around the world.

Market leaders such as Sweden's Ericsson, Norway's Nokia, France's Alcatel, Canada's Nortel and the US' Motorola are now locked in negotiations to decide how much they will have to pay each other for licences to use the technology required to make a new EU standard work.

These talks are essential because different firms hold patents for certain parts of the technology which is expected to be needed for the UMTS norm agreed by members of the Nice-based European Telecommunications Standards Institute (ETSI).

But as companies sit down at the negotiating table in bilateral talks, they are complaining that one firm, the Californian mobile telecom company Qualcomm Inc, is refusing to play ball and could derail the whole UMTS process.

Industry insiders say Qualcomm is likely to be one of the main holders of patents for technology used to run UMTS services in line with the basic specifications for the system - known as the 'air interfaces' - agreed by ETSI members last February.

Torbjorn Ihre, head of European Affairs with Sweden's Ericsson, said Qualcomm was threatening to refuse to grant licences for its patents unless the industry agreed to its own 'harmonised' specification for UMTS services.

“Because it has specifications for UMTS that industry wants to use, it is saying, 'if you don't do it my way, you won't get my patents',” said Ihre.

“This is an unfair threat. It wants to take the whole industry as a hostage. What is at stake is a well-working telecoms market in Europe and a system that works smoothly across the globe.”

Qualcomm executive James Person said it wanted UMTS to be compatible with the 'cdma 2000' standard set to become the third-generation choice in the US. The company was also behind much of the technology for this system. “To license our intellectual property for UMTS as it stands would be commercial suicide for us,” he added.

But Ihre and other industry sources are confident that the dispute can be resolved before Europe's 2002 target date for introducing UMTS services is threatened. They say industry is used to solving intellectual property rows over new technology.

“I don't think Qualcomm will block things forever,” said Brian Kearsey, director of technical strategy with France's Alcatel.

“It's in their interests to make licences available for technology that is potentially applicable to UMTS. A large part of their income is from licences,” added Kearsey, who is also chairman of an industry intellectual property working group which is trying to forge agreement on the UMTS issue. “It's just a question of when they will make them available and at what cost.”

The European Commission, which has enthusiastically backed a common standard, is powerless to intervene in a patent dispute. It is keeping its fingers crossed that industry's 'don't panic' message is justified.

Telecoms Commissioner Martin Bangemann and his officials have pushed through an EU regulatory regime for UMTS, but they fear delays to patent agreements could give rival systems across the world a chance to grab market share.

“We are very concerned. But it's so difficult to quantify the risks and opportunities. Deals are done on a bilateral basis and companies agree not to disclose details of their agreements,” said one telecoms official.

He added that Commission experts had held a series of fact-finding talks with EU industry last week in a bid to assess the damage a protracted patents dispute could wreak, but stressed: “We are not at the steering-wheel. It is ETSI and industry who must clarify things with Qualcomm.”