Friday 18 April 2008

Licensing Framework for LTE Announced

My recent embrace of podcast listening has yielded its first blogging fruits. A brief item on a Technology podcast of the Wall Street Journal reported this week that a licensing framework has been reached regarding the emerging mobile network technology known as Long Term Evolution (LTE). A quick search on the internet produced a cornucopia of items covering this development.

In short, the parties to the agreement undertake to keep royalty rates on their respective patents low enough to spur development of the technology. With respect to handset and laptop sales, they have agreed to keep patent royalties under 10%.

LTE is being described as the next-big advance in mobile technology, enabling cell phones to provide users with such nifty services as high quality TV (though the eyeglasses needed to view these programs by old geezers like myself are not part of the technology) and seamless video calling. By reaching agreement on the licensing framework, the hope is that the time to deployment of the LTE technology will be reduced to two years or so.

The international array of companies involved in the agreement reportedly are Nokia, Ericsson, Alcatel-Lucent, NEC, NextWave Wireless, Nokia Siemens Networks and Sony Ericsson. According to Reuters, Mobile carrier Verizon Wireless (no. 2 in the US) had previously announced its intention to build on the platform, while China Mobile (the world's biggest) has expressed an intention to test LTE. As well, Alcatel-Lucent and NEC have entered into a joint venture for development and marketing of the technology. Tantalizingly, Qualcomm, while not being a party to this agreement, has reportedly promised chips for the LTE technology, which competes with Qualcomm's own Ultra Mobile Broadband Technology.

Who else is missing? Well, for starters, Nortel is absent from the list. A company spokesman for Nortel, Mohammed Nakhooda, is reported to have stated that "[e]veryone would agree that Nortel is a major contributor to the LTE standards" and that it "is front and centre for all discussions [regarding LTE systems]." In other words, look for Nortel to announce its own royalty rate scheme.

A posting by Vijay Nagarajan puts the Nortel position in a broader light against the backdrop of past licensing agreements in this area. He notes that something similar was attempted in 2002 regarding WCDMA, where agreement was reached to cap royalty rates, only to witness that holdouts with a strong IP position in the technology went ahead and set their own (presumably double-digit) royalty rates, reaping the benefits on their corporate bottom line.

I personally love devoting one MBA class to arrangements of this kind, given the complex mix of cooperation, competition, standardization and hold-out. Only time will tell if the LTE royalty arrangement reached this week heralds anything more than feeding my pedagogical curiosity.

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