It seems there has been an olive branch extended in the ongoing war between the Europeans and the Americans -- by way of Sweden. If you haven't heard of this war, its probably because you have missed the latest technical journals, since that is where it is being carried out.
It's the war (no, that's not an overstatement) being waged over the standards that will govern the next generation of digital wireless phones are slated to become available around the turn of the century; phones that will be able to place a call, send an e-mail, update your Web page and about anything else you can dream up (maybe even drive your car, if you're James Bond.)
It's also a war where San Diego will either carry the laurels or pick up the bodies. That's because it intimately involves telecommunications wonder-firm Qualcomm, the city's favorite offspring and one of its largest employers, who is battling its European rivals to keep its well-regarded digital wireless technology at the heart of a new global telecommunications network. Naturally, the company's many rivals would prefer it to wait outside the door.
Until now. Qualcomm got a nice little holiday surprise last week when L.M. Ericsson, the Swedish maker of digital wireless phones who is one of Qualcomm's largest competitors, offered a truce -- sort of. The company called for a "harmonization" of two next-generation digital standards that are vying for the blessing of an international cabal of telecommunications interests that is charged with designing a network that will allow a mobile phone user to travel virtually anywhere in the world and still be able to make calls.
Although still very technical in nature, the importance of this issue cannot be understated. Today's wireless user is highly limited in several ways; any use of a mobile phone outside of a carrier's coverage area depends on the presence of a compatible network. For example, if you use the digital service offered by Sprint PCS in San Diego, roaming is confined to areas that employ a compatible CDMA (code division multiple access) system. Right now, that phone would not work in Europe, which has standardized a competing technology known as GSM.
Under plans for a so-called third-generation, or 3G, system, users would be able to travel anywhere, since the system would accommodate all the standards. To this end, Qualcomm, Ericsson and other makers of wireless equipment have been hammering out the finer points of such a system. But so far these negotiations have not gone well for the Sorrento Valley-based company.
Qualcomm's problem comes from being the smallest kid on the block with the best toys; sooner or later the bigger kids will notice. The company's revolutionary CDMA technology, which allows several conversations to be sent over a single slice of airspace, is now generally recognized as the superior method for digital wireless communications. As the main patent holder for CDMA, Qualcomm racks up significant royalties from companies making CDMA equipment and phones. Last year, the company saw more than $214 million in royalties from such deals.
A European telecommunications consortium, led by rivals Ericsson and Finland-based Nokia Corp., wants to use CDMA in its 3G system, but doesn't want to pay Qualcomm's beefy licensing fees to do it. To accomplish this, the group has proposed a standard referred to as WCDMA to power the new network. This hurts Qualcomm in two ways; the new system is not compatible with today's CDMA networks, so carriers would have to rebuild from scratch. Qualcomm also says WCDMA is tweaked in such a way that it would lessen or eliminate many of the royalties Qualcomm currently gets from CDMA sales.
The company retaliated by refusing to license any of its patents to the new system, which in effect could hamstring further development until some compromise can be reached. That compromise, hinted at by Ericsson last week, will likely involve incorporating some of Qualcomm's own cdmaOne standard into the 3G system, although not as much as Qualcomm would like. The company praised Ericsson's move but warned that the fine print in Ericsson's offer still imposes standards that will hurt the company.
The International Telecommunications Union will begin hearing the matter on Dec. 31, and the results will have significant impacts both for wireless users in general and Qualcomm specifically. Suggesting that the company's days may be numbered may go too far, especially since Qualcomm has other profitable lines of business outside of wireless. But even pioneering companies lead a revolution can be vulnerable (think Motorola). Qualcomm knows this, which is why the company will be ringing in the new year while biting its nails.