Wireless Giants Set W-CDMA Royalty Rates

Four wireless industry giants Wednesday put their stamp on what they call “modest” royalty rates for wideband CDMA (W-CDMA) technology.

NTT DoCoMo , Ericsson , Nokia and Siemens say they have agreed to license products that use W-CDMA at a cumulative royalty rate below 5 percent, perhaps even lower.

“For example according to the recent developments in China the cumulative royalty rate seems to remain even under our earlier targeted cumulative 5 percent level. This makes the W-CDMA standard safe to invest in for operators, manufacturers and application developers,” says Nokia Executive Vice President Yrjo Neuvo. “We can see the initiative gaining support amongst the industry, and encourage others to join.”

So far, Japanese manufacturers Fujitsu, Matsushita Communication Industrial (Panasonic), Mitsubishi Electric, NEC and Sony have expressed interest in cooperating on the new royalty rates. More than 110 operators are currently using the standard in their products.

The companies say the single-digit rate keeps the payments proportional to the number of essential Intellectual Property Rights (IPR) patents owned by each company.

“This initiative is meaningful for promoting the W-CDMA services by keeping cumulative royalty rate below 5 percent,” says Kota Kinoshita, Executive Vice President of NTT DoCoMo. “We have discussed through the 3G Patent Platform Partnership (3G3P) how to license essential patents at acceptable royalty rates. We believe the intent of the arrangement is well harmonized with that of 3G3P.”

Unlike CDMA, which was patented by San Diego-based wireless giant QUALCOMM , W-CDMA was developed by the 3rd Generation Partnership Project (3GPP) and is the radio access standard proposed for UMTS services – the European version of IMT-2000. The standard was developed as a 3G technology to support very high-speed multimedia services such as full-motion video, Internet access and video conferencing.

QUALCOMM currently sets its royalty rates at 5-6 per cent of equipment costs for it’s own flavor of 3G technology – CDMA2000. Both are viable alternatives to the GSM wireless standard that dominates Europe.

The agreement seems to quiet concerns raised in September by 3G3P director Brian Kearsey, who said too many companies were claiming they had W-CDMA patents. At the time, the 3G3P called for a royalty cap at 5 percent of the sales value of a product.

“We believe the cumulative royalty will be even lower for W-CDMA than GSM, which has enjoyed unrivalled success compared to any other standard in the world,” said Ericsson Senior Vice President Torbjorn Nilsson.