Thursday, August 27, 2009

FUD against EV-DO in China

W-CDMA supporters in China are running a campaign of fear, uncertainty and doubt (FUD) against EV-DO efforts there, in a rehash of their strategies from the 2G CDMA wars.

In the great 3G reorg of China last year that created three mobile operators, China Unicom got GSM/W-CDMA, China Telecom got CDMA/cdma2000 and China Mobile got the homegrown TD-SCDMA. On January 7, all three were awarded their 3G licenses after more than five years of delay.

In a story on China Unicom’s plans to sell the iPhone in China, Forbes included some commentary on China’s three-way fight for 3G market share:
Unicom was given a WCDMA (Wideband Code Division Multiple Access ) license. China Mobile, which holds a commanding 74% share of domestic subscribers, obtained TD-SCDMA (Time Division Synchronous Code Division Multiple Access), a homegrown 3G standard based on spread spectrum technology that is different from approaches used in the West). And China Telecom was allowed to develop CDMA 2000 (a hybrid 2.5 or 3G technology which built on code division multiple access, or CDMA, technology used worldwide.

Among the three, China Unicom's WCDMA is regarded as the leading 3G approach. What's more, it's the only 3G technology used by the iPhone.
This sort of FUD marketing strategy is a classic technique by a dominant player to marginalize competitors. IBM in the 1970s was credited with inventing the strategy for the tech industry, and of course Microsoft used it against open source software or other rivals in the 1990s.

Perhaps cdma2000 1x is a 2.5G technology ala EDGE. The fights between GSM and CDMA camps over what should count as “3G” caused a fair amount of disagreement.

But certainly EV-DO — as fast as W-CDMA’s HSDPA — is a 3G technology. This year China Telecom has issued a series of tenders for procuring EV-DO equipment. The company is preparing a new round of handset tenders and can brag about superior data performance.

So to say China Telecom is only developing “2.5G” is a lie. The claim about W-CDMA being the leading technology is true from an adoption sense, if not from a standpoint of technological performance.

I wasn’t there, so I don’t know where the reporter got the bad information. The Chinese equipment suppliers are the least likely suspects, since leading firms like Huawei and ZTE provide equipment to all three of the major standards: W-CDMA, cdma2000, and TD-SCDMA.

However, based on the bitterness of the GSM vs. cdmaOne (or W-CDMA vs. cdma2000) fight, the most likely suspects are those who want to commercially weaken cdma2000 and China Telecom. That leaves either rival operators (China Unicom, China Mobile) or foreign W-CDMA equipment providers such as Nokia and Ericsson.

Tuesday, August 18, 2009

InterDigital loses key patent case

On Friday, InterDigital lost an effort to enforce four key 3G patents on Nokia’s cellphones.

Of course, IDCC will appeal. Company supporters hope IDCC can win a favorable settlement — as it did with Samsung.

I don’t see a settlement in the cards. As the world’s largest cellphone maker — and thus the largest royalty target — Nokia has been playing hardball all the way. Of course, in 2008 Nokia settled its war with Qualcomm, on very favorable terms.

My sense is that Nokia places a much greater value on the Qualcomm patent portfolio — or at least considers it impossible to work around all their IP without getting some sort of license.

In the face of a precedent that (if sustained) could begin to destroy its business model, IDCC shares lost 23% of their value on Monday and were essentially flat Tuesday. This seems a little optimistic.

Barron’s reports:
Hilliard Lyons analyst Tom Carpenter maintains his bullish stance on InterDigital despite the setback at the ITC. Carpenter notes that Nokia could still lose on appeal, which could trigger a licensing deal between the two companies. He thinks Nokia could still end up paying IDCC 35 cents per handset, or as much as $300 million over five years.

Even if the company fails to win on appeal, Carpenter contends IDCC’s patent portfolio could make it a potential acquisition target for Research in Motion (RIMM), Cisco (CSCO) or even Nokia. The potential appeal: IDCC holds a large number of patents on LTE, the 4G transmission technology that has been adopted by most wireless carriers.
While I understand the large pool of IDCC bulls, I don’t get this, either. I guess it all depends whether you consider this court case a fluke, or representative of the quality of the rest of its patent portfolio.