Before Qualcomm

In the past few weeks, I’ve been hearing from old friends, my in-laws — and even a total stranger — about my article in the latest issue of the Journal of San Diego History.

The article, entitled “Before Qualcomm: Linkabit and the Origins of the San Diego Telecom Industry,” is the lead article of the Winter/Spring issue of the journal, which arrived in San Diego homes late last month. The text won’t be online for many months, and the journal doesn’t use abstracts. So let me quote the introductory paragraphs:

Most San Diegans know that our largest high-tech enterprise of the past decade is Qualcomm, a Fortune 500 company. Qualcomm—founded by Irwin Jacobs and Andrew Viterbi and five others—is recognized locally for the wealth that it created for founders, employees, and investors. It also enjoys a reputation for helping to fund many local philanthropic and charitable efforts.

Outside the local telecommunications industry, however, few people realize that the Qualcomm was the second company founded by Jacobs and Viterbi, not the first. The earlier startup, Linkabit, moved from Los Angeles to San Diego in 1971 and, over the next twenty-five years, helped to generate more than two hundred separate telecommunications companies. A series of fortunate coincidences—rather than a carefully thought out economic strategy—is the main reason why San Diego has a significant telecommunications industry.

This article traces the paths of Jacobs and Viterbi from their New England childhoods to their Massachusetts Institute of Technology (MIT) engineering degrees to the founding of Linkabit. It shows that Linkabit—its early application of cutting-edge communications technologies, its eventual sale, and the eventual dispersal of the company’s key engineering talent—was the catalyst that led to other new companies, including Qualcomm.

Because I expect to write other articles for the journal, I wanted my first JSDH article to tell the back story that few people know. Meanwhile, the journal wanted something with the “Q” word so that people would know why they were reading it. To achieve both goals, I worked with USD history professors Iris Engstrand and Molly McClain, who edit the journal on behalf of the San Diego Historical Society.

In the end, two-thirds of the article is about the story up until 1985 — when Jacobs and Viterbi left Linkabit, later starting Qualcomm a few months later. The final one-third is about the first 10 Linkabit spinoffs:

• ComStream (1984)
• Sciteq (1984)
• Qualcomm (1985)
• ViaSat (1986)
• MultiSpectra Engineering (1986)
• Pacific Communications Sciences, Inc. (PCSI) (1987)
• Indra Technology (1987)
• Primary Access (1989)
• Milpower (1989)
• Torrey Science (1990)

The final article was adapted from drafts of Chapter 5 and 6 of my (in progress) book, which cover Linkabit and its spinoffs. It also drew from my research into Andy Viterbi at JPL, which is both part of Chapter 3 of the book and my 2008 article on “Deep Space Communications as the Lead Market for Shannon Theory.”

Overall, we are all proud of the article. For me, it’s a chance to introduce myself to my hometown audience. For the JSDH, it’s a chance to get more local technology history in the journal.

What I really enjoyed was the chance to use so many photographs — something that’s never possible in an academic journal (except for a history journal). Most prominent were the color photos of Jacobs and Viterbi on the cover. Beyond these two men, I also got photos from Martha Dennis and some really cool ads from various archives. Together, they give a sense of what it was like for the Linkabit founders and employees back in the 1970s and 1980s.

The full article will eventually be online at the JSDH website. The historical society sells memberships (with subscriptions) at $40/year or back copies at $20 each.

Update, December 2009: The article is now available at the JSDH website.

Broadcom gets what it wants--but not 3G or 4G

On Sunday, Qualcomm and Broadcom announced settlement of their patent disputes in identical press releases from San Diego and Irvine. So far this morning, Qualcomm stock is up 6% and Broadcom stock is up 0.8%.

As with Qualcomm’s settlement last summer with Nokia, the agreement settles all existing disputes and lets Qualcomm and Broadcom get on with their business:

The agreement will result in the dismissal with prejudice of all litigation between the companies, including all patent infringement claims in the International Trade Commission and U.S. District Court in Santa Ana, as well as the withdrawal by Broadcom of its complaints to the European Commission and the Korea Fair Trade Commission. Under the agreement, the companies have granted certain rights to each other under their respective patent portfolios.

The press has emphasized the financial terms — Qualcomm paying $891 million over the next 4 years, including $200 million this quarter — which is clearly a lopsided settlement to allocate patent usage rights between the two companies.

TradingMarkets summarizes the numerous complex cases. However, the core issue was simple: Broadcom prefers royalty-free cross-licenses and has sought to coerce Qualcomm into providing same, using its various developed (and acquired) patents to win infringement judgements against Qualcomm.

Qualcomm sought at all cost (as it always does) to avoid setting a precedent that would undercut its core business model and revenue streams from the entire 3G (soon to be 4G) industry. It’s clear that Qualcomm paid dearly to settle the infringement claims without setting that dangerous precedent.

What seems to be under-reported is how the summary of the terms defines a clear partition of the industry:

• Qualcomm’s customers get use of Broadcom’s patents for Qualcomm’s ICs in cellular products, but not for non-cellular products.
• Broadcom’s customers get use of Qualcomm’s patents for Broadcom’s ICs in non-cellular products, but not for cellular products.

The only interpretation I have is that each firm is ceding key turf to the other: Qualcomm will stay focused (naturally) on cellular-related products, while Broadcom appears as though they will be avoiding cellular products that require Qualcomm’s patents.

At Qualcomm’s instigation, the first paragraph asserts

The terms of this agreement will not result in any change to Qualcomm's 3G (e.g., CDMA2000®, WCDMA and TD-SCDMA) and 4G (e.g., LTE and WiMAX) licensing revenue model.

The wording implies that Qualcomm changed its non-3G, non-4G revenue models. In other words, Broadcom got what it wanted — a royalty-free cross license — but not in cellular. This precedent seems to be the narrowest that Qualcomm could offer to satisfy Broadcom without hurting its core business.

On the analyst call, I would want to ask Qualcomm if the rights it granted Broadcom for non-cellular products will force it to renegotiate or otherwise change the terms of any other existing royalty agreements. My guess is that this is a small part of Qualcomm’s business, but as an analyst I wouldn’t want to guess.

However, the questions for Broadcom are more fundamental. It’s not clear what this means for Broadcom’s future, since it’s hard to see how they could ship a 3G or 4G product without a cellular patent license from Qualcomm. Had they already decided to give up on cellular and stay more in PCs and consumer electronics? Are they foreclosing cellular growth to avoid fighting Qualcomm? Or are they going to come back for a royalty-bearing agreement later on?

San Diego's Android connection

Last week I was able to attend an Android event held in Sorrento Mesa. Despite the inextricable link between Android and its Google parent, San Diego has a strong representation in the Android ecosystem.

At the event — as at any gathering of SD telecom companies — the 600 lb. gorilla was Qualcomm. The big Q was one of the five founding members of the Open Handset Alliance.

Of the four presenters, two were local companies among the 34 OHA founders: Qualcomm and PacketVideo. Three other non-local founders were also represented: host Wind River (based near Oakland but acquired a San Diego operation) and attendees from LG and Sprint.

The panel was

• Jason Bremner, Senior Director, Product Management, Qualcomm QCT (responsible for Multimedia, Winmobile, and all activities surrounding Android at QCT).
• Dr. Cheuk Chan, Senior Vice President, CORE Client Products, PacketVideo (Dr. Chan's team is responsible for PV's OpenCore, which is the multimedia framework for Android)
• David Tokunaga, Director of Technology Marketing, Nokia
• Egil Gronstad, VP Technology Planning, Leap Wireless

Bremner talked how Qualcomm’s traditional two application platforms — Brew and Java — now include BlackBerry, Windows Mobile, Android and Linux. In the future it will also be supporting Brew MP, Flash and Symbian.

Qualcomm is providing chipsets for a wide range of Android devices. The first Android phone, the G1, was launched with Q’s MSM 7201A (which will also be used with the HTC Magic). Bremner said Qualcomm had the “industry’s broadest chipset support for Android,” with three levels:

• QSD 8650: with 1 GHz MID, 720p HD video (suitable for Android-based netbooks)
• MSM 7600: The replacement for the 7201A, a WVGA video chip suitable for smartphones.
• MSM 7627: designed for sub $150 smartphones with VGA video

Chan talked about how formation of the Open Handset Alliance dates to 2006 — the year after Google acquired Android and a year before the public announcement of the Open Handset Alliance.

Tokunaga talked about general principles of open platforms in the context of the Nokia-owned Symbian open source platform. My ears perked up when he talked about “open enough” platforms — open enough to attract third party enhancements but closed enough to be controlled by a firm. (The reason my ears perked up is that “How open is open enough?” was the title of my 2003 paper on open source firms strategies).

Finally, Gronstad talked about this from Cricket’s standpoint. (Egil gave us a long intro on Leap, and several of us noted that the company and its Cricket brand are well known locally.) He talked about their plans to have its CDMA network open to all devices, both those it sells and those it does not. Someday (perhaps not soon) there will be a Cricket smartphone — just as there is already a Metro PCS smartphone (a two-year-old Qualcomm-enabled BlackBerry 8830 once exclusive to Verizon).

Qualcomm working with vendors for more than 20 Android-enable devices. However, a third party developer noted that handset vendors are holding off on releasing new phones because the performance and user experience is not there. Bremner said that “On the G1, we compromised on featureset and performance” to get the device to market, but now the top priority at the Q is to optimize Android performance with the MSM chipsets.

Overall, this partly answers one of my long-term questions. With CDMA going away as a separate air interface, what will be the Qualcomm-specific ecosystem or the benefit of wireless companies to locate in San Diego? There clearly is an increasing role for QCOM chipsets in shipping phones on the CDMA side, and also for Q’s expertise on platform support, thus giving local application developers a leg up over most of the rest of the country.