BWA auction can kick up dust

India’s broadband spectrum auction promises to be a long and bloody battle between the backers of Wimax, led by Intel, Samsung and Motorola and a host of PC-industry firms and backers of LTE, backed primarily by mobile industry firms such as Ericsson, Nokia Siemens Networks and Qualcomm.

At stake is the wireless future, and of course, billions in yearly profits from patent licences to the winners.

The result will also determine how widespread wireless connectivity will be, whether, for example, you will be able to directly upload your pictures from your digicam to your facebook account or not.

Despite Wimax being on a much stronger wicket, round one has gone to the LTE (short for Long Term Evolution) camp, thanks to a nifty move by Qualcomm, whose investments would be jeopardised if Wimax was to fully capture the 4G crown.

In line with the strategy it has widely used in the past to promote its technology, it put in an application to directly acquire half of the broadband spectrum coming up for auction.

If it wins, it will sell or ‘divest’ the spectrum to an actual operator after keeping it with itself till the LTE technology becomes ready, around 2-3 years from now.
The Wimax camp, of course, is not amused.

“It will be a setback for India’s broadband penetration,” says C S Rao, chairman of Wimax Forum, an industry group backed by Intel and others.
In the 2-3 years that LTE will take to mature, Rao says, Wimax can provide 2 to 3 crore (20-30 million) broadband connections using the amount of spectrum that will be ‘kept in waiting’ by the advocates of LTE.

“After a decade of efforts, we are still at 70 lakh [7 million] broadband connections. The two slots of broadband spectrum is our chance to take it to 54 to 60 million.. We cannot let profit considerations override national interest,” he says.

Qualcomm, which owns a large chunk of 3G patents, is unique in the LTE camp due to its heavy dependence on patent royalties. Others like Nokia Siemens, Ericsson, Sony Ericsson etc. are primarily equipment manufacturers. So, if Wimax trumps LTE, they could simply switch over to making Wimax equipment, though they will no longer get as high a share of the patent royalties as they would from an LTE world.

Qualcomm’s predicament also forces it to abandon the pooling approach that most other patent holders are advocating, both in Wimax and LTE. Under the pooling arrangement, the tens of different companies that each own part of the patents that is required contribute their rights to a common pool, in exchange for receiving the rights to use everyone else’s patents for their products. Qualcomm, whose hardware business is still fledgling, has little to gain from such pooling approaches and has steadfastly kept out of them, including for LTE. Instead, the firm — which owns around a quarter of the LTE patents — has said that it will charge 3.25% of the price of LTE-enabled device.

Other LTE partners fear that Qualcomm’s selling-price based approach will restrict LTE to low-priced devices, as was seen in case of Qualcomm’s CDMA market which flourished only in the low end.

It will also discourage computer, TV and camera manufacturers from embedding LTE in their products as they will have to shell out 3.5% of the overall price to Qualcomm for a non-essential feature. Besides, if the other vendors also start charging similar rates, the total royalty amount would be around 15% for LTE, compared to less than 1% for Wimax.

On the other hand, the ‘pooling’ strategy has more or less been completely successful in the Wimax camp. Intel, Acer, Samsung, Motorola and a few others have formed an ‘Open Patent Alliance’ which has a third party administered ‘patent pool’. According to Rao, the pool can supply “almost 100%” of the technology required for bringing out Wimax-enabled devices. “We don’t necessarily charge it as a percentage of selling price.. but for reference, the effective royalty rate is currently between 0.6-0.8% of the sale price,” he says.

To prevent Qualcomm from keeping spectrum in waiting for its technology to emerge, the Wimax Forum has already made presentations before IT and Communication minister A Raja, the Telecom Regulatory Authority of India and the telecom commission. It has requested to put conditions in the spectrum award, requiring winners to start actual roll out at least by the end of one year after they get the spectrum. Currently, winners can more or less sit on spectrum for five years. “They have said they will look into it,” Rao says.

Qualcomm is prepared for the long haul. “It is an open auction. Anyone can come and pay and acquire the spectrum. It is not like we are getting it through underhand means. If we get it, it will be because we are shelling out the price,” says a company official, not authorised to speak to the media.

From the murmurs in the Wimax camp, a Qualcomm victory in the auction is almost immediately likely to be challenged in court.

“The objective of the auction is to promote broadband penetration in the country, as it is given in the NIA [notice inviting applications]. The purpose is not to help one technology against the other. If any winner goes against the intent behind the spectrum auction, it is liable to be challenged in court,” says an official with a vendor in the Wimax camp.