Mobile phones set to go global

News Analysis: A world standard for cellular phones is closer as Ericsson and Qualcomm settle patent dispute
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The Independent Online
THE PROSPECT of a single standard for the world's mobile phones moved a step closer yesterday as Ericsson and Qualcomm, the mobile phone equipment makers, finally settled a long legal dispute about who owned the patents controlling the technology.

The battle, which has dragged on for years, threatened to delay the introduction of the third generation of mobile phone networks by casting doubt on the technical standard that would eventually win.

The third generation of mobiles, likely to come on to the market in the next three years, will be capable of sending and receiving large amounts of data at high speed. This will allow users to access the Internet and log on to company computer networks using their mobiles.

The technology will also increasingly be built into laptop computers and hand-held mobile terminals. Industry analysts estimate there will be 700 million such devices in circulation by the year 2005.

In a complex deal Qualcomm, a small but aggressive US manufacturer, is selling its wireless infrastructure business to Ericsson, the Swedish group that is one of the "big three" of the mobile phone industry. Meanwhile, the two companies will license each others' technology and abandon a lawsuit that had been due to start in the next few months.

Ericsson did not reveal how much it was paying Qualcomm for the division, which employs one-tenth of the US group's workforce. "This is a win-win situation," said Dr Irwin Jacobs, Qualcomm's chairman and chief executive. "It will benefit both companies and hopefully consumers as well."

The deal was welcomed by mobile phone operators around the world, many of whom had put pressure on Ericsson and Qualcomm to settle their differences. A spokesman for Vodafone, the UK group in the process of merging with Airtouch of the US, said the deal paved the way for the world to adopt a single standard of mobile phones for the first time.

At the heart of the dispute is the current second generation of mobile phones, which are incompatible between the US and Europe. Europe has almost universally adopted the inaccurately-named Global System for Mobile Communications, or GSM, but large parts of the US use a rival, Code Division Multiple Access or CDMA.

The next generation is based on an evolution of CDMA. However, while Ericsson put forward a standard called Wideband CDMA, Qualcomm insisted on an alternative known as CDMA 2000. Qualcomm also claimed control of key patents required to develop the technology and refused to license the patents to Ericsson unless it adapted its standard.

At one time the dispute threatened to escalate into a fully-fledged trade war as Charlene Barshefsky, the US trade representative, accused the EU of blocking US manufacturers from its markets.

Under the terms of the deal, a new standard based on CDMA will emerge, although with three slightly different variations. However, the differences are sufficiently small to allow mobile phone manufacturers to make handsets capable of switching between all three. So when third-generation networks are finally up and running, users should be able to use their phones around in the world.

"The alternatives will be driven by the operators themselves," Mr Jacobs said, adding that the deal opened the way for proper competition between rival manufacturers.

The emergence of a single standard is likely to simplify the auctions to allocate licences to run third-generation mobile networks, which are due to be held in the UK in the autumn, because it means the cost of equipment is likely to be much lower. "This way there is not so much of a problem for the operators," said Paul Sharma, telecoms analyst at Henderson Crosthwaite. "It shows that industrial logic always wins out in the end."

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