This was not a global victory, however. The ETSI decision to adopt CDMA technology suited Qualcomm down to the ground, says Beijer. “They looked really happy when the decision was made. ‘Qualcomm will not cause any trouble,’ Qualcomm’s delegate said and patted me on the back with a smile all over his face when he checked out of the hotel and left for San Diego.”

But there was trouble, as Uddenfeldt recalls: “In the spring of 1998, Qualcomm began to take action. The company wanted to stymie the 3G standard and announced that it had no intention of making its patents available for WCDMA. Qualcomm had numerous patents for narrowband CDMA and claimed that some of these also covered WCDMA.

“At Ericsson, we then went public and stated that where we were concerned, we were not willing to make our patents available for CDMA2000. Ericsson owned, and still owns, fundamental patents that CDMA2000 infringed, such as ‘soft handoff’, which Ericsson [through Uddenfeldt himself] patented in the mid-1980s.”  

Ericsson had in fact brought a suit against Qualcomm, through the then head of its American operations, Sven-Christer Nilsson, for patent infringement as early as 1995–1996 when it was obvious that the company intended to use Ericsson-patented features commercially. Qualcomm countered by suing Ericsson for the same thing.

Another development came when Qualcomm began to take action to “harmonize” WCDMA with its own CDMA2000. It was, says Beijer, “the kind of harmonization that meant essentially adapting WCDMA unilaterally to CDMA2000. There was no talk of adaptation in the other direction. They wanted to be able to milk royalties from the rest of the industry.” In this attempt Qualcomm sought support from a constellation of operators that called itself OHG (Operators Harmonization Group).

This meant that two parallel processes now started. One was public and attracted a great deal of attention, while the other created much less clamor.

TRADE WARS THREATEN

The first process involved the threat of a trade war between Europe and the US because of ETSI’s 3G decision. This initially consisted of Qualcomm’s accusation that ETSI had anticipated events by not waiting for an ITU decision on 3G. The ITU had set June 30, 1998, as the last date for proposals for a global 3G standard but Europe had decided on its course well before this, and was in the process of closing its markets to American technology.

It transpired that a total of four American proposals for a global 3G standard reached the ITU before the closing date. One was identical to the European proposal.

The conflict was taking place in an environment in which the US had obviously fallen behind Europe in the development of mobile telephony; one reason was the conflicting standards that still meant it was often impossible for Americans to phone each other. At the same time Ericsson and Nokia were going from strength to strength. In 1998 Nokia became the largest supplier of telephones in the US after a collaboration agreement with AT&T Wireless.

"HOLY WAR"

The conflict escalated in August after the European Commission announced a proposal for ETSI’s decision to be the basis of 3G in all EU member states. This added grist to Qualcomm’s mill and Motorola also began to speak out. Motorola’s chief lobbyist on this issue, Mike Kennedy, was quoted by Finnish newspaper Helsingin Sanomat, for example, as saying that a “holy war” was imminent.

The European Commission’s official decision on the 3G standard came on December 14, 1998, and was in line with the proposal. Five days later – which happened to be the same day as Bill Clinton’s impeachment – the US sent a sharply worded letter to Commissioner Bangemann in which the EU was accused of restricting competition in 3G telephony.

The signatories to this letter included the secretaries of state for foreign affairs, Madeleine Albright, and for trade, William Daley, and it could only be construed as a serious threat of a trade war. Bangemann sent a response a month later after having requested material from Ericsson, Nokia and others. Its main points were that the EU was not binding member states to use only European technology, only that at least one operator in each country was required to do so. This made it possible to guarantee that European mobile phones would work in all members states, as was also the case with GSM.

Author: Svenolof Karlsson & Anders Lugn

© Telefonaktiebolaget LM Ericsson and Centre for Business History

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