Telecom Chiefs on Same Wavelength
The wireless industry--from equipment makers to carriers and even government trade officials-- breathed a collective sigh of relief last week when phone rivals Ericsson of Sweden and San Diego-based Qualcomm Inc. announced that they had resolved their years-long technology disputes.
Their multifaceted agreement headed off a patent infringement trial that had been set to begin soon in Texas, and it clears the way for the selection of a single worldwide standard for wireless technology.
The companies will cross-license their technologies, and Ericsson will acquire Qualcomm’s money-losing wireless network equipment units in San Diego and Boulder, Colo. Fresh from an employee meeting in San Diego, Qualcomm Chairman and Chief Executive Irwin Jacobs and Ericsson President and Chief Executive Sven-Christer Nilsson sat down with The Times to discuss their past relationship and the future of wireless telecommunications.
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Question: Over the years, the relationship between your two companies has been icy, to say the least. How has that changed with this agreement?
Jacobs: I think we’ve always had a good personal relationship. In business, when you are not joined together, you end up competing, and I think both companies have competed reasonably fiercely. Luckily, I think for both companies, we did work through an agreement and now we’re going ahead.
Nilsson: I think that we have been able to differentiate between our personal relations and the business. We have had a lot of feelings and emotions in this as well. But we are both rational in the way we do business, and we felt this was an opportunity for both companies.
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Q: Some people believe there was some stubbornness and ego on both sides that delayed this pact.
Jacobs: This was really a business issue that was many-dimensional. They involve Qualcomm; they involve many U.S. manufacturers and many manufacturers and licensees around the world; they involve operators who have taken pioneering steps with CDMA [code division multiple access, the technology developed for commercial use by Qualcomm]; and they involve regions and countries and jobs and economies. So it’s really a very, very complicated situation. Sure, I suspect there may be a little ego and personal feelings among any of us, but I think the main thing is how do we do good business and how do we do the right thing for a wide variety of people, including our shareholders?
Nilsson: Out there in the barricade, in the marketplace, we were fighting very much for our causes. We also have to appreciate that people working with new systems and new technologies, they normally have a big pride in what they have achieved. This is really also what makes things happen, that you have a belief, that you have a vision that you believe in.
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Q: What was the biggest factor in finally reaching agreement now?
Jacobs: This is a very rapidly growing industry, and every day there is some new event that puts pressure on you, if you have some disagreements, to get those ironed through. I think the hardest deadline was the trial, and that got us talking very, very seriously.
Nilsson: It’s not too uncommon to make a deal on the courthouse steps. I wasn’t interested in spending so much money on the court proceedings. I think we both realized that whatever resolution that we would get from this trial, it would not resolve the issue. What we did was to look beyond the trial a touch to get a more holistic view of the issues between our two companies.
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Q: How long did it take to hammer out this deal?
Nilsson: I would say we started really to bring up a very good dialogue about a year ago. I would say for the last six months, we had much more intense [discussions]. And then the last three months, they were extremely intense.
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Q: What about the future, in services and in phones and the like?
Nilsson: The third generation is really about mobile Internet and mobile electronic mail. The next battleground will actually be in media and content coming into this. Here I would say that the world will be predominantly wireless in the future.
Jacobs: Where the world is going really is toward Internet protocol, and Internet protocol not only for the data, but also for the voice. Over time, although it appears we have something of a divide between the networks, I think even that is going to get blurred because we’re all going to be converging much more toward the Internet.
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Q: Where are phone companies going to be in the future?
Jacobs: Once you provide low-cost Internet connections, then a lot of services that one has had to buy through the traditional operators suddenly are available from entrepreneurs offering services on the Net. I think the services direction will change quite a bit to being supported by the Net, and once you have that access, you can do all sorts of different things. The operators will still have some value-added services, but probably much less so than they have had in the past.
On the handset side, that’s going to be an interesting change too. Clearly, we’re all going toward more powerful handsets. I believe that the laptop computer will probably disappear, and the handset will replace it. Voice recognition will have to be a key part of that.
The direction of manufacturing may change as well.
Nilsson: I have a different view there. Today, we see that the traditional telecom companies have some features in their networks that are extremely important. That is, they have robust networks, they have quality of service, they have a guaranteed delivery in real time, etc. The datacom market and some of the Internet service providers, they have a best-effort approach to this: “If we can deliver, we deliver. If we don’t do it today, we’ll do it tomorrow,” although I exaggerate a little bit.
The Internet protocol approach has a lot of interesting benefits for any operator because it is simple, it is cost-efficient and convenient to use. What is happening is we are seeing a convergence between the two.
We will also see a trend toward converging operators. I believe that we will see 10 to 15 big global operators carrying all of the international traffic. We have seen that convergence trend already. I believe that the traditional telecom operators--the ones that really embrace the Internet protocol, the datacom thinking--they will be the winners. But in all of these areas, there will be an element of the traditional carriers, because they own the customers today--they have the access to the customers.
