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Industry News

Commercial Market

June 1, 1999
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Commercial Market

Ericsson/QUALCOMM Resolution Raises New Concerns

According to the terms of a series of definitive agreements, Ericsson and QUALCOMM have resolved all of their outstanding global disputes relating to CDMA technology. The agreements call for the companies to jointly support a single world CDMA standard with three optional modes for the next generation of wireless communications, to enter into cross licenses for their respective patent portfolios and to settle any existing litigation. (The royalty-bearing cross licenses are specified for CDMA subscriber units sold by either party.) Ericsson will also purchase QUALCOMM's terrestrial CDMA wireless infrastructure business, including its research and development facilities in San Diego, CA and Boulder, CO, and assume select customer commitments, including a portion of vendor financing obligations, related assets and personnel.

The agreements settle the litigation between the companies and provide for cross licensing of intellectual property rights (IPR) for all CDMA technologies, including cdmaOne,™ wideband CDMA and cdma2000.™ QUALCOMM will receive the rights to sublicense certain Ericsson patents (including those asserted in the litigation) to QUALCOMM's application-specific IC (ASIC) customers.

The companies have also agreed to jointly support approval by the International Telecommunications Union (ITU) and other standards bodies, including the US Telecommunications Industry Association and the European Telecommunications Standards Institute, of a single CDMA third-generation (3G) standard that encompasses the three optional operational modes: direct-sequence frequency-division multiplexing (FDD), multicarrier FDD and time-domain duplexing. Each mode supports operation with both GSM MAP and ANSI-41 networks. The companies will notify the ITU and other relevant standardization bodies of the agreement to remove all IPR blocking currently in force.

In response to these developments, a new study from Shosteck Associates Ltd., - "The Political Drivers behind Spectrum Value: The Profit Risks and Implications for Third Generation Wireless," predicts that the Ericsson/QUALCOMM dispute settlement will remove all barriers to 3G auctions and expose network operators to serious financial problems. While the disputes were unresolved, progress toward 3G auctions, standards, equipment and deployment were delayed and network operators could defer consideration of a 3G investment. The operators now face governmental, regulatory and equipment manufacturer claims that the new technologies offer new services for which subscribers will pay. However, the report points out that these claims mask a convergence of interest by these parties to enhance the value of the technologies and the spectrum associated with them.

While the government's agenda is to sell the spectrum at a maximum price, the study suggests that, notwithstanding greater use, spectrum supply is shifting from shortage to surplus. As a result, the value of spectrum has declined from as high as $208 M/MHz for a nationwide license to $1 M/MHz, a decline that is expected to continue. Manufacturers' interest in raising spectrum values is based on their desire to sell equipment for such services as multimedia and full-motion video.

The study suggests that the most serious risk to the operators in the transition to 3G is the uncertain business scenario. However, carriers may be forced to move forward due to heavy pressure. For additional information, contact Jane Zweig at Herschel Shosteck Associates (301) 589-2259 or jzweig@shosteck.com.

Millimeter-wave System Potential Reviewed

A new study from Allied Business Intelligence, "Millimeter Wave 1998: Broadband Wireless and Automotive Radar Markets, Opportunities and Forecasts," predicts strong growth for millimeter-wave systems in 38 GHz radio, broadband satellite, local multipoint distribution system and automotive collision warning system applications over the next 10 years. (As established wireless markets mature, system suppliers and component manufacturers are seeking new applications to maintain double-digit growth. For many, the answer is millimeter wave.) Shipments of these systems (not including point-to-point millimeter-wave radio links) are expected to grow from $33 M in 1998 to over $2.1 B in 2003 and increase more sharply thereafter. Cost is currently a limiting factor. The development of low cost packaging for millimeter-wave components, the availability of highly integrated ASICs and the adoption of automated assembly methods are expected to bring the current high costs under control.

The study, scheduled to be released in September, assesses four millimeter-wave markets in addition to the millimeter-wave component market. For additional information, contact
Tim Archdeacon at
Allied BusinessIntelligence
(516) 624-3113, fax (516) 624-3115
or info@alliedworld.com.

Worldwide Space Manufacturing and Services Market to Exceed $250 B in 2003

According to a new study from Business Communications Company Inc., "Commercial Satellite Industry: Manufacturing and Services," the worldwide market for the space manufacturing and services industry (which totaled more than $68 B in 1998) will increase at an average annual growth rate (AAGR) of 30 percent and reach $251 B by 2003. The $39 B 1998 US market is forecast to grow at an AAGR of 30 percent to $145 B in 2003. The market in the rest of the world is expected to grow at the same rate and reach $106 B in 2003. While early satellite systems were mainly geocentric earth orbit (GEO) systems, the continued evolution of applications for low earth orbit (LEO) and big LEO or middle earth orbit satellite systems is expected to revolutionize the industry. These applications are being driven by the increasing demand for broadband services, including video and multimedia traffic and Internet access.

Worldwide markets for satellite manufacturing and ground system support used in tracking, monitoring and data gathering totaled $32 B in 1998 while the US share was approximately $20 B. Through 2003, these US markets are forecast to grow at an AAGR of 38 percent and reach $100 B in 2003. These markets in the rest of the world are expected to grow at an AAGR of 34 percent, reaching $52 B in 2003 for a total expected worldwide 2003 market of $152 B. Worldwide LEO and GEO commercial space markets are expected to grow from nearly $21 B ($8.5 B in the US) in 1998 to $65 B ($20 B in the US) in 2003, an AAGR of 26 percent. Rest-of-the-world commercial space markets reached $12 B in 1998 and are forecast to grow to $45 B in 2003 with an AAGR of 30 percnt. For additional information, contact Malika Rajan at Business Communications Company Inc. (203) 853-4266, ext. 309 or publisher@buscom.com.

Lucent Technologies and AT&T Announce $1 B Agreement

Lucent Technologies has entered into an agreement with AT&T to supply an expected $1 B worth of equipment and services for the next phase of AT&T's DigitalPCSSM network buildout and ongoing business in existing wireless markets. The four-year agreement includes the construction of new wireless networks for some of AT&T's planned 1900 MHz markets, enhancements to key existing 850 MHz markets and ongoing business. Lucent's digital wireless technology is expected to enable AT&T to support more customers on its existing wireless network and help AT&T evolve its network with next-generation technology that will offer such new services as wireless Internet access over AT&T's Digital PCS TDMA network or while traveling internationally. AT&T's TDMA wireless network will incorporate high speed data systems similar to those planned by carriers with GSM networks. Lucent's  recently announced TDMA wireless platform will enable network carriers to offer third-generation wireless services, including seamless global roaming and converged voice, video and data applications.

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