In WiMax, It's Qualcomm vs. The World

My colleague Bill Alpert, who writes the Technology Trader column in Barron’s, is in Boston this week attending the WiMax World conference, and filed the following dispatch following Tuesday’s sessions:

Qualcomm (QCOM) is the ghost at the banquet, here at WiMAX World, a Boston conference about the WiMAX wireless broadband technology that promises to be a kind of city-wide version of your home’s WiFi network. Intel (INTC) and several hundred other companies are promoting WiMAX as a lower-cost alternative to cellular services — and a key part of the low cost formula would be WiMAX’s purported freedom from the patent royalties that Qualcomm now levies on many cellular products.

Qualcomm is just about the only wireless vendor that hasn’t jumped on the WiMAX bandwagon, and the San Diego-based company often reminds WiMAX enthusiasts that it has more than 600 patents that it may assert over WiMAX.

Along the corridors of this conference, half the conversations I overhear seem to be discussing what Qualcomm will do.

So the WiMAX World organizers invited Qualcomm to give a presentation. Jeffrey K. Belk, senior VP for strategy and business development, gave a jolly talk about a future in which many wireless technologies coexist peacefully. He described a road warrior salesman — a couple of years from now — whose handset would have five different radios: cellular, Bluetooth, GPS, television and WiFi. That road warrior would simultaneously be doing many cool things wirelessly. None of them apparently required WiMAX.

Belk said he’d been at a wireless conference in Singapore last week, where WiMAX fans made conflicting claims about their technology’s cost advantage over cellular. One said WiMAX chips would be one-tenth the price of Qualcomm chipsets, but another said WiMAX would cost one-third. Which will it be? “Until somebody starts showing real trial results, real prices, real performance…,” Belk said, “…there should be some healthy skepticism.”

Meanwhile, he said, the cost of Qualcomm’s technology has been falling. The least expensive handsets based on Qualcomm’s chips cost $77 in 2003. This year, they cost $42. WiMAX advocates brag that their large ecosystem of manufacturers will ensure low prices. But for years to come, the cellular ecosystem will be much bigger, said the Qualcomm VP. He cited Yankee Group predictions of 270 million advanced cellular subscribers in 2007, compared to about 2.5 million WiMAX subscribers. By 2010, the predictions are for 600 million cellular subscribers versus 23 million using WiMAX. Cellular manufacturers like Qualcomm will enjoy substantial economies of scale, said Belk, compared to WiMAX.

I asked him if Qualcomm might ever join in on WiMAX. Qualcomm would never say never to WiMAX, he said, citing Qualcomm chief executive Paul Jacobs. Belk notes that Qualcomm did join in developing WiFi technology, after waiting several years for WiFi standards to gel. WiMAX will also take a while to iron out its kinks, Belk suggested: “It’s going to be several years at minimum before Qualcomm will have to decide one way or another.”

While Qualcomm asserts that WiMAX may yet find that its royalty burden is no less than cellular’s, the industry group known as the WiMAX Forum plans a Thursday morning presentation here at Boston’s WiMAX World in which the WiMAX gang reports their survey of the patents necessary for WiMAX’s success. The WiMAX Forum study will apparently say that no one company — not Qualcomm, not Intel — has a dominant position in patents covering WiMAX. There will be no blocking patents, like those that Qualcomm enjoys in the digital cellular market.

I look forward to Qualcomm’s response.

One of the exciting promises of Internet telephony is toll-free calling from WiFi handsets. Within range of a WiFi base station (or conceivably, a WiMAX base station), you wouldn’t have to use up your cellular minutes.

Large enterprises could realize substantial savings from “dual-mode” phones capable of seamlessly hopping from cellular to WiFi, especially with many enterprises now replacing their office phones with Voice-over-Internet Protocol systems. But the leading VoIP supplier Cisco Systems (CSCO) has lamented that cellular operators seem in no great rush to certify dual-mode handset models that would allow cellular subscribers to user fewer cellular minutes.

So I was intrigued when a bunch of WiMAX World panelists predicted that the arrival of cellular-WiFi would be huge. Motorola (MOT) marketing executive Hossein Parandeh said that his company was testing such dual-mode phones.

Which operators are removing their roadblocks, I asked him? Some wireless operators own both cellular and WiFi networks, he hinted.

Which ones? Two of the operators fitting that description were British Telecom (BT) and Verizon Communications (VZ), he said.

So has Verizon Wireless been testing dual mode phones? “I can’t comment,” said the Motorola vice president, who quickly shook my hand and said, “Gotta go!”