Nortel joins others in publishing its LTE royalty rates

Nortel Networks has become the latest wireless equipment maker to say it will charge handset makers only a modest royalty fee for using any of its fourth generation LTE technology patents in their gear.

It’s part of a movement by a number of manufacturers to ensure that introduction and adoption of the high-speed LTE (long-term evolution) technology doesn’t get slowed by patent payment disputes. Trials of LTE-capable devices, which will help users download video, music and Web sites faster than ever, could move out of manufacturers’ laboratories and into the field with operators in the U.S. later this year.

Nortel will charge “about one per cent” of sales for use of its LTE patents, which is less than the 1.5 per cent rate another manufacturer has announced, Danny Locklear, Nortel’s director of global wireless marketing, said in an interview Tuesday.

The move is “to help operators who are in the midst of demonstrations and trials and working on their business plans” for introducing LTE service, he said. By publishing its LTE royalty rates, should make it easier for handset and mobile device makers to calculate their manufacturing costs.

“It’s to help the ecosystem and bring about accelerated deployment of next generation broadband,” Locklear said.

Telcom and handset manufacturers have long felt that Qualcomm’s lock on CDMA wireless technology, used by carriers such as Bell Canada and Telus, has held back that standard and forced what they believe are unreasonable patent payments. Meanwhile operators using the GSM standard, including Rogers Communication, have pushed use of its technology further around the world.

According to Iain Grant, managing director of the Montreal-based telecom consultancy SeaBoard Group, Nortel has mixed motives for making public its royalty rate.

For operators and handset makers, it wants to send the message, “Nortel’s not trying to hold you out to ransom,” he said. At the same time, the financially-troubled company also wants to send a message to investors that it’s prepared to exploit its LTE patents, because in Grant’s view LTE is “the next big thing” in wireless.

LTE – which hasn’t yet been standardized – is the next step in the race for faster mobile broadband, often dubbed 4G. Today, CDMA providers are using so-called 3G technology called 1xEVDO, while GSM providers use the HSPA technology.

Until now, GSM and CDMA have been incompatible standards, making it impossible for Bell handset owners to switch to Rogers and vice versa. Meanwhile GSM is used by more operators around the world. LTE may be a way in which the CDMA and GSM merge, which could mean a titanic shift in the industry. There has been constant speculation that Telus and Bell are considering shifting to GSM, which would be costly. LTE could give them a way to get there.

However, Grant says that while HSPA provides a path to LTE without requiring providers to spend a lot of money upgrading their equipment, there isn’t a smooth path from EVDO. As a result, GSM providers are in no rush for LTE, he says, while CDMA providers are pushing the industry for action.

Part of the industry’s response is forming a 4G patent pool called Next Generation Mobile Networks, an alliance of 18 network operators and 28 manufacturers, including Nortel, to push 4G technologies and set standards. However, Nortel has so far refused to join seven companies – including Alcatel-Lucent, Ericsson, Nokia and Nokia Siemens Networks – that in April announced a framework for establishing single-digit costs for licencing intellectual property rights. Locklear said that while Nortel agreed with the group’s goals, “we had some concerns with the way the framework was set up.” In particular, he said, “we believe not all patents are created equal. Some are more valuable [than others] and should be treated that way.”

Meanwhile, Nortel and others continue to trial LTE both privately and at shows like the recent GSM Mobile World Congress.

Verizon, a CDMA carrier, has selected Nortel as an equipment supplier for LTE trials that will hopefully start later this year, Locklear said.

Full deployment of an LTE-enabled network could start in 2010, he said. On the other hand SeaBoard believes LTE won’t be deployed by operators until 2012.

Also in the news, WiMAX, a competing technology, got a boost with the announcement Wednesday that a consortium led by wireless carrier Sprint and fixed wireless Internet provider Clearwire are promising to build a U.S. network based on WiMAX.

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