Patent stranglehold keeps 3G kit prices high

The cost of 3G WCDMA devices remains relatively high because just 12 companies own 80 per cent of the intellectual property underpinning the mobile technology, market watchers report.

The fact that four of these firms own almost 60 per cent of 3G intellectual property is a major factor keeping average royalty rates very high, according to ABI Research.

The analyst firm pointed out that, in order to access essential patents, device vendors not among this elite top four are subject to cumulative royalty rates that can climb to 28.5 per cent.

However, ABI predicts that the 4G royalty landscape will be far more diverse. "This alone will allow average royalty rates in 4G devices to be lower than in their 3G equivalents," said the firm.

"Licence trading will be more commonplace, especially in the WiMax environment where over 350 companies own essential intellectual property."

Stuart Carlaw, wireless research director at ABI, believes that this more diverse 4G intellectual property landscape will allow more companies to trade licences, resulting in lower average royalty rates.

"This diverse intellectual property landscape will not be a product of litigation or regulation, but of pure market mechanisms," he said.

"Companies have seen the benefits of a strong intellectual property portfolio, and are now ploughing huge funds into R&D in order to capture patents."

The ABI study also warned that there could be a case of "out of the frying pan and into the fire" regarding WiMax.

Carlaw believes it is likely that Samsung will hold close to 30 per cent of the essential WiMax intellectual property, effectively replacing Qualcomm as the dominant force in the market.

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