Qualcomm has come under some pressure recently when Reliance, with one of the fastest growing CDMA-based networks in the world based on Qualcomm’s patented technology, announced that it would provide mobile service using GSM technology and criticised Qualcomm’s high royalty and licensing fees. The inference was that Qualcomm’s fees were resulting in higher costs for handsets which is preventing Reliance from offering affordable service to low-income subscribers.
Qualcomm claims that CDMA handset prices in India were already some of the lowest in the world and that royalty was only about $2 per handset. It further argues that Reliance’s move into GSM has to do with flawed spectrum policy of the Indian Telecom Ministry (DoT) that provides more than twice the spectrum to GSM operators compared to CDMA operators like Reliance. This is because according to Qualcomm, GSM technology allows only a finite number of subscribers in a cell whereas the CDMA technology on the other hand poses no such restrictions. “For instance India’s GSM operators get 4.4 MHz of spectrum initially while CDMA operators get 2.5 MHz. But when the subscribers of GSM operators cross one million they become eligible for a total of 10 MHz. For crossing that level, the CDMA operators get only 5 MHz. That’s because DoT, the spectrum allocater, feels that since the CDMA technology can carry about five times more traffic, it can operate efficiently with much lower spectrum.”
The announcement by Reliance has however spurred Qualcomm CEO, Paul Jacobs, to visit India and meet with Reliance and Tata, the two dominant CDMA operators. India contributes 2.2% of all Qualcomm royalty revenues and 8.8% of CDMA handsets sold worldwide. Jacobs is also meeting with the Indian regulator TRAI and the DoT minister. Although Qualcomm has ruled out lowering royalty fees it is promising increased investment and contributions in kind. The above issues are discussed in detail here: