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3G CHOICE COULD STING U.S. FIRMS

WASHINGTON-The Clinton administration, encouraged but apparently not swayed by assurances in Brussels that Europe will be open to multiple third-generation wireless standards, is growing increasingly worried that American mobile phone technology will be locked out of the 15-nation European Union in the next century.

“We are concerned about how the standards-development process in Europe affects U.S. telecom manufacturers and potential services providers,” said David Aaron, Commerce Department undersecretary for international trade, in written testimony given to the House Ways and Means subcommittee on trade last week.

Despite verbal gestures of goodwill to Aaron, Federal Communications Commission Chairman William Kennard, State Department international telecom head Vonya McCann and other U.S. officials at regularly scheduled U.S.-EU talks in Brussels late last month, sources say the administration is skeptical about where Europe is headed on 3G. In particular, administration officials are keenly focussed on a bill working its way through the European Parliament and Council of Ministers that would mandate a standard for 3G pan-European mobile phone service and possibly favor European manufacturers L.M. Ericsson and Nokia Corp. over U.S. firms such as Qualcomm Inc., Lucent Technologies Inc. and Motorola Inc.

The 3G legislation could become the law of the land in Europe before year’s end.

Qualcomm, Lucent and Motorola representatives met recently with David Beier, domestic policy adviser to Vice President Gore, on 3G issues. It is unclear, however, to what extend Gore is engaged, if at all, in the 3G debate. The vice president’s clout on high-tech issues appears to have diminished during the past year.

While Lucent and Motorola-unlike Qualcomm-can manufacture to foreign wireless standards, all three U.S. manufacturers would be affected to varying degrees if the EU market remains closed to outside wireless technologies.

“We believe that the administration’s ability to work with the EU to overcome this flagrant act of protectionism will signal whether the U.S. and the EU are truly committed to an economic partnership,” said Kevin Kelley, Qualcomm’s senior vice president for external affairs, in congressional testimony. “Specifically, the administration needs to take immediate steps to encourage the EU not to pass the pending legislation.”

An EU official based in Washington, D.C. said the EU “does not dictate technologies” and described the European Telecommunications Standards Institute as an open and fair body that neither favors European manufacturers nor discriminates against American suppliers.

Some U.S. manufacturers and policy makers dispute that characterization, complaining that European suppliers exploit the more open U.S. standards at the expense of American firms.

If the United States becomes dissatisfied with either the bill’s passage or the law’s implementation, the administration could seek action against the European Union in the World Trade Organization.

In addition, Qualcomm could pursue litigation to protect intellectual property rights to Code Division Multiple Access technology that is deployed in the United States and overseas but absent in Europe.

The EU anticipates using wideband CDMA (W-CDMA)-a technology based on the Global System for Mobile communications standard that dominates Europe and is popular in other countries-for 3G mobile phone service throughout Europe.

Qualcomm, which is pushing cdma2000, favors a single 3G standard that draws on different CDMA technologies. But Ericsson, Nokia and GSM wireless carriers here and abroad argue that a harmonized standard will degrade the surviving CDMA technology.

The U.S. recently forwarded W-CDMA, cdma2000 and two other 3G standards to the International Telecommunications Union for consideration. ITU, having received at least 10 proposals for 3G wireless, is unlikely to converge them into a single standard by next March.

That will leave the critical decision on 3G to the EU. Then, the United States would have to decide whether it makes the next move.

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