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QUALCOMM, ERICSSON LEAVE OTHERS TO DECIDE CHIP RATE

Although Qualcomm Inc. and L.M. Ericsson announced resolutions to Code Division Multiple
Access disputes and the standoff over third-generation intellectual property rights, the companies didn’t resolve key
technical differences 3G parties have tried to resolve for more than a year.

Qualcomm and Ericsson announced last
week they resolved all patent disputes over cdmaOne technology and will cross license IPRs for all CDMA
technologies, including cdmaOne, W-CDMA and cdma2000. Both companies had remained deadlocked over 3G
patents, refusing to cross license patents they claimed to own to W-CDMA and cdma2000 technologies unless certain
conditions were met. Qualcomm wanted one CDMA standard backward compatible to second-generation systems,
while Ericsson advocated multiple standards.

The two said they now agree to jointly support approval by the
International Telecommunication Union and other standards bodies-including the U.S. Telecommunications Industry
Association and the European Telecommunications Standards Institute, which already has approved W-CDMA
technology-of a single CDMA 3G standard that encompasses three optional modes: direct sequence FDD, multi-
carrier FDD and TDD. Each mode supports operation with both GSM MAP and ANSI-41 networks. The companies
say the resolution allows operators to select which mode of operation to deploy based on market needs. Greenfield
operators in Europe are likely to deploy a direct sequence mode, while existing operators in the United States will
deploy the multicarrier approach.

The companies agreed to this framework last month at the TransAtlantic Business
Dialogue meeting in Washington, D.C.

The ITU adopted a similar framework earlier this month in Brazil, and last
week announced a single flexible standard with a choice of multiple access methods that include CDMA, TDMA and
TD/CDMA technologies to meet the many different mobile operational environments around the world.

Qualcomm
and Ericsson did not come to terms on the hotly contested issues of chip rate, synchronization and pilot schemes.
Ericsson has pushed W-CDMA technology-a standard incompatible with cdma2000 technology’s 3.684 Mcps rate.
Qualcomm remained adamant on the 3.68 Megachips per second rate to maintain backward compatibility to today’s
cdmaOne networks. Both companies last week were quiet on the issue and said they are leaving further harmonization
efforts to carriers.

“Operators are looking to see advantages to further convergence,” said Dr. Irwin
Jacobs, chairman and chief executive officer of Qualcomm. “The agreement removes the issue of IPR blockages
from those discussions. Operators will make decisions on how to best proceed ahead.”

A global carrier
meeting in London last week did not produce a document stating any agreement on technical parameters. The ITU was
hoping for input from carriers to help harmonize the CDMA umbrella standard further.

“The parties are still
talking and moving forward in the correct direction,” said Keith Paglusch, senior vice president of operations
with Sprint PCS, a nationwide cdmaOne operator pushing for one CDMA standard. “There’s a series of
discussions that continue to take place.”

Perry LaForge, executive director of the CDMA Development Group,
hinted that consensus is building on some technical parameters such as synchronization.

“The chip rate was
used as a tool against cdmaOne. Now that Ericsson is on board, it’s not as big a deal,” said LaForge.

But the
North American GSM Alliance, in heralding the companies’ announcement, said it will continue to ensure that
technical parameters enable multiple technologies. The ITU said several countries, particularly from Asia and
Australia, urged members to agree on a single 3G standard, ideally based on one technology. Though the view was
endorsed by many operators, several stressed the need for operational flexibility to meet varying situations around the
world, said the ITU.

“The flexible approach represented the only option on which consensus could be
achieved and work could proceed,” said the ITU. “The meeting nonetheless agreed to strongly encourage
the various operators fora in their efforts to achieve a minimum set of radio interfaces, covering operators needs having
the least possible impact on mobile terminals so that the user is unaware of the technology which provides the services
he/she has chosen, and thus meet the widely endorsed IMT-2000 objectives.”

In migrating to W-CDMA
technology, GSM carriers will have significant investments to make in changing out equipment, while existing
cdmaOne operators will be able to gradually migrate to cdma2000 by adding extra equipment. Moving the chip rate
away from 3.68 Mcps would mean all carriers must start over.

The next challenge, said the ITU, will be developing
a more detailed ITU specification in a way that minimizes technical complexity while catering to multiple operating
environments.

“We’re likely to see handsets glue the family of standards together if the chip rate is close
enough,” said Bob Egan, research director with Gartner Group in Stamford, Conn.

The ITU will hold
meetings starting in late May in Beijing. The consensus process should end by then, and members will begin with the
technical work on the standards, which will require explanations of how each standard operates.

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