Qualcomm is planning to apply for a license to operate third generation mobile services in Japan if DDI, a leading local cellular operator, doesn't choose Qualcomm's CDMA2000 technology as the base for its service.
The company is making the pledge after two of the expected three applicants have already announced support for the rival WCDMA (wideband code division multiple access) format and says it will lead an "American consortium" that will apply for a license in the final hours of the Japanese government's application period, Qualcomm Japan president Ted Matsumoto said in an interview.
"A US consortium is planning to make an application in the case that DDI plans to use WCDMA," said Matsumoto. "If they make a decision to go with MC (MC is the technical name for CDMA2000) the US consortium will probably not make an application," he said.
The executive said staff at Qualcomm will be working through this week's Golden Week holiday in Japan to prepare a license application in advance of the May 12 deadline. He would not be drawn on the identities of other members of the consortium.
For Qualcomm the stakes are high. While both 3G formats are based on its CDMA technology - in fact Matsumoto says Qualcomm receives equal royalties no matter which format is employed - its CDMA2000 system is closely related to the existing Qualcomm-developed second-generation CDMA format that is in widespread use in North America and some other Asian countries, most notably South Korea, Hong Kong, Singapore and partially in Japan.
WCDMA is more closely linked with the second generation GSM (global system for mobile communications) format that is the defacto standard in Europe, much of Asia and the rest of the world. WCDMA has already been chosen by many European operators because of the lower cost of upgrading networks and looks set to become the defacto standard across the continent.
If Japan, Asia's largest cellular market, also unanimously chooses WCDMA it will make Qualcomm's job of selling its current generation CDMA and next generation CDMA2000 systems much more difficult and potentially give the upper hand to its competitors, most of which have been involved in WCDMA development.
The prospect of an application from Qualcomm also turns on its head the conventional wisdom that the 3G licensing process in Japan is a done deal.
Through a series of mergers and acquisitions that began in 1998, the local telecommunications industry has organised itself into three strong local carrier groups - the same as the number of licenses to be issued by the Ministry of Posts and Telecommunications (MPT).
Each of the three carrier groups, NTT, DDI and Japan Telecom, contain existing cellular operators - NTT DoCoMo, DDI Cellular and Nippon Ido Tsushin, and the J-Phone Group respectively. The path to 3G looked smooth with each of the local carriers assured of a license because of a seeming lack of interest from foreign carriers.
NTT DoCoMo was the first to announce its decision to go with WCDMA - not a surprise since the carrier has led much of the development and testing of the format. Japan Telecom then followed with an announcement that it will also back the format which left just DDI to decide.
At a recent press conference the president of DDI said the company had yet to make a final decision although rumours are rife that the carrier has already chosen WCDMA. A mid-March report in the Nihon Keizai Shimbun, Japan's leading business daily, quoted sources at the company as saying just that.
Now the carrier is left in a difficult situation.
If Qualcomm applies there will be four applications for three licenses and therefore one loser. Observers expect NTT DoCoMo is almost assured a license since it is the country's dominant cellular carrier, a unit of Japan's dominant local carrier NTT and has invested heavily in developing WCDMA.
"It is difficult to deny a license to DoCoMo," said Koichiro Hayashi, a professor at the Institute for Media and Communications at Tokyo's Keio University and a former head of NTT America. "Japanese common sense will show DoCoMo will be given a license. The question is whether other Japanese carriers will be given a license."
Should DoCoMo be one of the winners, it would leave the loser as either DDI, Japan Telecom or the Qualcomm-led American consortium. Qualcomm thinks it has a good chance of getting a license.
With friction building between Japan and the US on the long running issue of interconnection, political considerations come into play. The MPT and Japanese government would likely come in for some heavy criticism from the US should the consortium be denied a license on anything but technical grounds and here Matsumoto believes he has an advantage.
He will argue the CDMA2000 technology is technically superior to WCDMA because it makes more efficient use of the available spectrum and so will be able to offer users better data-based services. The Qualcomm system has three times the spectrum efficiency of WCDMA, said Matsumoto.
"Probably the MPT will face a very difficult choice," said Hayashi. "On the one hand they have the three Japanese carrier groups, they are established and have shown they are capable of providing the Japanese people with high quality services, but on the other hand they have to be neutral to the applicants."
"It may bring about another international incident," he concluded.