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QUALCOMM, ERICSSON NEAR DEAL?

Tensions ran high at the International Telecommunication Union two-week meeting on third-
generation technology in Fortaleza, Brazil, as the industry waits for an agreement between Qualcomm Inc. and L.M.
Ericsson on cdmaOne patents.

Qualcomm and Ericsson won’t comment on progress made in negotiating a
settlement over Code Division Multiple Access Standard-95 patents at issue in a Texas court. A trial is set for June 7.
Sources close to the companies, however, indicate the two already have reached terms for a settlement and are
hammering out the details. An announcement could come within weeks. Qualcomm employees were sternly warned
not to comment on the matter. Ericsson spokeswoman Kathy Egan said “the rumors are flying.”

A
settlement potentially could give the companies access to each other’s technologies and settle the dispute over
intellectual property rights to 3G technology. Qualcomm and Ericsson today remain deadlocked over 3G patents. Both
claim to hold patents to W-CDMA and cdma2000 technologies-two major radio transmission technologies the ITU is
considering for 3G networks that are incompatible. The ITU is trying to move ahead despite the IPR deadlock to decide
on a family of standards this year.

The loud message coming out of Fortaleza last week was that the ITU
increasingly is taking its cue from industry and that it wants a limited number of 3G standards. The two-week ITU
Plenary meeting that ended Friday resulted in a draft recommendation outlining the key characteristics of 3G radio
interfaces, which restructured work done in last month’s Kuala Lampur, Malaysia, meeting. Last month’s meeting
resulted in the ITU rubber-stamping all 16 radio transmission proposals submitted by standards bodies and other
entities from around the world.

The draft obtained by RCR adopts a similar framework decided by wireless
executives at a February TransAtlantic Business Dialogue meeting in Washington. U.S. and European wireless
executives agreed to pursue a framework for an umbrella CDMA standard that combines common elements of
competing CDMA technologies and gives operators the ability to choose from three different CDMA modes-W-
CDMA, cdma2000 and a Time-Division duplex mode for unpaired spectrum. TDMA backers keep their technology
intact as well.

Yet major challenges of translating TDMA and umbrella, tri-mode CDMA technical characteristics
into standards and resolving controversial technical and trade issues remain.

“A lot of work needs to be done,
but the foundation is there,” said Frank Urbany, international senior vice president for BellSouth Corp.

The
chip rate issue and synchronization schemes remain hurdles for harmonizing the CDMA proposals even further. W-
CDMA backers and cdma2000 supporters remain deadlocked over harmonizing the chip rate. W-CDMA supporters do
not want to move the rate below 3.84 Megachips per second, citing capacity reasons. Cdma2000 supporters say they
need the rate to stay at 3.68 Mcps to remain compatible with today’s cdmaOne systems.

“There was not much
harmonization at this meeting,” said a person who attended the meeting. “The hope is that some strong
words will come out of the London (carrier) meeting to provide some guidance.”

In a series of meetings in
recent months, carriers from around the world have met to discuss harmonizing the CDMA proposals. They are set to
meet today and tomorrow in London in a meeting similar to one held in Beijing in early January involving 14 operators
from Asia, Europe and the United States. Carriers also remain split over the chip-rate issue.

Back in the nation’s
capital, the debate continues on whether the United States should be entertaining a 3G wireless trade war with
Europe.

Sen. Conrad Burns (R-Mont.), chairman of the Senate communications subcommittee, wrote U.S. Trade
Representative Charlene Barshefsky last week urging her against taking retaliatory trade action against the European
Union for locking out CDMA technology.

“I believe … that the more drastic options at your disposal should
be reserved for well identified anticompetitive trade practices or market barriers,” said Burns. He suggested the
United States pursue 3G trade concerns through “the appropriate bilateral and multilateral means, such as the
World Trade Organization.”

In addition, the Information Technology Industry Council is said to have sent
letters to key lawmakers on commerce and trade committees informing them of the 3G consensus reached at February’s
TABD meeting.

It is unclear, however, whether the Clinton administration is ready to back off 3G-one of several
flashpoints in current U.S.-EU trade relations.

“We are monitoring the ITU standards process and EU
member-state 3G licensing decisions to assure U.S. technologies receive equal treatment,” said a U.S. official.

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