Huawei: IPR gains, Indian losses, but what about AT&T?

In the turbulent world of wireless and converged infrastructure, the spotlight has been firmly on Huawei this year.
The Chinese firm is leveraging its economies of scale, financing capabilities and now its rapid progress in next generation networks (LTE and Wimax) to pose a serious challenge for number two position in the market, and even Ericsson cannot sleep easily.
The week started with mixed news for Huawei - an aggressive statement of its patent position in LTE, followed by talk of India barring Chinese suppliers from telecoms deals.
And the billion-dollar question - as AT&T finally announced its list of preferred equipment suppliers, anointing Ericsson in its wireline access unit, has Huawei made it to a tier one US carrier's roster yet?
AT&T has, as promised earlier this year, reduced the number of equipment vendors on which it will rely, selecting two preferred suppliers for each of 14 “domains” or business areas.
So far, it has remained tightlipped on the identities of its favorites, with one exception - Ericsson has declared it has taken a slot in the landline division.
This is a huge boost for the Swedish giant in two areas where it has traditionally struggled to make impact - the north American territory and wireline networks.
The company has made major progress in the former this year - gaining part of Verizon Wireless' high profile LTE award and a massive outsourcing deal with Sprint Nextel - and its position will be further boosted by its acquisition of Nortel's CDMA and LTE technologies and customer base.

Now it has increased its AT&T position with the selection for AT&T's Wireline Access products and services, where it will have to compete with the other, unnamed vendor to get its DSL products for FTTN (fiber to the node) and IP DSLAM into the carrier's U-verse system.
AT&T has previously approved Ericsson's GPON fiber to the home platform and Ericsson sources said the fact the firm had press released the broadband access deal did not mean it had been excluded from other AT&T domains.
The obvious one would be wireless access, where Ericsson has an existing relationship with AT&T. The Swedish firm will have a sharp eye on the operator's plan to extend and upgrade its HSPA network and to trial LTE from 2010, but will face fierce competition from Nokia Siemens, Alcatel-Lucent and potentially from Huawei.
The Chinese firm has got itself onto the preferred supplier lists of several tier one carriers in developed markets – notably Vodafone in Europe – but has only made limited inroads into north America; its major deals have been with Clearwire Wimax and Cox 3G. A position in AT&T would transform the perception of the vendor, but despite the value that Huawei brings an operator in terms of putting price pressure on other vendors, US giants have so far been wary.
There have been indications that AT&T has been softening its stance. In May, a USB research note said that Huawei, Ericsson and ALU were shortlisted for the carrier's initial LTE trials, to be carried out next year, and the operator is likely to select two of these in the coming weeks.
Huawei is strengthening its hand in LTE trials by boasting of its credentials as a supplier of cutting edge, not just low-cost, equipment. With Ericsson, it has shared the bulk of western European LTE test deployments to date, and last week it stepped up the pressure on rivals by declaring itself in pole position for LTE patents.
It said European standards body ETSI had confirmed the award of 147 LTE patents to the company, challenging the traditional IPR dominance of Ericsson, Nokia and Qualcomm in 3GPP technologies.
This could shift the balance of power in 4G intellectual property, especially as the nascent LTE sector faces huge uncertainties over future royalty payments.

Ericsson, Qualcomm, Nortel and others are claiming major patent holdings and analysts have cast serious doubts over whether these are compatible with the stated aim of the European suppliers to reduce royalty payments in handsets to 5% of the price.
If Huawei is aggressive about royalty pricing in order to gain market share (last year's major patent deal with NSN gives some hope of this), it could put pressure on its rivals to be flexible, but it could also decide to work outside the emerging LTE patent pools and plow its own furrow on charging.
Huawei says the ETSI patents are in several critical areas such as physical layer air interface, radio resource management and connection management, and represent 12% of the total existing 1,272 LTE patents assigned by ETSI as of August 2009.
Huawei said in a statement it had filed a total of 35,773 patent applications globally last year.
But while Huawei may be pushing its foot into the US door, it faces serious obstacles in one of the world's highest growth wireless equipment markets, India.
The Chinese vendor has already come up against political and security concerns over its provisional selection for a major part of state-owned BSNL's massive GSM expansion contract.
Now the Indian government is reported to be proposing to expand a partial ban on Chinese supplied cellphones, to include all telecoms equipment from Chinese vendors like Huawei and ZTE.
The Department of Telecom (DoT) has proposed the ban in between 14 and 20 of the country's 22 telecoms “circles” - ones that it considers to be sensitive because they are close to international borders.
The operators are alarmed at the possible restriction of their choices and the DoT will now consult with the Ministry of Home Affairs. An alternative route might be to require all vendors to go through security clearance every two years.
Earlier this year, BSNL was said to have dropped Huawei from a shortlist in the regions closest to Pakistan, under pressure from the Intelligence Bureau. Huawei has consistently denied rumors about close links to Chinese government, military and intelligence agencies.