Accommodating Telecoms

I attended the 3rd round-table meeting for the UK Government Consultation on Open Standards last Friday. The meeting was well attended although not completely full. In particular, perhaps because of the controversy that broke the same day...


I attended the 3rd round-table meeting for the UK Government Consultation on Open Standards last Friday. The meeting was well attended although not completely full. In particular, perhaps because of the controversy that broke the same day involving their back-room activities, a number of seats that people supporting FRAND had booked at the sold-out meeting remained empty.

In the absence of those friends of FRAND, input on the supposed necessity of FRAND was made by only by spokespeople from the telecommunications industry. Their history is of participants in a market where a legally-constituted cartel of suppliers commission specifications for key shared standards. Technologists contribute freely on the expectation they will recoup their costs through royalties for licensing the patents on their contributions. In their market, it is reasonable to expect and tolerate FRAND terms. I believe understanding that is critical to progress on a rational policy for the UK Government.

Different Approach

In their world, "open standards" are those where anyone is able to freely participate in the definition of the standard; "open" does not refer to the use of the standard itself. Their industry has multiple standards bodies, including 3GPP and the Open Mobile Alliance, in which I was involved nearly a decade ago. These operate on the basis of a completely open forum where a technical committee asserts requirements for standards and then participants propose solutions for the requirements. A rigorously transparent discussion and vote on the proposals follows, and the agreed best solutions become the standard.

The people (or more usually companies) who proposed those solutions are then entitled to charge patent royalties from all implementations of the standard as a way to recoup their costs. Everyone enters the process understanding this is how it works, so everyone accepts that royalties are not only inevitable but necessary. Since every participant usually ends up having at least some ideas accepted, most participants in the process have some claims on each standard, with the result that net royalties payable between the participants may not be the relative burden they appear if taken in isolation. But it does mean that late entrants to the market can face an insurmountable cost barrier.

The telecommunications market is being inexorably drawn towards software. Representatives of telecommunications companies come to the software market with a FRAND-expected view of standards, but their view is not useful in a standards community for software specifications where FRAND is not considered reasonable. They express "horror" at "naive" expectations that "open standards" will be redefined as being entirely free of royalties. They argue that such a definition will prevent innovators recovering their costs, and that important technologies will be excluded for the market as a result. They argue that most standards are FRAND licensed and that restriction-free approaches are the exception.

Not Transferrrable

But they are wrong. At the round-table, Mark Ballard explained that as part of his research he had asked BSI how many standards were royalty-bearing, and had been told "almost none"; Glyn Moody expanded on this too. More than that, the software standards arena is different. Work at W3C, OASIS and other bodies is conducted in the expectation that its participants will recoup their costs through commercial competition in a resulting dynamic market.

FRAND terms are theoretically available to standards in these bodies, but approximately no standards activities use them. In this context, FRAND terms actually discriminate unfairly against the majority of market participants, who have come to the standards activity and the marketplace in the expectation of recovering their costs through profitable competition and not through rent-seeking patent taxation.

If we are to have peaceful acceptance of the proposed UK Government procurement rules by the telecommunications industry, I believe the Cabinet Office will need to make some changes to accommodate them. Odd and distasteful though it may be for software people, their industry is based on standards with restrictions on implementation. When procurement for predominantly telecommunications solutions is sought (for example police radios or broadcast equipment), a note in the rules may be needed indicating that it is understood that the standards from this older industry will be royalty-charging.

I don't think any other change is required; as Glyn pointed out, the proposed policy already allows FRAND standards if there are no restriction-free solutions possible. But a nod of understanding may help the telecommunications industry to accept the realities of the software industry.

Follow Simon as @webmink on Twitter and Identi.Ca and also on Google+

Enhanced by Zemanta