Nokia reveals expected licensing rate for 5G phones

Nokia has announced its expected licensing royalty rate for 5G mobile phones, becoming the latest operator to publicly disclose its price for the next generation of wireless devices.

The Finnish telecoms giant’s rate will be capped at €3 per device for a licence to the company’s 5G portfolio of standard essential patents. 

The news comes with the roll out of 5G expected to start in earnest next year which should be a considerable boon to Nokia and other licensors that own significant amounts of the IP underpinning the new technology. 

It also comes as another example of patent owners conceding that they must provide some transparency around their royalty rates in a licensing market that is typically fairly opaque.  

“We feel it’s a best practice to give some indication and it’s fairly consistent with what we’ve done with 3G and 4G,” Nokia patent chief Ilkka Rahnasto commented on the company’s 5G announcement.  

The company is just the latest contributor to the new standard to make an announcement around its expected rate. In May 2017 Ericsson disclosed that it would charge between $2.50 for the cheapest handsets and $5 for top-of-the-range devices as it took the lead among the largest SEP owners in going public with its 5G terms.

Chip giant Qualcomm has also revealed its likely rate disclosing last November that it would cap its royalty at 3.25% of a multi-mode device’s wholesale price (the rate is 2.275% for single-mode 5G handsets) and then announcing in April this year that it would cap the phone price that that rate applied to at $400.

While those rates offer useful guidance to the market and help patent owners’ counter accusations of a lack of transparency and that they are charging unreasonable amounts for licences, for the largest players they may not bear much resemblance to the actual rates that they end up paying. 

That’s because the likes of Apple, Samsung and Huawei, who dominate the global smartphone market and are big contributors to SEP owners’ licensing revenues, typically benefit from a volume discount which may take the amount they pay per device well below SEP owners’ publicly disclosed rates.  

“The actual rates are sometimes less so this is the higher end,” Rahnasto admitted of the €3 price tag. “Our licensees have appreciated in the past that there are certain rates we’re not going to exceed even though their companies are making expensive products,” he added.

With 5G still in its very early stages it’s not yet clear which companies will end up making the most important contributions to the final standard, although Nokia’s patent head insisted that the company expected its share “to be a very significant one”.

While Nokia’s 5G rate will apply to the new generation of smartphones it does not cover the broad range of additional devices that are expected to increasingly become connected under the next iteration of wireless technology. Nokia’s position on a rate for those devices appears to be based around wait-and-see. 

“We have taken the position that we will determine our approach when we know those product categories and get a little more flavor on how the radio standards are going to be used in those products,” Rahnasto commented. “We assume that the smartphone rate will give some guidance to other device categories, at least in terms of the highest rate that we foresee for smartphones.”   

The approach that the likes of Nokia and other major SEP owners take with new sectors could be highly significant in determining the prevailing licensing climate for 5G. The roll-out of 4G, which coincided with a radical change in the dominant device manufacturers as Apple and Samsung supplanted the likes of Nokia, also prompted the start of the smartphone wars, which saw widespread litigation between numerous mobile players.

Those have largely subsided and while licensing negotiations between patent owners and prospective licensees are never straightforward, the relatively peaceful environment in the mobile market might be expected to continue into 5G. 

However it is not clear if that peace will extend to new sectors who may not be accustomed to the kind of royalty based licensing that predominates in the mobile world. Rahnasto conceded that it was still unknown how patent owners might have to change their approach in new markets. “The real disruption [with 5G] is going to be in the new product categories and there it’s still uncertain how licensing will play out,” he said. 

With Nokia joining Ericsson and Qualcomm in announcing their expected 5G rates, Huawei is now arguably the largest likely contributor to the new standard yet to announce its price. Recently the company’s chairman Eric Xu was in the headlines after telling a conference in Shanghai that the Chinese telco would not, “seek to squeeze other companies or society as a whole”, with its 5G licensing demands.  He then added: “That means we will stick to the FRAND principle and make every effort to reduce licensing fees for 5G patents. We advocate that 5G patent holders should ensure their cumulative licensing rates are lower and more transparent than 4G.” 

With the first 5G devices expected at some point next year if Huawei is going to go public with its rates then we can expect them in the coming months.