Analysis of Standardization, IPRs, and their Implications for Commercial Deployment

1. Multimedia Home Platform: an Analysis of Standardization, IPRs and their Implications for Commercial Deployment 46th FITCE CONGRESS 30th August–1st September 2007. Warsaw (Poland) ClaudioFEIJÓO1 José-LuisGÓMEZ-BARROSO2 ÁlvaroMARTÍN1&2 YasminaBENMESSAOUD1 1 Grupo de Tecnologías de la Información y las Comunicaciones (GTIC) E.T.S.I.Telecomunicación Universidad Politécnica de Madrid {cfeijoo; amartin; ybenmessaoud} @gtic.ssr.upm.es 2 Dpto. Economía Aplicada e Hª Económica Universidad Nacional de Educación a Distancia (UNED) jlgomez@cee.uned.es

2. :: Contents Introduction About Multimedia Home Platform and its Commercial Uses The Standardization Process: IPRs and licensing agreements Patent Pooling for MHP Potential Implications for Business and Commercial Deployment Conclusions

3. :: Introduction Innovation and competition within the ICT sector are some of the best tools to ensure productivity and social welfare in a world led by • Technological knowledge, • Industry standardization • Interoperability • Product compatibility • Economies of scale (Source: MHP) …MHP seems to be an attractive solution for interoperability of digital interactive applications

4. :: Introduction: The Multimedia Convergence The DVB-MHP Project is an alliance of over 260 companies, originally European and now spread worldwide in over 36 countries. Main aim → To provide a common platform that avoids the fragmentation existing in some audiovisual areas. A platform that brings integration of all kinds of multimedia applications • The Project has focused particularly on interactive applications for Digital Television (iDTV) systems. • MHP extends the existing DVB standards (in satellite, cable, terrestrial networks and microwave systems) and also provides access trough the Internet to e-commerce, e-government and similar services.

5. :: Introduction. The Multimedia Convergence (II) • MHP contributes to the convergenceprocess between traditional broadcast and interactive broadcast services and the World Wide Web

6. :: Introduction. The Multimedia Convergence (III) Windows CE Windows CE 2000 2004

7. :: Contents Introduction About Multimedia Home Platform and its Commercial Uses The Standardization Process: IPRs and licensing agreements Patent Pooling for MHP Potential Implications for Business and Commercial Deployment Conclusions

8. :: Commercial uses of MHP MHP is a fully open middleware system and standard designed by the DVB Project that defines an interface between interactive digital applications and the terminals on which those applications execute. (Source: DVB)

9. :: Commercial uses of MHP (II) • Transversal Markets • Multi-application environments - High flexibility in implementation - Several service providers Applications - Return channel. InteractionBroadcaster ↔ User • Contents and Applications • HW independent - Wide range of terminals with different capabilities supported API – Application Programming Interface MHP Terminal Device MHP enabled Receiver

10. :: Commercial uses of MHP (III) • Applications can run and access from a broadcast network, a local storage device, or an interactive network • Priority to Enhanced Broadcast, Interactive Television and Internet Access

11. :: Commercial uses of MHP (IV) • THE CASE OF SOUTH KOREA • In 2004, the government of Korea, in cooperation with • Alticast, SkyLife and KBS, offered Touch 2004, an MHP • interactive TV election service. The service allowed • viewers to • participate in debates and polls, • view background information on the candidates, • explore in detail the election counts as they happened. • A total of 6 Multi-System Operators (or MSOs) launched OCAP-based services; • the first, CJ CableNet, began in February 2005 (Mosaic EPG, VoD, karaoke, a finance portal and T-shopping) • Gangnam Cable, a Korean regional cable operator, launched recently T-Government services for people that do not have easy access to the Internet.

12. :: Contents Introduction About Multimedia Home Platform and its Commercial Uses The Standardization Process: IPRs and licensing agreements Patent Pooling for MHP Potential Implications for Business and Commercial Deployment Conclusions

13. :: The Standardization Process IPRs and licensing agreements • The MHP standard was published as an ETSI Specification within the DVB Project • ETSI IPR Policy seeks a balance between • the needs of standardization for public use in the field of telecommunications • the Intellectual Property rights of its members • FRAND terms – Article 82(a) of the European Commission Treaty Fair – equitable. Taking into account all interests involved (proportionality). Reasonable – moderate, bearing some rational relation to objective criteria other than monopolist’s desire to maximize profits. Non-Discriminatory– equal treatment of all customers, including the IPR owner’s own downstream business. • The EC is aware of the stakes involved in standard development and IPR management, in terms of innovation, interoperability needs and consumer protection. Some of these concerns have been expressed in an active consultation on “EU Strategy for International Co-operation on ICT” (until September 17th 2007).

14. :: The Standardization Process (II) IPRs and licensing agreements • The European Telecommunications Standards Institute (ETSI) – is in charge, through its Standards and Technical Specifications of ensuring the compatibility and interoperability of MHP-enabled products and components. • IPR management in normalization processes in Europe: Disclosure ofpatents essential for the implementation of the standard by the rights-holder at an early stage • → Avoids anti-competitive practices that would exclude other emergent technologies from the market. • → However… Patent owners sometimes claimed for high royalties on patents that had not been disclosed at an early stage (higher switching costs, lock-in strategy). • …how to prevent patent owners from demanding supracompetitive royalties, and guarantee reasonable license fees? SUBMARINE PATENTS

15. :: The Standardization Process (III) IPRs and licensing agreements • The Standards Association of the Institute of Electrical and Electronics Engineers (IEEE-SA) adopted in May 2007 an enhanced IPR policy including: → Any participant in an IEEE standards development project rmust now reveal personal knowledge they may have of patents they or their employer hold on intellectual property being considered for inclusion in the standard. → Everyone in a standards working group is "encouraged to inform the working group chair" if they are aware of any patented intellectual property held by others → Improved commitment from patent holders in the legally binding letters of assurance (LoA). These letters express willingness to license its technology, either on a royalty-free basis or with license terms that are reasonable and non-discriminatory (RAND). → LoA may now include license terms such as the maximum royalty rate the patent holder will charge (ex - ante disclosure).

16. :: Contents Introduction About Multimedia Home Platform and its Commercial Uses The Standardization Process: IPRs and licensing agreements Patent Pooling for MHP Potential Implications for Business and Commercial Deployment Conclusions

17. :: Patent pooling for MHP • Firms holding essential patents organized a patent pool for MHP VIA LICENSING US entity that administrates the joint patent licensing program for MHP of the following licensors: Comsat Cable Holdings, LLC; Koninklijke Philips Electronics N.V; LEG Electronics, INC.; Matsushita Electric Industrial Co., Ltd; OpenTV Corp.; Samsung Electronics Co., Ltd; Time Warner Cable, Inc. • Via presented on July 2005 the first terms for the payment of royalties, • Highly criticized: royalties considered disproportionate • On former patent rights - almost 5 years before the publication of the ETSI norm on IPR Policy and with millions of MHP decoders distributed all over Europe and Asia!

18. :: Patent pooling for MHP (II) • Via’s final licensing fees on July 2006, were classified as follows: • Device fees: $1.75 per device • MHP services-providers by • – subscription-based service provider: $0.25 per household • – Free-to-Air (FTA) broadcaster: several options. • (depending on the number of households with MHP receivers and whether or not the FTA broadcaster generates revenue from MHP services or advertising: from $0 to $50,000) • Initial administrative fee of $15,000 per licensee UNEQUALLY SUPPORTS SOME BUSINESS MODELS AT THE EXPENSE OF MANY OTHERS, OR ELSE CONTRIBUTES TO DISCOURAGE THE ADOPTION OF MHP HIGH FEES COULD MAKE THE SOLUTION IMPOSSIBLE TO DEPLOY COMMERCIALLY

19. :: Contents Introduction About Multimedia Home Platform and its Commercial Uses The Standardization Process: IPRs and licensing agreements Patent Pooling for MHP Potential Implications for Business and Commercial Deployment Conclusions

20. :: Potential Implications for business and commercial deployment • Via Licensing’s fees are still being disparate compared with the conditions set by Sun Microsystems for the use of the JAVA Virtual Machine (JVM) →LESS THAN 1$ PER DEVICE, AND EXCLUSIVELY BY THE MANUFACTURER! • The business model cannot take into account the revenues obtained from the use of the return channel and the interactive services as the population – excepting some Asian countries - does not use intensively those services. Final compromise, the use of commercial requirements to set cap on royalties • However a full consensus is still pending. And the question is… … which are the reasons that block the business and commercial deployment of MHP from a standardization/IPR perspective? Competition

21. :: Potential Implications (II) for business and commercial deployment BENEFITS OF STANDARDIZATION and a wide deployment of MHP, from the perspective of: • Users • Freedom of choice • Resolves the interoperability issue – access to a wider range of new and existing services with a given piece of equipment • Service Providers • Would be able to develop new services • Enables diversity of players and equipments, according to consumer choices • Equipment Manufacturers • New market: otherwise, no commercially viable way to produce and maintain separate populations of receivers with APIs across Europe…Except for pay-TV market! • Free-To-View broadcasters • their business model being the access to the broader audience as possible and not the commercialization of APIs • Vendors of proprietary APIs • No direct benefit for them…

22. :: The case of DVB-H for mobile TV • Several Mobile TV technologies for different platforms Is Mobile TV a Killer Application in a mass market…? • Mobile TV was considered as a relevant service for mobile users by 87% of the participants in a trial in Stockholm on April 2007,butup to 3 major technological alternatives: DVB-H; DMB; MediaFLO • Other technologies: • MediaFLO ( Media Forward Link Only): starting technology to be tested in Europe. Field tests in the US • DVB-SH: Hybrid system. Standard to be published in 11/07. No terminals available. • MBMS (under UMTS): Field tests in Europe. No terminals available

23. :: The case of DVB-H for mobile TV (II) • Regulatory framework for DVB-H • The need for a common technical standard, to attain a critical mass and ensure sustainability of the Mobile TV business models, with no kind of barriers for its correct adoption • - The EMBC (European Mobile Broadcasting Council) agrees on the importance of a common standard, but does not propose a specific one. • The European Commission recommends specifically the use of DVB-H as the single European standard for mobile TV to avoid the risk of fragmentation in its Internal market • “Strengthening the Internal Market for Mobile TV” • - European Commission Communication, 18 July 2007 - • DVB-H appears to be the strongest contender for future terrestrial Mobile TV deployment in Europe: • 40+ DVB-H pilot networks all over the world (including USA and Asia) and trials in most European Member States…

24. :: The case of DVB-H for mobile TV (III) • Penetration Rate of Mobile TV/video • Italy (leader in Europe) 1% • Vs • South Korea 10% • More than 65M estimated users in Europe in 2011 • Mobile broadband handset penetration (3G/3,5G) in Europe: • 1/3 by 2008 • 62% by 2011 • 1,5% of U.S. wireless users (3M) had accessed mobile TV services. More than $40 per month on average. (Source: Telephia Study, 2006)

25. :: Contents Introduction About Multimedia Home Platform and its Commercial Uses The Standardization Process: IPRs and licensing agreements Patent Pooling for MHP Potential Implications for Business and Commercial Deployment Conclusions

26. :: Conclusions • The standardization of the MHP technology still has to tackle with several issues concerning IPR policies and licensing terms • Risk for the global success of MHP and the real uptake of this technology compared to the success story of the DVB standard. • Relationships of open standards and IPR still being a general matter of discussion: MHP seems to be just the “tip of the iceberg”… • MHP is an outstanding example of how incorrectly managed IPRs might constitute an insurmountable barrier for the development of technologies,no matter if they are the most attractive, complete and efficient in the market or if they contribute to the users’ welfare.

27. Multimedia Home Platform: an Analysis of Standardization, IPRs and their Implications for Commercial Deployment 46th FITCE CONGRESS 30th August–1st September 2007. Warsaw (Poland) Claudio FEIJÓO1 José-Luis GÓMEZ-BARROSO2 Álvaro MARTÍN1&2 Yasmina BENMESSAOUD1 1 Grupo de Tecnologías de la Información y las Comunicaciones (GTIC) E.T.S.I.Telecomunicación Universidad Politécnica de Madrid {cfeijoo; amartin; ybenmessaoud} @gtic.ssr.upm.es 2 Dpto. Economía Aplicada e Hª Económica Universidad Nacional de Educación a Distancia (UNED) jlgomez@cee.uned.es