Historically, there has been business value when a firm is able to influence the setting of technology standards in ways that play to the firm’s strengths.
Some argue 3G, 4G and 5G provide examples. With the exception of “market-driven” standards such as Windows or IoS, it is less clear to me that vendor influence actually delivers so much value in setting telecom standards.
“Standard setting does not always create market power for the standardized technology,” say economists at NERA Economic Research.
“The gains from formal standard setting can be defined as the difference between the royalty that the technology owner can charge after being selected formally as the standard and the royalty that she could charge if no formal standard were set,” they say.
Some will point to quantitative measures to suggest Chinese firms have a clear lead in 5G patents. But more patents do not necessarily mean better patents, some will note.
By some accounts, patent portfolios are rather more distributed than often appears.
In settings where compatibility requirements are high, standards competition may be very important as the choice of a standard may virtually eliminate, not merely disadvantage, competing technologies.
One hears it argued that Europe benefited from its “leadership” of 3G, while the United States benefited from its “leadership” in 4G. It is hard to parse such statements. One might note that European firms Ericsson and Nokia benefited hugely in the 3G era as suppliers of infrastructure.
The same argument is heard about U.S. firms in the 4G era, but the argument is nuanced. Firms such as Qualcomm lead in chipsets, but no U.S. firms lead in radio infrastructure. To the extent there was “leadership,” it was in applications and service development, not infrastructure or necessarily “economic benefits.”
Also, the growth of open source and virtualization tends to degrade any potential value standards influence might have, as, by definition, open source means buyers have choices beyond the usual cast of supplier characters.
One way of putting it is that what mattered was the economic benefit derived from 4G, not the “leadership” in standards or infrastructure supply, and that mostly because it was application developers, platforms and content suppliers that drove the value of what could be done with 4G, not the network infrastructure or connectivity supply.
The same “value” often tends to be believed about patent portfolios, and there is evidence that the causal link is quite weak: patent portfolios do not often lead to market dominance.
It is not the infrastructure; it is the value a nation or a firm can wring from it that matters.
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