Here's how Wikipedia defines FRAND, the fair, reasonable, and non-discriminatory terms under which holders of patents agree to license technology in exchange for that technology becoming part of a standard and, as such, essential:
Apple, back in January, via CNBC:
The way I understand it, Qualcomm holds a few patents that are essential for electronic devices to communicate on cellular networks, and holds those patents ransom in exchange for a deep cut not just of the modem that enables communication but the entire device built around the modem.
It's like the maker of your garage door demanding a percentage of the entire price of your house for allowing your car to fit inside. Or the vendor of your tires wanting a cut of your entire car.
Qualcomm's exact terms haven't been disclosed but rumors over the years have pegged it at exorbitant levels, especially for devices that need to access the legacy CDMA networks in the U.S., namely Verizon and Sprint. Exorbitant enough that it explains the $130 price difference between a Wi-Fi-only and Wi-Fi + Cellular iPad with a Qualcomm modem.
That's cost that's directly passed on to customers like us. It's a Qualcomm "tax", and we pay it regardless of whether or not we use Verizon or Sprint or even live in U.S. We pay it to such a degree that Apple started testing Intel modems (based on Infineon, the original iPhone modem suppliers) in more recent iPhones that didn't have to connect to Verizon or Sprint.
Qualcomm this week:
Apple seems willing and even happy to pay for Qualcomm's technologies. Simply not to be extorted into grotesquely overpaying for them.
FRAND is a pact between inventors and industry. It allows technology to become a standard — a dependency — in exchange for that technology being made available to everyone in the industry, fairly, reasonably, and without discrimination.
For years, Qualcomm seems to have wanted all the advantages of FRAND but none of the responsibilities. That's easy to understand: If you make an industry as invaluable as the telecommunications utterly dependent on you, and then you ruthlessly extract as much value as you can from it and everyone connected to it, it's the legal version of a protection racket. And you become as dependent on those profits as a gangster does on its cut.
Until companies like Apple start refusing to pay up, that is. And governmental regulatory agencies from China to the U.S. start investigating.
These types of investigations and lawsuits can drag on for years or they can be settled seemingly out of the blue. Multi-billion-dollar companies certainly have the resources to sustain litigation and appeal as long as they need to. But sometimes they also have the foresight to avoid when it''s best for everyone, especially if they can look long-term.
Licensing essential communications technologies at a fair, reasonable, and non-discriminatory rate is absolutely better for everyone. And charging based on those technologies, not entire devices that you've contributed nothing else towards, while obviously better for Apple is also better for the shared customer because we end up bearing more than just the difference in price.
I like Qualcomm's modems. I'm just sick of paying their "tax". I don't have the resources, much less the control, to do anything about it. But Apple does. And the various regulatory bodies certainly do.
And godspeed to them.
Master your iPhone in minutes
iMore offers spot-on advice and guidance from our team of experts, with decades of Apple device experience to lean on. Learn more with iMore!
Rene Ritchie is one of the most respected Apple analysts in the business, reaching a combined audience of over 40 million readers a month. His YouTube channel, Vector, has over 90 thousand subscribers and 14 million views and his podcasts, including Debug, have been downloaded over 20 million times. He also regularly co-hosts MacBreak Weekly for the TWiT network and co-hosted CES Live! and Talk Mobile. Based in Montreal, Rene is a former director of product marketing, web developer, and graphic designer. He's authored several books and appeared on numerous television and radio segments to discuss Apple and the technology industry. When not working, he likes to cook, grapple, and spend time with his friends and family.