Ericsson announces FRAND royalty rates for 5G

In 2009 Ericsson joined other SEP holders in announcing ex ante royalty rates for 4G (LTE)

"Ericsson expects to hold a relative patent strength of 20-25% of all standard essential IPR. Ericsson believes the market will drive all players to act in accordance with these principles and to a reasonable maximum aggregate royalty level of 6-8% for handsets. Ericsson ́s fair royalty rate for LTE is therefore expected to be around 1.5% for handsets." 

More recently Ericsson announced "FRAND licensing terms for 5G/NR in 3GPP Release 15" (pdf) explaining that: 

"Ericsson is prepared to grant licenses to its portfolio of essential cellular patents [with coverage for multimode mobile handsets that fully conform to 3GPP's forthcoming 5G/NR Release 15 technology] subject to reciprocity by the license seeker, at a fair and reasonable royalty rate of $5 per 5G/NR multimode compliant handset." Ericsson also explained that it "has decided to voluntarily allow for even lower royalty rates on a case-by-case basis" and that "in exceptional circumstances, Ericsson is prepared to allow for rates as low as, but not lower than, a floor of $2.5 per 5G/NR multimode compliant handset." 

Ericsson's $5 per unit royalty rate is equivalent to a royalty of 1.5% on an ASP (average selling price) of approx. $330. Given that IDC (in a slightly dated) forecasts an "ASP of $293.61 in 2015 [declining] at a rate of 4.6% each year before reaching 236.38 in 2019" Ericsson's 5G royalty rate is likely to be in reality slightly higher than the 1.5% announced for 4G. 

Noteworthy are the facts that Ericsson's FRAND offer is 1) a portfolio offer; and 2) only available to "mobile handsets that fully conform" to 3GPP specifications. This indicates that Ericsson will continue with the long established practice of offering portfolio licenses to end-user devices and will not be making licenses available to chipset manufacturers. 

The biggest change is the switch from a royalty calculated as a percentage of end user device ASP to a fixed royalty per unit. Given that Apple's iPhone recently reached a new high ASP of $695, Ericsson's policy for 5G is surely to be welcomed in Cupertino, but perhaps less so in Shenzhen.