Mobile Drm Fee Debated

The pending technical specification for digital-rights-management protection in mobile phones, poised to become the standard for the industry, may be doomed to fail before it is ever implemented because of disagreements about the cost of licensing the technology.

The mobile industry has been working to define a common standard for DRM in handsets through its de facto standards-setting body, the Open Mobile Alliance. Although wireless carriers and handset manufacturers participating have agreed on the technical details of a DRM solution, they are balking at the fees demanded by those providing the software behind it.

Intertrust Technologies, Matsushita and Sony, among others, have contributed patented technology to the DRM specification, and have set terms on a joint patent portfolio through technology licensing service MPEG LA.

The licensing plan calls for a $1 per-device fee to be paid by whomever sells the device to consumers, which in the United States means wireless carriers. It also asks for 1% of the sale of any content protected by specification, to be paid by the service provider. However, it is vague on exactly what constitutes a service provider. In most cases, it could be the wireless carrier, but could also apply to content owners selling to consumers independently of the carrier.

MPEG LA would collect the fees and distribute them to the patent holders it represents.

The GSM Assn., which consists of such carriers as Cingular and T-Mobile, called the proposal "impractical, excessive and short-sighted."

"Based on frank responses from operators throughout the world, our board understands that members are being 'forced away' from the OMA DRM standards by this unworkable licensing scheme," GSMA chairman Craig Ehrlich says. "To provide the services and content which their customers desire, operators will have no option but to take their own routes toward implementing proprietary DRM solutions. These solutions may have lower licensing costs, but will ultimately introduce problems for customers when roaming, changing networks or exchanging content with other users."

The Mobile Entertainment Forum lashed out against the plan as well.

"The MEF membership is concerned that the fee level proposed . . . will inhibit mobile entertainment industry growth," MEF chairman Patrick Parodi says.

The wireless and entertainment industries consider a common DRM standard essential to the success of mobile content distribution. The wireless market hopes to avoid the fragmented DRM environment typified in the Internet space by incompatible proprietary DRM solutions from the likes of Apple Computer, Microsoft and Real Networks.

Industry analysts say a $1 per-handset fee creates difficulty for an industry looking to keep down costs on multimedia-capable handsets.

"The pressure is on to make these mainstream devices, so adding $1 to even entry-level phones is a lot when you consider that carriers are trying to keep that cost low," says Neil Strother, senior mobile devices analyst at In-Stat.

Carriers subsidize the costs of handsets and recoup their losses in airtime fees and content services. High DRM costs mean more expensive content, and thinner margins for all.

Yet many believe this is just the beginning of a negotiation period, and that MPEG LA eventually will reduce the licensing fees.

"Overall, we are optimistic that this dispute will be settled and the OMA's DRM implementation will continue as planned," says Harry Wang, research analyst at Parks Associates. "Unlike the personal computing and consumer electronics spaces, the mobile phone industry has been able to develop interoperable DRM solutions from the ground up, which is a real advantage for providers seeking to add multimedia content to their services."