Qualcomm has recently been pushing a new false narrative that the Federal Trade Commission’s (FTC) antitrust case against the company represents a “threat to national security.” It has employed throngs of lobbyists and hired spokespeople to spread this mantra, including via op-eds in the media. It’s not a surprising strategy given the wide public concern with U.S.-China competition issues. However, a new paper by former FTC competition policy head Joseph Kattan explains why this new canard is both dangerous and not credible.
Kattan’s paper, titled “The Qualcomm Case and U.S. National Security,” comprehensively addresses Qualcomm’s attempt to shroud its coercive and anticompetitive behavior under “national security” fears and paper tiger rhetoric in what most likely resembles a conspiracy theory. Qualcomm’s and its defenders’ arguments are built on four fictions:
Fiction #1 – The FTC is suing Qualcomm for charging high prices
Truth: The FTC sued Qualcomm to enjoin coercive behavior that U.S. antitrust law prohibits, not simply because Qualcomm charges high prices
Fiction #2 – Curbing Qualcomm’s anticompetitive practices will eviscerate Qualcomm’s incentive to invest in 5G technology
Truth: Halting Qualcomm’s anticompetitive behavior will not reduce in any way the company’s incentives to invest in 5G; the large 5G profit opportunities that Qualcomm has said it expects will maintain the company’s incentives to invest in that technology.
Fiction #3 – Qualcomm is the only American company competing for 5G leadership
Truth: Qualcomm is not the only American innovator in 5G; its illegal practices sought to exclude from the market another American company, Intel, which has invested heavily in 5G.
Fiction #4 –American innovation thrives in the absence of competition
Truth: Having to compete on the merits with Intel and others will not impede innovation; on the contrary, the race to the top between American (and against foreign companies) will enhance innovation, result in higher performing and more secure technologies, and lead to American technological leadership in 5G. The American way is to foster competition, not enshrine Qualcomm’s monopoly in the law.
Qualcomm’s argument goes against everything we know about the relationship between competition and innovation. As Kattan explains “The story that Qualcomm has been peddling has it exactly backward. Letting competition flourish cannot harm national security. Allowing Qualcomm to continue injuring competition and making the entire cellular ecosystem dependent on it alone is the real threat to national security.”
Very recently (and conveniently omitted from Qualcomm’s analysis), International Trade Commission administrative law judge (ALJ) Thomas Pender found that Qualcomm’s efforts to lock Intel out of the market for modem chips constitutes a clear threat to U.S. national security. In his opinion rejecting Qualcomm’s request for an import ban of iPhones with Intel modem chips, ALJ Pender argued “competition is necessary for quality, innovation, competitive pricing, and, in this case, the preservation of a strong U.S. presence in the development of 5G and thus the national security of the United States.” Judge Pender also found “a real and palpable likelihood that national security interests will be jeopardized” if Intel exits the modem chip business.
Kattan’s paper discusses in some detail the nature of Qualcomm’s coercive licensing practices, some of which are unique not only in the telecommunications industry but unmatched by anyone in any industry. These practices both exclude competition and result in massive overcharges that are ultimately paid by everyone in the wireless telecommunications ecosystem. ACT | The App Association is concerned that the significant adverse impact of these anti-competitive practices has had to date will continue unless they are permanently enjoined. The FTC’s approach to competition and policy, and its enforcement priorities, directly affect each of the App Association’s members and their ability to access, use, and build on standardized technology with their own innovations.