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7/10/2007
The Brattle Group’s Daniel L. McFadden and Glenn Woroch Conclude that the ITC Order in the Qualcomm/Broadcom Dispute Would Impose Substantial Economic Harm on Consumers, Producers and the Broader U.S. Economy
The Brattle Group issued a report analyzing the effects of an Order issued by the U.S. International Trade Commission banning the importation of all new wireless broadband handset models that contain Qualcomm chipsets found to infringe Broadcom’s “sleep mode” patent. The analysis, “The Costs of the ITC Downstream Exclusion Order to the U.S. Economy,” was conducted by Dr. Daniel L. McFadden, recipient of the 2000 Nobel Prize in Economic Sciences, and Dr. Glenn Woroch, Executive Director of the Center for Research on Telecommunications Policy at the University of California, Berkeley.
The ITC Order would impose a virtual ban on the sale of all new models of wireless broadband handsets in the U.S. market, including all 3G cell phone and smart phone models with new or improved functions or features. Although McFadden and Woroch express no opinion on the merits of the ITC’s infringement finding, they conclude that there are compelling economic policy justifications for the President to disapprove the Order, which they argue will “create a gross imbalance with economic harms to third parties that far outweigh any social benefits…”
McFadden and Woroch estimate that the Order will:
- Cause direct harm to consumers and producers of handsets and related goods and services ranging from $4.3 billion and $21.1 billion, depending on the duration of the ban
- Generate spillover effects to the broader U.S. economy by reducing the substantial contribution of the telecom sector to productivity growth
- Harm domestic competition by arbitrarily “picking winners and losers” among handset manufacturers and mobile wireless carriers—tantamount to “accidental industrial policy being practiced in one of the country’s most critical high-tech industries”
- Retard progress toward the Bush Administration’s goal of expanded broadband access, and harm U.S. international competitiveness
- Undermine the upcoming FCC auction of valuable spectrum in the 700 MHz band, with a potential revenue loss to the U.S. Treasury of up to $1.4 billion
McFadden and Woroch conclude that ongoing federal court litigation could afford Broadcom an appropriate remedy while avoiding the collateral economic damage that the ITC Order would cause.
Please select the pdf below to view the full report.
The Costs of the ITC Downstream Exclusion Order to the U.S. Economy
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