Europe before ETSI: A Fragmented Market
Before 1990, Europe’s telecommunications market was fragmented and dominated by national monopolies. National operators, known as PPTs, worked exclusively with one or two Original Equipment Manufacturers (OEMs) based on cross-licensing agreements. Coordination, where it existed, was limited to the European Conference of Postal and Telecommunications Administrations (CEPT).
The first step toward a European mobile standard emerged in 1981 when Nordic countries launched the Nordic Mobile Telephone system, an analogue standard. CEPT followed in 1982, with efforts to create an analogue GSM standard. But as digital technology rapidly advanced, the group shifted to develop a digital standard in 1984 instead. OEMs, with their deep R&D investments, were invited to contribute to the project.
The European Commission (EC) soon became involved in 1987, during which several operators signed a Memorandum of Understanding agreeing to implement the GSM standard by 1991. Yet the Commission’s push for reform caused intense disagreement when CEPT proposed that OEMs license their IPRs for free to interested manufacturers.
The European Telecommunications Standards Institute (ETSI) was founded in response to the EC’s 1987 Green Paper advocating for a common market for telecommunications services and equipment across Europe. As part of this effort to harmonise the telecom sector, a new European-wide standards body was established, which would eventually become ETSI. In 1990, the EC issued another Green Paper on standards to create FRAND policies for SEPs related to ETSI standards.
ETSI's mission was clear, but reaching a consensus on an IPR policy was difficult. The organisation’s 1992 draft IPR policy was controversial for imposing strict licensing restrictions for Standard Essential Patents (SEPs). These included, among others, licensing by default, maximum royalty rates, and different licensing conditions for EU and non-EU manufacturers. Critics argued that these provisions conflicted with both EU law and international trade rules. This meant in particular the General Agreement on Tariffs and Trade (GATT), the predecessor of the now World Trade Organisation (WTO) agreement.
The Commission responded swiftly, publishing the 1992 General Principles that should govern standardisation. Among the most notable requirements were that: (i) all persons wishing to use European standards must be given access to those standards and (ii) standards be available on FRAND terms to all, regardless of whether the user participated in the standard activity.
Tensions continued in 1993, when ETSI adopted a revised version of its IPR policy, which received overwhelming support from 88% of ETSI’s members. However, it faced strong backlash from major industry players like Motorola, IBM, Philips, and AT&T. These companies, among others, condemned the policy and threatened to withhold access to vital technologies.
With the opposing views and the Commission raising legal objections, ETSI was forced to withdraw its IPR policy in September 1993.
