Unicom links networks for CDMA crown
Jun 19 2001 11:16AM
Homeway
China Unicom last week concreted its role as king in the
CDMA world after it linked the networks of 14 operators,
although its own network is still under construction,
Business Weekly reports.
Since the commercial introduction of CDMA, or code
division multiple access, to South Korea in 1997, one of the
primary distinctions between CDMA and its rival standard
GSM (global system for mobile communications) has been
that GSM phones offered roaming services to most
countries in the world - except, of course, countries like
Japan, South Korea, and the United States.
Roaming services refer to a network inter-connection which
enables users make phone calls outside of their places of
residence.
Despite a lack of network coverage in these key countries,
the European telecoms firms that developed and earned
royalties from GSM have built up the value of global roaming
as an important feature for China's telecoms networks.
As a result, this has also become an important issue in the
current discussions surrounding the future of mobile
communications in China.
Until recently, the CDMA networks in each of the countries
in which the system is used have operated as isolated
systems. The reason, according to Paul Jacobs, executive
vice-president of Qualcomm, the US firm that developed
CDMA, was that while GSM focused on global roaming,
CDMA focused on making the best use of spectrum.
Now, however, what many experts contended was the last
important competitive advantage for GSM, global roaming,
will no longer apply.
Under the leadership of China Unicom, 14 companies last
week met in Hong Kong to sign an agreement that lays out
the framework for global roaming for CDMA users.
With 13 mobile operators from North America, South
America and the Asia-Pacific region, the combined network
covers 60% of global CDMA users.
While this may appear to be a technical issue of little
consequence, it is in fact a major step forward both for
mobile phone customers in China and for Unicom itself:
For the first time, mobile phone customers in China will be
able to purchase a handset that not only works in China, but
also works in Japan, South Korea, Canada, and the United
States.
Unicom will have an opportunity to earn mobile roaming fees
from overseas visitors from the above countries - an
opportunity as yet unavailable to China's dominant mobile
phone operator, China Mobile.
Unicom now has relationships with carriers around the world
that will enable roaming for Unicom's third-generation (3G)
mobile data phones immediately upon introduction.
Many of these agreements also include opportunities for
Unicom to leverage its roaming relationships and learn more
about making maximum use of the CDMA network.
China Unicom is slowly coming to be seen by the
telecommunications industry worldwide as something more
than just a participant, and indeed is being increasingly
perceived as a leader in the industry.
Beyond the immediate and positive effects for Unicom, a
much broader set of interests in China stand to benefit from
this agreement.
Many analysts are suggesting that this agreement is yet
another milestone in a major trend in the industry that sees
the "center of gravity" of mobile telecoms shifting away from
Europe and the United States towards China.
Following last year's high profile government auctions of a
new spectrum in Germany, the United Kingdom, and
elsewhere, the focus of the world's attention to 3G was
firmly fixed on Europe.
Given the important role Europe and European companies
have played in the development of mobile telecoms, this
was perhaps to be expected.
But in recent months it has become clear that, far from
taking the lead in next generation mobile telecoms, Europe
is facing the possibility that it is, in fact, falling behind.
The auctions, once hailed for having raised so much money
for their governments, have threatened to break the
continent's telecoms giants. The favored local 3G standard,
WCDMA, is beset with technical issues and has yet to be
finalized.
And even the "evolutionary" technology, general packet
radio service, or GPRS, which was supposed to be a
stepping-stone from current GSM technology to 3G, has
met with some problems in operation.
All of these problems might be attributed to the growing
pains of a new technology - except for in Asia.
While the world's business and trade press cover the
politics of spectrum auctions and the structural changes
facing handset manufacturers in Europe, Asia has been
quietly laying the groundwork to take the technological lead
in mobile telecommunications.
South Korea, without any fanfare, rolled out the first 3G
network late last year, and began commercial operations
ahead of the originally planned launch date of Japan's NTT
DoCoMo.
And with the same quiet efficiency exhibited by the South
Korean carriers, KDDI telecom is preparing to roll out a 3G
system that is unlikely to face the same issues that have
slowed the DoCoMo roll-out.
China Unicom is also planning on rolling out what is
expected to become the world's largest CDMA network.
With original projections covering up to 10 million users, the
carrier has rapidly increased estimates of the capacity of
the new networks. The current estimate stands at a
capacity of over 15 million users within a year, and over 50
million within five years.
In signing supplier contracts, Unicom made decisions that
will for the first time enable China's manufacturers to take a
significant share of the revenues coming from a major
domestic network.
During the dominance of the GSM standard, not only were
royalties being paid to European GSM developers, but in
excess of 90% of handsets and equipment for those
networks were made by offshore firms.
With Unicom's choice, China's manufacturers will have an
opportunity to share a major market at home for mobile
communications equipment using cutting-edge technology.
One analyst, citing Ericcson's recent sale of its handset
division, noted that between contract manufacture for foreign
firms and the CDMA network contracts Unicom signed with
local manufacturers, China has an opportunity to become
the world's dominant supplier of the next generation of
mobile telecommunications hardware.
Finally, China is preparing to take the global lead in mobile
communications networks purely by virtue of having the
world's largest subscriber base.
According to figures from the Ministry of Information
Industry, China has now well surpassed 100 million mobile
users, and will soon have more users than any other country
or territory, and more than most of the rest of Asia
combined.
This adds up to tremendous market clout - no supplier
seeking to develop a major position in the global market is
able to ignore China.
Hou Mingjuan is a Business Weekly staff and David Wolf is
a senior telecoms analyst with US-based consulting firm
Burson-Marsteller.
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