October 25, 2002
Beijing Steps Up Its Promotion
Of Home-Grown 3G Technology
By H. ASHER BOLANDE
Staff Reporter of THE WALL STREET JOURNAL
HONG KONG -- Beijing is stepping up efforts to rally its telecommunications industry behind a home-grown version of third-generation wireless technology known as TD-SCDMA, in a potential blow to U.S. and European standards that foreign vendors are trying to sell in the world's biggest market.
Top-level government officials including Vice Premier Wu Bangguo and representatives of China's main telecom-equipment manufacturers, financial institutions and its two mobile-service providers -- China Mobile Communications Corp. and China United Telecommunications Corp. -- are scheduled to meet on Wednesday to establish the TD-SCDMA Industrial Alliance, according to people familiar with the situation.
The meeting's location at the Great Hall of the People, the symbolic heart of state power, underlines government support for development of the so-called Chinese 3G technology.
International organizations had originally hoped to create a unified, global standard for next-generation wireless networks, but the global map has so far been divided between two incompatible technologies: WCDMA, the choice of European companies and NTT DoCoMo Inc. of Japan, and CDMA2000, a standard backed by San Diego-based Qualcomm Corp., Lucent Technologies Inc. and South Korea.
With the largest number of mobile-phone subscribers in the world, China will cast a deciding vote on which will achieve the biggest economies of scale, but it has yet to commit, preferring instead to play wait-and-see. As a result, foreign companies such as Nokia Corp. -- which has invested heavily to develop WCDMA products -- have been lobbying furiously in Beijing.
TD-SCDMA, a third standard that's not been considered anywhere else in the world, could play a spoiler role. With help from Germany's Siemens AG, Chinese state-owned equipment maker Datang Telecom Technology Industry Group has led research-and-development work to date, and the government's latest move indicates it wants to spur broader efforts across the domestic industry to commercialize TD-SCDMA products.
According to a report Friday in the Beijing Morning News, the state telecom regulator is also backing TD-SCDMA by setting aside radio-frequency spectrum in the 155 megahertz band for its exclusive use in the future. In addition to Datang, manufacturers expected to attend Wednesday's meeting include Huawei Technologies Ltd., ZTE Corp., China Putian Corp. and TCL Mobile Communications Ltd., said one person involved in the meeting's planning.
In a country where the government carefully shepherds the telecom industry's development, the meeting represents an important political statement, said Peter Lovelock, a telecom consultant at Beijing-based firm MFC Insight. Instead of just giving way to prevailing foreign standards, the government is showing it "wants Chinese industry focused on development of TD-SCDMA," he said.
The meeting also signals that the country is in no hurry to make firm choices on 3G, as TD-SCDMA is farther away from market readiness than other alternatives, Mr. Lovelock added.
But it is far from certain that government encouragement will be enough to spur genuine R&D investment at a time when most of the domestic industry is seeing sharp declines in profit after years of steady growth.
Equally uncertain, say other analysts, is whether wider industry participation in TD-SCDMA would help or hurt Datang. The company risks losing control of the technology but at the same time could potentially garner royalty business by licensing out its TD-SCDMA patents, together with Siemens, to other producers.
-- Matt Pottinger contributed to this article.
Write to H. Asher Bolande at hyam.bolande@wsj.com
Updated October 25, 2002 11:04 a.m. EDT
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