Chinese alliance strives for 3G standard
Author: (LI WEITAO)
November 12,2002
Chinese telecoms regulators have renewed their backing for a home-grown standard for third-generation (3G) wireless telecommunications, which is expected to change the competitive landscape of China's mobile telecoms market.
However, more uncertainties loom for the already blurred 3G market, industry analysts said.
Domestic vendors, carriers and financiers gathered in Beijing last Wednesday to form a TD-SCDMA Industrial Alliance to try to win acceptance of the Chinese standard to rival two standards backed by US and European developers.
It was revealed at the gathering that TD-SCDMA (time division synchronous code division multiple access), developed by State-owned Datang, had been awarded much broader spectrum resources than its rivals WCDMA (wideband CDMA) and CDMA2000.
Datang's shares rocketed last week after details of the alliance were made public.
Meanwhile, shares of QUALCOMM, which collects royalties on most CDMA chipsets, dropped significantly in the US stock market.
Analysts said the alliance underscores regulators' increasing support for TD-SCDMA, and their eagerness to boost the domestic telecommunications manufacturing industry.
TD-SCDMA is believed to lag behind WCDMA and CDMA2000.
"TD-SCDMA is less mature than its competitors, due to its late development," Lei Zhengzhou, chief engineer of the Institute of Telecommunications Research under the Ministry of Information Industry (MII), told Business Weekly.
The home-grown standard still has a long way to go before it is used commercially, industry analysts said.
TD-SCDMA's field trials were only completed in August.
Although they were deemed a success, WCDMA and CDMA2000 are already commercial and being supported by major global vendors.
The government's support for TD-SCDMA is expected to help it receive wider acceptance, and hurry up its commercialization, analysts said.
The government's support is also expected to send a strong signal to telecoms firms and operators, pushing them to increase investments in the Chinese standard, analysts said.
With TD-SCDMA, which possesses most Chinese-owned intellectual property rights, domestic gear makers would pay less royalties to overseas core technology owners and, hence, greatly enhance their competitiveness.
"The volume of Chinese-made telecommunications products is the largest in the world, but the sum of the royalties they are paying to technology owners is also the largest," said Zhang Guobao, deputy minister of the State Development Planning Commission.
"China's mobile telecoms market will no longer be a playground for only overseas companies in the coming 3G age."
Datang joined the alliance with leading domestic gear makers Huawei and Zhongxing Telecommunications (ZTE), computer giant Legend and conglomerate China Putian Corp to promote the standard.
Several vendors are prepared to endorse TD-SCDMA.
Alcatel, Huawei and Taiwan discount cellphone manufacturer DB-Tel have indicated they are planning to make equipment and handsets for the standard.
"Now, the key is whether it can successfully go commercial," said Li Chengshu, honorary director of Modern Communication Research Institute with Northern Jiaotong University.
As a relatively young technology, TD-SCDMA has no commercialized network equipment or mobile terminals.
"If commercialization is successful, operators will rush to adopt it," Li said.
Encouraged by the government's support, Datang announced last week it will invest 1 billion yuan (US$120 million) next year in the 3G technology.
Datang said it will use its own money, investments from overseas partners and government, and bank loans to finance 3G network research.
German telecoms gear maker Siemens AG, a major partner, also said it will invest about US$50 million into the research this fiscal year.
That would help TD-SCDMA technology mature and catch up to its competitors.
Market has final say
Despite telecoms regulators' support, analysts suggest the government is unlikely to mandate TD-SCDMA as China's sole 3G standard.
The government, they suggest, will let the market choose which of the three standards should be adopted.
"The alliance reflects the government's attitude that it hopes the home-grown standard can gain some ground from its rivals," Li said.
Industry analysts anticipate 3G will take off in China in 2003 and 2004, and that the three standards will co-exist.
Zhu Min, an analyst with Beijing-based Analysis Consulting, predicts MII will issue 3G licences next year.
"China Telecom is the most likely to receive a licence, if the MII issues only one licence," Zhu said.
China Telecom, the largest fixed-line operator, is believed to be lobbying regulators for approval to conduct mobile business.
If China Telecom receives a licence, it is very likely to adopt the TD-SCDMA to rival China Mobile and Unicom.
It's also possible all major telecoms players - including China Mobile, Unicom, China Telecom and Netcom - will receive 3G licences.
To protect investments in upgrading its CDMA network, China Unicom will almost definitely adopt the CDMA 2000 standard, Zhu said.
China Mobile has suggested it would choose WCDMA to upgrade its current second-generation (2G) GSM network.
China Mobile is likely to adopt TD-SCDMA, as migration from GSM to TD-SCDMA is viable, Zhu noted.
Datang has put a lot of effort into ensuring the GSM network and TD-SCDMA are compatible, industry insiders said.
It's likely China Mobile will choose both the WCDMA and TD-SCDMA standards, Zhu said.
Li, however, said that is unlikely.
"No company has made an effort in R&D (research and development) of the interoperability of the three standards, due to a lack of funds and companies' unwillingness to share their technologies," he said.
China's 3G market remains blurred.
"The government may wait to see which standard will become the mainstream globally and then make the decision," Lei said.
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