China, (did not see this one posted)>
China politics disrupt Qualcomm's phone card | Chinese
army's bid for CDMA raises eyebrows
The San Diego Union-Tribune
It was the biggest deal Qualcomm had ever
signed: an order from China's Great Wall Mobile
Communications for $300 million in wireless
handsets. To sign the deal, Qualcomm's chairman
and CEO, Irwin Jacobs, flew to Beijing in April
1997, where he heard Great Wall's Kang Jian praise the phones for their
"crystal-clear voice quality, fewer dropped calls and enhanced security."
Barely mentioned at the time was that Great Wall is half-owned by the
People's Liberation Army. Or that the PLA will get a cut of every sale it
makes of Qualcomm equipment in China. Or that the PLA itself could
benefit from the enhanced security the phones provide.
The Qualcomm deal is noteworthy because of its reliance on Code Multiple
Division Access technology, or CDMA, the U.S. standard for wireless
communications.
U.S. government documents say CDMA is the technology of choice for the
PLA, which pushed hard for the technology's entrance into China. Although
it has widespread civilian applications, CDMA is also useful in protecting
messages from jamming or eavesdropping.
Congress, meanwhile, has raised concerns about the flow of sensitive
information and technology to China.
"Technologies like CDMA are harder to (penetrate) because of their digital
nature," says Bukasha Tshilombo, a senior analyst on the wireless
communication team at Dataquest. "They provide an element of security that
is beneficial to military organizations."
CDMA technology originally was developed during World War II to protect
battlefield communications from interference. During the Cold War, it was
refined to provide security for satellite communications. "With CDMA, each
bit of information is encoded and then reassembled on the receiving end,"
says Larry Hardigan, Qualcomm's regional vice president for North America
and China. "It's inherently more secure than GSM or any analog system."
In the late 1980s, Qualcomm, [ Motorola ] and Bell Labs (now known as
[ Lucent Technologies ] ) pioneered ways for CDMA to be used by the
general public. Philip Karn, a staff engineer at Qualcomm, says the company
"dumbed down" CDMA's security features, to make it more appropriate for
civilians. An uphill battle
Restrictions had been imposed on high-tech exports to China, especially
after the Tiananmen Square massacre, for fear they would fall into the
military's hands. After some lobbying by Qualcomm, Motorola and others,
the White House relaxed most of those restrictions in 1994. By late 1994,
Qualcomm was testing CDMA in the Chinese city of Tainjin. The tests
showed that CDMA could handle 10 times as many calls as could the
analog system the Chinese were then using.
A later test in Hong Kong showed that CDMA had about three times the
capacity of any global system for mobile communication, or GSM, a
competing European system.
Still, Qualcomm faced an uphill battle. By the time the United States had
relaxed its restrictions, China's three largest phone companies were using
GSM, which was being promoted by such European giants as Ericsson,
Siemens and Nokia.
Behind the scenes, however, the PLA was pushing the Chinese telecom
ministry, now known as the Ministry of the Information Industry, to move to
CDMA.
In a 1996 memo, Jim Sasser, then the U.S. ambassador in Beijing, cabled
Washington that the army "has for some time been discussing with (the
ministry) the possibility of . . . establishing a mobile phone network based on
CDMA technology."
In the memo, obtained through the Freedom of Information Act by Softwar,
an arms-trade watchdog in Virginia, Sasser wrote that the army pressed for
CDMA because it offered greater capacity than GSM.
"The issue of efficiency is crucial," Sasser wrote, noting that the government
had allocated the army one-third of available radio frequencies, with
two-thirds going to local and regional governments.
"The ministry quickly realized that CDMA will be the more important
technology because it allows for fewer cell sites to achieve the same
coverage," Sasser wrote.
In 1997, the army and the phone ministry formed Great Wall Mobile
Communications, which quickly set about acquiring CDMA technology from
the West.
Within months, Great Wall established CDMA tests in four of China's
biggest cities, with Motorola in Beijing, Lucent in Guangzhou, Samsung in
Shanghai and Nortel in Xi'an.
Qualcomm was not named to head any of the projects, but it became one of
Great Wall's biggest suppliers because of the $300 million order for phones.
Meanwhile, the army's relationship with Great Wall was raising concerns in
national-security circles in the United States.
In 1997, China specialist Kevin F. Roth, writing in Princeton University's
Journal of Public Affairs, sounded an alarm.
"In the commercial haste to get a piece of the action in the Chinese market, it
is important to remember that the post-Cold War environment in Asia and
within China could be volatile in the future," Roth warned. "Hence,
governments should guard against the pressures of high-tech firms wishing to
sell their goods and technology abroad."
Roth added that "one cannot conclude that a liberal evolution is taking place
within the Chinese armed forces. At the moment, peace and democracy are
not on the PLA's corporate agenda, while profits, influence and power are."
Nothing nefarious
Qualcomm officials say there is nothing nefarious about the army's
involvement in Great Wall. The army, they say, wants to make money, just
as it does from hotels, hospitals and restaurants under its control. The
Central Committee of the Communist Party has urged the army to limit its
involvement in the day-to-day operations of its businesses, although it is still
permitted to reap its share of the profits.
"The Central Committee is saying 'We want you to be professional soldiers,
instead of commanding business enterprises,'" said Hardigan of Qualcomm.
"Essentially, the army is stepping back. And that's good for both Great Wall
and the PLA, which will be able to participate in whatever profits come from
the CDMA network."
Critics contend the Chinese are keeping a tight grip on telecommunications,
and they question whether a U.S. company should be helping the PLA
become more profitable.
"It's in our interests to ensure that the PLA doesn't get too fat and confident,"
says Harry Sokolski, director of the Nonproliferation Policy Education
Center in Washington, D.C.
In addition, there's the pesky concern about whether CDMA can enhance
the PLA's capacity for secrecy.
"Telecommunications inherently has military applications," says Peter Leitner,
a trade adviser at the Pentagon. "A good deal of what we're shipping over
now was developed with the military in mind, so of course it has military
uses."
Leitner said the PLA potentially could encrypt CDMA and use it as part of a
network -- built largely through U.S. technology -- that could be impervious
to eavesdropping. With China periodically threatening Taiwan, India and
other neighbors, such eavesdropping is important for regional stability.
Karn, the Qualcomm engineer, said there's no reason to worry. U.S. spy
agencies, he said, can still intercept and crack CDMA messages. "It's not
easy to eavesdrop on CDMA, but it's not impossible, either," he said. He
also said CDMA is already so widespread in the global marketplace that it
would be impossible to keep it out of the army's hands. "It would be easier
to keep the tide from flowing in than to prevent the spread of this kind of
technology," he said..
(Copyright 1999)
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