China likely to go its own way with 3G
Start with a seriously large figure – half a billion. That is how many people use cell phones in China making it the biggest market in the world. I know, I know, I exaggerate. There are currently only 470 million of them but, probably, by the time you read to the end of this article there will be half a billion.
For every phone maker in the world, for every phone operator, that is a magic figure. The sort that gives executives erotic dreams.
The ITU Telecom World 2006 conference in Hong Kong is running even as this is written and everyone is desperate to know what China will do about 3G because it HAS to have it running by the Olympic Games which are in Beijing in 2008.
And Chinese government officials simply avoid saying when, who and how it will allow next-generation mobile phone networks (3G) to China.
So all of the executives of Nokia, Motorola, Hutchinson et al are running around in little circles trying to get an answer. As the same time they are using the FUD – fear, uncertainty and doubt – to try and push China into a decision.
There is simply no chance this will happen.
China is already in the happy position that it makes most of the mobile phones in the world which gives it a certain amount of expertise. For the phone companies this may be make or break time and the Chinese negotiators know it.
3G has been a little slow to take off in Europe (and totally daft prices were paid for the privilege of not getting very much back) but Australia has shown that a major sporting event, like the Ashes cricket matches running at the moment, can boost 3G skywards.
Telecommunications suppliers have been counting on China to provide a major lift and most are keen and eager (nay, desperate) to jump in if and when a 3G network building begins in earnest on the Chinese mainland.
At the opening ceremony for the conference on Sunday and again Monday, Chinese leaders simply declined to announce a timetable. Even in private discussion they will not give a timetable. Or any sort of firm decision. Beyond doubt and beyond debate this is a planned policy but it left many at conference gnashing their teeth.
They had hoped to hear the answer to three questions:
• Which technology China will select?
• Which mobile phone operators will get the licenses?
• When will it happen?
Wang Xudong, the minister for the information industry, said on Monday, ‘China will consider three standards for 3G. The timing for issuing 3G licenses will be determined by the market.’
With the rest of the world reaching saturation point in many industrial economies, telecommunications supply executives are wistful/envious/desperate about the potential for 3G networks in China where there are, if you have read this far, half a billion owners and growing.
There is potentially a $26 billion market for such systems.
Frederic Rose, president of the Asia-Pacific region for the newly merged Alcatel-Lucent diplomatically said, ‘This is for the government to decide.’
True.
There is no doubt China has shown a preference for developing and choosing its own standards, and if it does, some Western companies may well be in the cold.
For this decision is mainly all about standards of which there are three main ones.
- WD-CMA is the European version of 3G and backed by Nokia and Ericsson.
- CDMA 1000x is used by some American carriers.
- TD-CDMA is the one used by China.
Technically, they are related, but that is about as far as it goes. No one agrees as to what is best for China. Commercial pressures inhibit unbiased thinking.
Alcatel-Lucent seems to be playing it well. It is still actively investing in the second-generation business (the one before 3G) which is still growing in China which gives it some, but not many, brownie points. Alcatel-Lucent is prepared to jump into any of the three standards. (Or stand and on its head and play Jingle Bells through an ocarina if that will help.)
- Its TD-SCDMA equipment, through its Shanghai Bell joint venture with Datang Communications of China, is already being used in pilot networks in the country. And since Datang owns most of the TD-SCDMA intellectual property, Alcatel-Lucent would generally not pay royalty fees to use it.
- In addition, Alcatel-Lucent makes W-CDMA equipment for the European market.
- The merger of Alcatel and Lucent Technologies brought to the combined company Lucent’s expertise in CDMA.
Chinese manufacturers are also ready.
ZTE and Huawei are among the biggest pushing for the TD-SCDMA standard, and they, too, make equipment for the competing standards. And they would like very much for the Nokia and Motorola stranglehold of the second-generation network business in China to be broken.
Samsung of South Korea would also like a piece of the action. Jeong Han Kim, senior vice president for Samsung Electronics’ telecommunication network business, said, ‘We are ready to enter that market, whether it is TD-SCDMA or W-CDMA — whatever the standard. We will be a major player in that area.’ Samsung has two factories in China.
One thing that companies can bank on, 3G will happen in China before the Olympic Games. Most executives in telecom companies are updating their CVs for if another company gets the China contract they will need it.
In fact, the Chinese delegation is pretty firmly committed to doing it itself as much as possible. Which will not be cheery news for Nokia, Motorola, Samsung et al.
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