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Unraveling the telecom puzzle
(China Daily)
Updated: 2009-01-08 07:48

China has finally given the nod to operators to build 3G high-speed mobile phone networks. Below are answers to some key 3G-related questions.

Q: Why was the 3G licensing scheme delayed in China?

A: A complex industry restructuring and the immaturity of TD-SCDMA, a home-grown 3G mobile phone standard, has been thwarting the 3G licensing.

China Mobile dominates the market, controlling about half of the total revenue and nearly 70 percent of the total profits in the industry. The government had been exploring options to break the monopoly by creating two bigger rivals through an industry consolidation. Disagreements over the restructuring plan have been stalling the 3G licensing process until May 2008 when the final plan was announced.

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Unraveling the telecom puzzle China issues 3G licenses
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Unraveling the telecom puzzle China Mobile falls after 3G licence issue
Unraveling the telecom puzzle 3G trouble for China Mobile?

China has been betting big on TD-SCDMA to cut the royalties paid to foreign technology vendors. However, due to inadequate financing for research and development and industry-wide support, TD-SCDMA has been lagging behind its foreign rivals. As the government has greatly increased its support and kept the 3G licensing on hold, TD-SCDMA developers have been given more time in the catch-up game and have made substantial progress.

Q: How will the 3G licensing affect the industry landscape?

A: By mandating China Mobile, the dominant operator in the country, to operate 3G networks based on TD-SCDMA, the government hopes to reduce the risks of a possible failure of the home-grown standard, which has yet to be deployed in any commercial network in the world. This could affect China Mobile brand with some of its subscribers switching over to the more proven technologies.

There could be an even bigger blow for China Mobile if the government introduces the number portability scheme under which users are allowed to retain their existing number while migrating to a different operator.

All these might be exactly what the government has been hoping for as it intends to help China Telecom and China Unicom grow stronger to pose a real threat to China Mobile, in order to rationalize the domestic sector, plagued by the so-called "unbalanced competition".

Q: What has been the response to 3G services globally?

A: WCDMA is widely adopted in Europe and the number of WCDMA subscribers globally soared to 262 million in the third quarter of last year, according to the Global Mobile Supplier Association. CDMA 2000 is mainly used in South Korea, Japan and North America and the number of CDMA2000 1x EV-DO users hit 105 million in Sept 2008.

Q: How will telecom equipment makers gain from the licensing?

A: Nearly all the gear makers will gain from the spending spree. Foreign vendors who have been reluctant or slow in supporting the TD-SCDMA would naturally get lesser contracts.

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