Patience a must for 3G operators
By Chen Zhiming (China Daily)
Updated: 2004-12-01 14:01

For those who want to cash in on China's lucrative third generation (3G) of mobile telecommunications, patience seems to be a must.

Despite an increasing outcry for the release of 3G licences as soon as possible, the Chinese Government has continued to be cautious, reported China Daily on Wednesday.

However, the 3G era is approaching China.

It was reported last week that the State Development and Reform Commission (SDRC) has submitted a report containing suggestions about the issuing of 3G licences to the State Council.

Sources close to the commission said that the report hinted that the Chinese Government is to release four 3G licences in all.

According to the report, both China Mobile and China Unicom are to get one 3G licence each. China Mobile will be awarded one based on European WCDMA and China Unicom for CDMA2000.

China Telecom and China Netcom are each to hold a 3G licence based on TD-SCDMA. But they have been constrained to deal in 3G businesses inside their own territory southern China and northern China.

Also according to the commission blueprint, China Telecom is to build commercial trial TD-SCDMA networks in Shanghai, Jiangsu, Zhejiang and Guangdong.

Trial commercial use is scheduled to start in March next year. Official commercial use will be launched in June next year.

Test results from the commercial networks will be used as the main reference to help decide if TD-SCDMA will be the single 3G standard for China Telecom and China Netcom, according to the SDRC.

If the test result is not adequate, both fixed-line carriers are likely to adopt a combination of WCDMA and TD-SCDMA.

In another development, sources said that the SDRC suggested that TD-SCDMA change its frequency band from 2.1G to 800M, in an effort to meet the development of the digital trunking business of China Railcom and China Satcom, who are unlikely to obtain 3G licences.

"I am quite for the SDRC suggestion, if the message is correct," said Zeng Jianqiu, a professor with Beijing University of Post and Telecommunications.

"It is rational for the Chinese Government to release no more than three 3G licences," he told China Daily.

The cost of building up a nationwide 3G network will cost almost 250-300 billion yuan (US$30-36 billion).

If the Chinese Government issues four licences, the total cost will amount to about 1 trillion yuan (US$120 billion).

The cost for the 3G networks is excessive when compared to the yearly revenue from the telecoms industry.

Figures from the MII show that the revenue of the industry was 461 billion yuan (US$55.5 billion) last year.

"It will take years to get the money back," he said.

Besides that, it will also be expensive to operate and maintain networks after completion.

"The cost is far more than US$120 billion for four nationwide 3G networks," he said.

Zeng said he wondered if the domestic market had enough demand for 3G services.

"Currently, we do not see much demand for 3G services driven by value-added service such as video calls, multi-media message service and high speed data services," he said.

For both China Mobile and China Unicom, the country's only two mobile carriers, revenue from value-added telecoms services is very small compared to its main businesses.

"But I believe that the Chinese Government can start the 3G step by step by deploying experimental networks in the country's most developed areas such as Beijing, Shanghai and Guangzhou now," he said.

Then services and experience could be gradually introduced to the other parts of the country, he said.

"This will be a cautious and feasible way to roll out the 3G strategies," he said, adding 3G technologies are reaching maturity.

Nevertheless, Zeng said that given the fast development of China's telecoms industry, the issuing of 3G licences is no longer a matter just for the industry but a key factor that may affect national economic development.

Given the size of the Chinese market, the issuing of 3G licences in China could be a "nuclear weapon" in the world telecoms industry, he said.

Figures from the Ministry of Information Industry (MII) show that by the end of October this year, revenue from the telecoms industry reached 477.1 billion yuan (US$57.5 billion), up 12.2 per cent for the same period last year.

Meanwhile, it had signed up 310.6 million fixed-line subscribers and 325 million mobile subscribers. Broadband users topped 21.7 million.

"It is up to the State Council to hammer out the time and mode to develop 3G in China," he said.

Lou Qinjian, vice-minister of the MII, reiterated last month during the 3G in China Global Summit 2004 in Beijing that the Chinese Government is working to develop a most feasible way to launch the country's 3G development strategies.

"We are to plan 3G technologies and market as a whole and ensure industry sustainability," he said.

Many factors such as technology, system equipment and terminals, as well as the business modes and market demand, will all be considered, he said.

Being cautious about 3G development, the Chinese Government has studied the development of all 3G standards via experimental tests since June 2001.

The three technologies include Chinese TD-SCDMA (Time Division Synchronous), European-backed Wideband CDMA and US-based Qualcomm Corp's CDMA 2000.

Since last month, 3G has drawn increasing attention to the industry home and abroad when three reports focusing on the experimental testing of the three 3G standards during the summit showed the 3G standards are almost approaching full development.

Previously, the Chinese Government said that the test results would serve as a reference for the government to release its 3G licences.

Rumours then had it that China is to release 3G licences in the second half of next year.

Most recently, the frequent visits of world telecoms heads is a reflection about increasing world concerns about China's 3G.

At present, there is heavy competition among telecoms companies home and abroad such as Motorola, Nokia, Siemens, Ericsson, Nortel Networks, Huawei and ZTE over the mobile market in China, where an expansion into next-generation or 3G services is seen as a lucrative opportunity for growth.

Motorola Inc, for example, vowed late last month to watch closely China's 3G-related issues with an eye to keeping its leading position in China.

During last month's 3G World Conference in Hong Kong, Motorola announced the availability of five new 3G handsets.

The new handsets all offer lighter, compact designs, improved battery life and richer camera quality maintaining picture-perfect large screens, according to Ronald Garriques, president of Motorola's Personal Communications Sector.

He claimed that the company expects its sales of 3G handsets based on the European WCDMA standard to surpass those based on the second-generation GSM standard in 2008.

"The Chinese market is important for us," he said.

The company would keep following TD-SCDMA development to roll out corresponding strategies, he said.

Government figures show that a total of 129 3G licences have been awarded worldwide.

For example, a total of 38 telecoms operators has launched commercial WCDMA networks worldwide.

WCDMA subscribers had increased worldwide from 2.93 million last year to more than 10 million by the end of September this year.

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