You can hear the footsteps on the stairs before you see who's coming. Like many timeworn Chinese expressions, it's as practical as it is evocative. It conveys that agonizing sense of anxiety and anticipation in the face of enormous change.

Chinese telecoms pundits have been hailing third generation (3G) mobile communications systems as the biggest thing since sliced bread for ages. Four years on, one of the biggest opportunities the industry has ever seen is about to take the domestic market by storm soon, that is.

It is widely believed that China will release 3G licences next year, because if it doesn't, it will not be able to provide services to participants of the Beijing 2008 Olympic Games.

The country still must choose between the largely European WCDMA (wideband code division multiple access) technology and the Chinese-led TD-SCDMA (time division synchronous CDMA). Either way, this decision has the potential to significantly influence both the domestic and global mobile phone industry, says US market research house In-Stat.

"China's eventual course of action holds huge implications for the international market," says senior telecoms analyst David Chamberlain.

The Chinese Government is evaluating a range of schemes for giving 3G mobile licences to different operators. The difference between the proven and popular WCDMA licences and the TD-SCDMA licences will shape the futures of both operators and the industry as a whole.

Chamberlain says that the TD-SCDMA standard is not up to scratch yet, but that does not mean it can't develop over the next five years. Regardless of the outcome, it will continue to be a strong force in the 3G market.

This is why an increasing number of international mobile equipment companies, including Nokia and Nortel, have established TD-SCDMA partnerships with domestic players. They simply can't afford to focus exclusively on WCDMA, particularly amid speculation that the Chinese industry is seriously considering adopting the domestic standard.

The launch of 3G in China does not guarantee impressive growth, but Chamberlain says that it will enhance value-added services, increase average revenues per user, and give operators more control over the handset market.

Expectations for 3G are high, but In-Stat is calling for a cautious approach. It predicts that there will still be 1.6 billion second-generation GSM (global system for mobile communications) users throughout the world by 2009, compared with 279 million WCDMA users.

In-Stat also estimates that China will continue to be the fastest growing mobile phone market in the world between 2004 and 2010, adding up to 166 million subscribers. The projected growth rate is significantly lower than before, however, with an average monthly increase of 2.5 million subscribers, compared with a monthly average of 4.8 million over the first nine months of this year.

India is a huge market for the mobile communications industry, and will maintain its global significance, but its growth will be outpaced by the United States, which is projected to increase by 52.3 million users over the same period, compared with India's 42.5 million.

"India is difficult to predict," says Chamberlain.

He says a major reason for explosive growth in India is an aggressive marketing push from operators. They are offering free call time and other perks to lure more subscribers, but consumer spending following the free-service period is still quite low. It is not enough for operators to achieve sustained growth in the long run.

Mobile entertainment is expected to become a key application in the 3G era.

An In-Stat survey of US users suggests that 12.5 per cent say they would be willing to pay for mobile video, and almost 10 per cent would spring for music files.

Chamberlain says his firm's survey of Chinese subscribers shows a similar willingness: Domesticconsumers will pay 10 per cent more for mobile video.

Voice over IP (VoIP), which sends signals in packets on an Internet protocol-based network, is posing an increasing challenge to traditional public switching telephony networks. Keith Nissen, another senior analyst with In-Stat, says that this could further complicate the situation in China.

A lot of this depends on operators' attitudes to competition. All telecoms operators are State-owned, so they do not fully compete with each other. This discourages technological innovation to a certain degree.

VoIP also usually provides better reception, but China Mobile and China Unicom both enjoy comprehensive coverage, so incentives to adopt a new standard are relatively low.

(China Daily 11/07/2005 page5)