3G in China: One Country, Three Standards
If China Mobile made any splash as a top-level sponsor of the Beijing Olympics, it was for its limited deployment of TD-SCDMA (Time Division-Synchronous Code Division Multiple Access) 3G (third-generation) telephony service in the Olympic cities, except Hong Kong.
TD-SCDMA is one of numerous Chinese efforts to establish a technology standard that will be adopted both domestically and internationally. Both the Chinese government and the local technology industry bristle at the idea of continuously paying royalties to foreign technology patent holders. Several such efforts -- including EVD (enhanced video disc) and WAPI (WLAN Authentication and Privacy Infrastructure) -- have failed to gain adoption even in their home market.
However, TD-SCDMA will achieve at least some success with China Mobile backing it as its 3G standard. The math for such a strategy works: If even 10 percent of China's total mobile market starts using TD-SCDMA phones, that's about 60 million users. TD-SCDMA could therefore achieve reasonable success without a single foreign user.
Despite strong government support for TD-SCDMA, China's telecom regulators and rival operators have found a way very quietly to accommodate international 3G standards. By allowing China Telecom and China Unicom, China Mobile's newly-integrated rivals, to use CDMA2000 and WCDMA (Wideband Code Division Multiple Access), respectively, those operators can differentiate themselves.
Not everyone is convinced. "The U.S. had competing technologies including analog, CDMA, TDMA, GSM/PCS and iDen/Nextel to name a few. Poor coverage and retarded growth was the result. Not encouraging," said Duncan Clark, chairman of BDA China, a Beijing-based telecom investment and research firm.
Using three standards solves political questions, but will the concept of one country, three 3G systems work?
"If a multi-system approach makes sense for any market, it is China. The sheer size and diversity of the country makes it the ideal track for a horse race among competing systems," said David Wolf, CEO of Wolf Group Asia, a Beijing-based consultancy. "One reason China's multi-system approach makes sense is as a means of arresting subscriber churn. Because China's handset market is retail-driven, if all carriers are on the same type of system, it is easier to switch from one carrier to another. With switching so simple, the industry would rapidly devolve into a costly marketing war over users."
China's Ministry of Industry and Information Technology (MIIT) has yet to issue 3G licenses, but it's a done deal. China's three telcos will each get one, while foreign providers remain barred from operating in the country.
There is also no official timetable for the official launch of commercial 3G services in China, although China Mobile began pushing TD-SCDMA sign-ups during the Olympics, and phones for a new, larger trial were just delivered this week.
Despite China Mobile's size, TD-SCDMA as a new and incompatible technology could be both an advantage and a challenge for the carrier. "[China Mobile] can exploit [TD-SCDMA] by at least getting a head start on building out new towers and core infrastructure for 3G, hopefully they can go LTE (Long Term Evolution) and quietly dump TD-SCDMA in the future," Clark said.
Both Wolf and Clark agreed that the Chinese government would offer long-term support for China Mobile's TD-SCDMA efforts.
"China Mobile is being given a long runway by the government. It will be months before the other two networks will be up and running, both because of the engineering effort required to procure, install, test, and start up a 3G network and because of the disruption caused by the reorganization of the industry," Wolf said.
China Mobile was likely to use TD-SCDMA to "win sympathy and subsidies from the government," Clark said.
Although the new standard and its standard bearer may find the initial going difficult, discontinuing its use is unlikely. "Dumping the system altogether is and would be all but politically impossible. I suspect that even if the TD-SCDMA network turns out to be technically unworkable, it will remain operational in some form for a very long time, sustained by national pride and government largesse," Wolf said.
"Bad state-supported technologies in China never die, they just fade away," Clark said.