Long-haul for 3G in China

David Murphy

XingCheng, an Engineer with Chinese network operator China Netcom, examines the prospects for 3G in China

XingpicChina is potentially the biggest 3G mobile market of the world.The future 3G mobile market in China is no less than RMB 1,000 billion Yuan Renminbi (RMB), which equates to 65 billion, according to the most conservative estimate, and the industries associated with telecoms industry are likely to top RMB 10,000 billion.
The advent of 3G will definitely have a strong impact on the overall telecom market in China. Every link of the 3G industry chain will benefit, including main equipment manufacturers, fibre and cable manufacturers, terminal manufacturers, system integrators, and vendors of auxiliary lines such as electricity power, instruments, etc. Therefore there exists huge hidden competition between the profit groups, such as telecom operators, manufacturers, the overseas patent owners, involved in the issue of 3G mobile licenses in China 3G.
The license issue is affected not only by problems related to technology and the economy but also by political factors. What is certain is   that the Chinese government will be dominant in the 3G process.

The 3G Mobile Standard
At present, Chinas pending 3G license issue continues to hold the
mobile community in suspense. But the countrys strong attitude towards
mobile standards and political support for the home-grown TD-SCDMA
standard is becoming more and more transparent. Because it is the key
strategy for the maximum long-range profit of the industry and the
state, the Chinese government will support the Chinese domestic-owned
3G standard, TD-SCDMA.
According to data from the Ministry of
Information Industry, MII, the Chinese government put more than RMB 0.2
billion into the initial research and development of TD-SCDMA. In
total, governmental investment for the exploitation of TD-SCDMA
standard has now exceeded RMB1 billion.
In 2005, Chinese TD-SCDMA
research and development escalated, while the results of TD-SCDMA
trials has helped win the standard more support. The most recent trials
indicate that China's domestic TD-SCDMA standard is finally ready for
commercial operation.
The Chinese government has given sufficient
support to TD-SCDMA all along and announced in January this year that
TD-SCDMA is the 3G mobile standard for China, indicating its strong
determination. The Chinese IT indsutry, which missed the development
opportunities of 1G and 2G mobile, will not let the 3G development
opportunity slip.

3G Mobile Licenses
The 3G licenses issue will provide the essential
national profit opportunity for China. During the license
decision-making process, the Chinese government will be concerned with
how to promote the healthy development of the Chinese 3G industry; how
to enhance the competition capability of Chinese telecoms
manufacturers; how to deepen the innovative capabilities of telecom
operators and set up a reasonable telecom service environment; and how
to maintain and increase the value of state-owned assets.
According to
the Chinese 3G mobile process, the Chinese government will first issue
a TD-SCDMA mobile license. Two regional 3G licenses will be awarded to
two fixed telecommunications operators, China Telecom and China Netcom.
The Chinese government would like to eliminate its dependence on
overseas corporations, including Qualcomm, prop-up domestic vendors
like Huawei and ZTE, and in the process bolster Chinas IT
manufacturing industry. Additionally, if TD-SCDMA was a success, China
would be able to export the equipment to developing countries as a
cheaper alternative to the WCDMA system.

3G Commercial Operation
After much delay, China's 3G licenses are expected to be issued by the
end of 2006. By then, all large-scale TD-SCDMA trials by China Netcom
and China Telecom in Beijing, Shanghai and other places will be
completed, and the commercial operation can be rolled out. Then telecom
operators will accumulate operating experience and develop the market,
while other 3G mobile licenses (WCDMA and CDMA2000) will be issued, or
not, later, according to the macro environment. Additionally, 3G
networks cannot be deployed in rural areas. Initially, it will be
confined to city centres such as Beijing and Shanghai, so the Chinese
3G process will be a long-term one. Therefore, the first round of
investment in the 3G market will not exceed RMB 10 billion at best,
assuming each mobile subscriber line costs around RMB 900.

To discuss
the issues raised in this article directly with Cheng, email him at xingchengsy@163.com