The situation in China over 3G is complex, highly politicized and difficult to understand from the outside. There are widely differing stories over what will happen and, equally as important, when it will finally happen.
The basic facts are that the Chinese Ministry, MII, is leading an experimental test on all 3G standards in China – WCDMA, CDMA 2000 and the homegrown TD-SCDMA. The result is expected in November, although predicting approval dates in China is a hazardous occupation. Once a technology is chosen, the Chinese Government will release its 3G licenses, with initial guesses of mid-2005 now being moved to late 2005.
TD-SCDMA is the pet project of the Chinese government, which spent $70m last year helping to develop the standard. Seeing the list of vendors supporting the standard provides the answer to why it is so popular in China government circles. TD-SCDMA infrastructure providers include Datang Mobile, ZTE Corporation, Huawei Technologies and China Putian. Handset vendors include DBTEL, Samsung, Lenovo, Huawei Technologies and China Putian. DBTEL has already showcased its first TD-SCDMA model, although this is not believed to be commercially available until 2006.
The pragmatism of the Western vendors
The Western vendors were spitting blood on the first announcement of TD-SCDMA. To them, it smacked of protectionism, flew in the face of global 3G standards and meant additional costs and efforts. However, of course, China is far too important a market – often around 10-15% of their global revenues – to ignore. And the cost of building 3G networks in China is conservatively estimated at a cool $20bn. This is before the potential windfall from handsets and new services.
The first signs of Western involvement in TD-SCDMA were that it was partly developed by Siemens, in conjunction with Datang Mobile. Then, in 2002, a group called Commit was established to manufacture chipsets for TD-SCDMA. This was an early sign of the co-operation between Western and Chinese vendors. The backers include; China Putian, China Academy of Telecommunications Technology (CATT), Texas Instruments (China), Nokia (China) and LG Electronics. This pragmatism will be seen at the forthcoming 2004 International TD-SCDMA Summit, held on the 14-15 December in Beijing. Organizers expect the event to be full of representatives of Western vendors.
The agreements around TD-SCDMA have accelerated in recent months. Huawei Technologies is now in partnership with Siemens (as well as Datang Mobile) to develop TD-SCDMA network equipment. In June, Nortel signed a memorandum of understanding with China Putian to form a joint venture to research, develop and manufacture 3G products based on TD-SCDMA. Both Alcatel and Motorola have been recently quoted as saying they are close to finalizing deals with Chinese vendors for TD-SCDMA.
This interest is also shown in the membership of the TD-SCDMA alliance. STMicroelectronics has officially become its first Western member. But the group is also "maintaining contact" with another 10 foreign telecom equipment providers, including Siemens and Nokia. A spokesperson for the TD-SCDMA Forum said that they expected other Western vendors to join by year end.
Competition or cooperation?
Another interesting recent development is that TD-SCDMA is increasingly not been seen as a standalone 3G technology. This is partly for practical reasons, and partly because of concerns that the technology may struggle to be ready in time. The MII has hinted that all TD-SCDMA handsets will be dual-mode and either TD-SCDMA/WCDMA or TD-SCDMA/CDMA 2000. It is also rumored that China Mobile, China Telecom and Netcom hope to bundle WCDMA and TD-SCDMA.
This spirit of co-operation can also be seen in the actions of the GSMA, the global trade association. It recently signed an agreement with the TD-SCDMA Forum to help promote the Chinese standard in a bid to co-ordinate the development of the two 3G standards.
More than one standard, more than one market
The other interesting aspect of the GSMA agreement is that the deal is worldwide and not just for China. One of the benefits of TD-SCDMA is that operators can avoid paying royalties to foreign patent holders. This creates the intriguing possibility that TD-SCDMA will be adopted in other emerging markets. Perhaps the most likely markets will be those where the Chinese vendors have started to develop a presence. These include some Asian markets and parts of Eastern Europe and Africa. It is also likely to be those countries where the Chinese government has strong relations, and could be prepared to lobby on behalf of TD-SCDMA and Chinese vendors. If TD-SCDMA becomes a success in China, then these other countries could use it to speed up their move to 3G.
The success of TD-SCDMA can, of course, be far from guaranteed. Some Western vendors believe that 3G licensing will be continually put off until TD-SCDMA is considered robust enough. However, the approach of most Western vendors is changing. It is no longer WCDMA (or CDMA 2000) versus TD-SCDMA, but how to win whatever the Chinese government finally decides.