The Chinese are big on standards. When Mao and his comrades came to power in 1949, one of their first acts was to switch the country from 110 Volts to 220 Volts, presumably to give more power to their glorious revolution. A previous (albeit unsuccessful) rebellion was launched by students demanding the government settle on a standardized form of Mandarin that all Chinese could understand.
Even today, China remains one of the most standards-happy nations on earth. Almost every locally made product - from giant earth-moving equipment to electronic rice cookers - proudly displays its International Standards Organization (ISO) seal of approval. And though the country stretches from the Pacific Ocean to Afghanistan, China still insists on having only one time zone - Beijing Standard Time.
Yet when it comes to wireless, the Chinese have failed to live up to their own exacting standards for standards. The country's 1G, 2G and 2.5G networks were all imported from abroad. And there is nothing more galling to the proud Chinese than having to be dependent upon foreigners - particularly for the technology that has made their nation the world's number one wireless marketplace.
But the advent of 3G may change all that. For the last three years, the Datang Telecom Corporation, a subsidiary of the government's Chinese Academy of Telecommunications Technology (CATT), and Germany's Siemens Corporation have been developing a new technology that is almost certain to become one of China's 3G standards.
A different route
This mainland 3G alternative is called TD-SCDMA (Time Division Synchronous Code Division Multiple Access). And though it was approved alongside such heavyweights as WCDMA and CDMA2000 as one of six 3G standards by the International Telecommunications Union (ITU), few outside of China have ever heard of it.
Within China, however, it's almost impossible to discuss the country's migration to 3G without the conversation turning to TD-SCDMA. With China Mobile's nationwide GSM network already in place and China Unicom's CDMA network coming on-stream in early 2002, most analysts are convinced the Chinese government will choose both WCDMA and CDMA2000 as 3G standards to migrate to. The question now is whether newcomer TD-SCDMA - a technology CATT/Datang and Siemens only began developing in 1998 - will find a place in a market that China's Ministry of Information Industry estimates will exceed 255 million users by 2005.
In theory, most analysts agree that TD-SCDMA is a first-rate technology. The biggest innovation it brings to the party is its use of asynchronous time division. Unlike symmetric code division, which is used by WCDMA and CDMA2000, TD-SCDMA's technology shifts network resources to where they are needed the most. For example, if a new MTV video comes out that everyone wants to watch on their 3G handsets and hundreds of thousands of users are downloading it simultaneously, TD-SCDMA will allocate its space dynamically to the downlink side. Whereas with WCDMA and CMDA2000's synchronous mode, the uplink channel still eats up the same amount of network real estate even when it's not being used.
Because of its efficient use of resources, TD-SCDMA is particularly well-suited for a country like China with its densely populated urban areas. "It's definitely a commercially viable technology for China," says Dr. Hui Zhao, CEO Chou of Jutone, a Shanghai-based wireless telecommunications software developer. "At present we have 5 cities whose populations exceed 10 million and hundreds of cities with populations of more than 2 million. And the market is big enough to support it because it will eventually reach 300 million mobile phone users."
Efficient use of resources has been a major concern for China in all areas. But in the wireless realm it's become acute. In an interview with Asiaport Daily News, China Mobile's manager of technology development, Wang Xiaoyun, said that traffic in major cities such as Shenzhen and Shanghai has reached 40,000 users per square kilometer. China Mobile's GSM capacity, however, tops out at 50,000 per square kilometer - a figure that could be reached as early as 2003. And that's after upgrading the current infrastructure to adopt new load-sharing technologies such as frequency hopping and multi-level frequency multiplexing
Its promoters also claim that TD-SCDMA is a "Green" technology because of its use of smart antennas. These antenna arrays located at the base stations track the mobile user as he or she moves throughout the cell. So instead of bombarding every person in a coverage area with radio microwaves, TD-SCDMA's smart antennas just focus on a single user. By targeting individual terminals, these antennas also improve the signal-to-interference ratio by an impressive 8 dB, according to the Beijing-based TD-SCDMA Forum - an industry group with more than 200 local and international members.
But TD-SCDMA does have its drawbacks. The biggest is its transmission rates. For stationary or slow-moving terminals (such as those held by people walking through a city) its data rates are similar to those of WCDMA and CDMA2000. But in fast-moving environments, its speed drops off considerably and transmission quality deteriorates. Another problem is that because it is a new technology, aside from CATT, Siemens and a few mainland manufacturers, it has nothing approaching the commercial support base of WCDMA or CDMA2000.
Making an international play
So does TD-SCDMA have the chops to become a 3G contender? If it was any other country in the world, the answer would probably be no. Simply because it is too immature. As a 3G technology, TD-SCDMA is either on the drawing boards or in its bench-testing infancy. Whereas WCDMA, for example, was rolled out in Japan this October by NTT DoCoMo.
"At the moment everything is just paperwork from CATT," explains Gary Cai, an analyst with BDA, a Beijing-based telecommunications consultancy. "Which means you can't translate the TD-SCDMA standard into detailed products."
But China isn't any other country. Just as all politics is local, all standards is political. And TD-SCDMA is no exception. The Chinese government appears determined to promote the technology as a homegrown 3G alternative. (Some officials have even gone so far as to describe TD-SCDMA as a "patriotic" technology.) And as everyone knows, if the Chinese government wants something to happen, it usually does.
"If you look at GSM, China came to it really late in the game and the government does not want that happening with 3G," says Connie Hsu, manager of Pyramid Research in Hong Kong. "They want to be right at the same level as the foreign players, at least in their own market, and with TD-SCDMA they have the opportunity to do that."
Hsu points to the example of ISDN, which was rolled out with great fanfare in 1998. But technical bugs coupled with the fact that most potential users knew ADSL was just around the corner kept consumers away in droves. Yet the government not only stuck with what the rest of the world considered an out-dated technology, but also delayed the launch of ADSL until this year in order to build more market-share for ISDN. "They'll probably do the same with whatever they want to push," says Hsu, "they'll make sure there are no competing technologies and they'll make sure prices are low enough so it goes mass market very quickly."
Does that mean TD-SCDMA is a sure bet? Not exactly. Few industry insiders, Hsu included, believe the government will stick with the technology if it doesn't live up to its promises. Though China desperately wants to have its own place at the 3G standards table, most analysts believe that desire will be sublimated by the government's over-arching ambition to stay on the cutting edge of the next generation of mobile telecommunications technology. "They're not going to stick with TD-SCDMA if it means getting left behind," says one analyst who asked not to be identified.
There's also the relatively new issue of shareholders. Both China Mobile, the country's largest wireless operator, and China Telecom, which is being split into two regional entities (with each expected to begin offering wireless service) are listed on stock exchanges outside the mainland. The government desperately wants both of its flagship telecommunications companies to succeed in the public markets. At the same time, TD-CDMA not only offers the government a chance to create its own 3G standard, but an entirely new domestic wireless industry to support it.
"The first to move into 3G are going to be the most profitable," says Fan Zhang, an Asia-based associate with the US venture capital firm of Draper Fisher Jurvetson. "And the customers they will attract with 3G are the cream of the crop, but how are they going to satisfy them? If they bet on a technology that's not ready, there is potential for massive subscriber defections and that's going to affect their bottom line."
The government pushing a standard one way. Shareholders pushing it another. If it all sounds rather wild and wooly, that's the state of the wireless market in China today. Adding to the confusion is a massive reorganization of the Chinese wireless industry as the government attempts to make its domestic players more competitive in the face of increasing foreign competition brought about by its accession to the World Trade Organization. In terms of 3G, the regulatory climate is so volatile that no one knows when the government will even settle on a standard. Let alone how many new 3G operator's licenses it is going to grant.
"As venture capitalists we love this environment just like hedge fund investors love a volatile stock market," says Zhang. "It's in this kind of atmosphere where paradigm shifts happen and major corporate giants can be created out of nothing."
Given Chinese pride and TD-SCDMA's promise, don't be surprised if one of the new giants to emerge is marketing itself as the only 3G standard to be Made in China.
Eric Ransdell is the former Silicon Valley Bureau Chief for US News and World Report magazine. Now living in Shanghai, he covers mobile technology in Asia.