Too good to be true? China plans to issue 3G licenses

Could it really be true? China reportedly is ready to issue 3G licenses after six years of hints and delays. While announcing it plans to restructure China's telecom service providers, China's regulators also announced that three 3G licenses will be granted once the restructuring is complete (No one knows when that will be). China's regulators have teased the industry for the last six years over the prospect of 3G in China--a prospect that makes wireless vendors downright giddy given the billions of potential consumers in that country and especially now that sales have been slowing for the major vendors.

While China has claimed in the past that it hasn't seen a business case for 3G, it really has been waiting for its home-grown TD-SCDMA standard to catch up with the world's existing 3G standards. In any free-market society, of course, TD-SCDMA  would have long been dead given the enormous head start WCDMA and CDMA EV-DO have had. But the Chinese government has taken some drastic measures to make sure this technology succeeds and that it positions China as a leader in technology. Consider some of the results so far: ZTE, that low-cost vendor everyone is afraid of, is targeting emerging markets with TD-SCDMA technology [1]. Japanese wireless licensee now wants to flip from TD-CDMA technology to TD-SCDMA, citing better costs since some 20 vendors have developed more than 100 kinds of handsets.

Early last year, regulators ordered China's operators to stop work on WCDMA trial networks [2] presumably so that TD-SCDMA could get a head start. It also appears that China Mobile, the country's largest mobile operator, will be deploying the technology. The 2008 Olympics are also expected to play a big role in TD-SCDMA's future, as the country looks to showcase its 3G capabilities there and demonstrate to the the world how modern it is.

Or will the technology make a show at the Olympics at all? A report from the Financial Times [3] indicates that China Mobile, which has been trialling TD-SCDMA in eight cities since April 1, isn't so enamored with the technology. In fact, in a report titled, "TD-SCDMA: Future or Fiasco ? [4]," consultancy BDA said China Mobile is now "clearly unenthusiastic" about pushing TD-SCDMA, and that end user feedback showed the technology had a "rough road ahead."

Meanwhile, the Chinese government is restructuring China's second-largest mobile operator, China Unicom, by requiring it to merge with fixed-line operator China Netcom. The new company is expected to build a WCDMA network. And China Telecom, the country's leading fixed-line operator, is anticipated to introduce services based on CDMA 1xEV-DO. Both technologies are far more mature than TD-SCDMA, giving these operators an inherent advantage with the ability to roll out proven technology faster while taking advantage of economies of scale for equipment and handsets.

Will the Chinese government continue its adamant quest to push the home-grown TD-SCDMA 3G standard even when it may hurt the country's largest mobile operator? Or will regulators there change their minds and once again declare that 3G doesn't have a viable business model in China yet... at least until TD-SCDMA is ready? --Lynnette [5]