China Approves Use of Foreign 3G Standards; No Timetable for 3G Licensing

The Chinese Ministry of Information Industry (MII) said in a statement on its website that it has set the technical standards for two 3G mobile technologies developed abroad, namely W-CDMA and CDMA 2000. The release of two foreign-developed standards, in addition to China's home-grown TD-SCDMA technology launched in 2006, will provide more clarity for companies producing products and operating services based on the technologies, said the ministry. An MII spokesman, Wang Lijian, reiterated the government's stance that China's telecoms operators will be able to choose from all three technologies. However, the move to issue technical specifications for 3G technologies developed abroad is not necessarily linked to licensing for advanced mobile services, Wang was quoted by Dow Jones as saying. "There is no necessary link between licensing and the specifications," he said, adding China still does not have a timetable for issuing 3G licences.

Outlook and Implications

By approving the use of two foreign 3G technologies, along with the local TD-SCDMA, the Chinese authorities are reinforcing their technology-neutral stance that the telecoms operators will be allowed to choose their 3G platforms from all three technologies. However, the government's favour of TD-SCDMA could not be more obvious. In January 2006, the MII issued the technical specifications for the home-developed 3G technology, long before those for the foreign technologies were issued. In the following month, three Chinese telecoms operators—China Mobile, China Telecom and China Netcom—started building TD-SCDMA test networks in several selected Chinese cities. Over the past year, the test area has been expanded to ten major cities, where mobile users will have higher 3G demand. Pushing ahead with test deployments despite the lack of official 3G licences aims to provide the TD-SCDMA standard with a significant headstart before other technologies break into the large Chinese market. The government may also issue the licences on TD-SCDMA ahead of the licensing on W-CDMA and CDMA 2000, to give the local technology more time for commercial deployment.

China has promised to have 3G commercial services available before the 2008 Olympics in Beijing, but the government has yet to decide when to issue 3G licences. Two factors are delaying 3G licensing: the development progress of TD-SCDMA and the decision on how to restructure the telecoms industry. The licences will not be issued before October, when the TD-SCDMA trials are scheduled to be completed. In addition, the government may need more time to decide on its plans for an industry reshuffle. According to Dow Jones, Xi Guohua, vice-minister of the MII, said in April 2006 that difficulties in designing a different industry structure to foster competition—while keeping restructuring costs low—were holding up 3G licensing. "The problem is very complicated and there are a lot of different opinions," he said at the time, adding that the ministry was stepping up research on the matter. China's mobile market is currently split between China Mobile and China Unicom; both are stepping up efforts to acquire as many new customers as possible before new players come into the market following an industry restructuring. Both China Telecom and China Netcom, the country's major fixed-line operators, are eager to tap into the faster-growing mobile segment and have expressed their interest in a 3G licence. However, uncertainty remains over how the fixed-line operators will enter the mobile market without existing mobile networks. Previous market speculation—that China Unicom could sell one of its GSM and CDMA networks to the fixed-line operators—could provide a possible solution, although the mobile operator has declined such a consideration.