China's surging appetite for 3G

March 8, 2006

With more than 10 million potential subscribers of third-generation mobile phones at the ready, China seems ready to continue shaping its role as a powerful force in the adoption of new technologies and innovations.

After several false starts the country finally seems ready to roll out 3G licenses by June 2006, and analysts from Analysys International are already predicting that by the end of the year 3G subscribers in China will account for 2.2 percent of the total mobile subscriber base. That number is projected to rise to 13 percent by 2011 resulting in about 100 million Chinese subscribers.

Such bullish projections come as no surprise to industry observers -- China has seen incredibly rapid adoption of information technologies over the past few years, and the implementation of 3G telecommunications technologies complements these adoptions nicely. The country is already the world's largest producer of mobile phones, personal computers and cameras, and now with the introduction of 3G it may also become the world's largest consumer. The 90-percent growth rate in wireless broadband access seen in the country means that China will be the largest broadband country in the world by the end of 2006, according to Telecompaper. Regulatory frameworks for Voice over Internet Protocol are also on the horizon, and China is hosting several major technology-focused tradeshows, conferences and events in 2006. All of these advances are working to heighten the competitive advantages of Chinese business in the expanding global economy.

The only surprising part of this story is that 3G has taken so long to be rolled out in China -- both industry observers and international spectators expressed concerns about whether the technology and its networks would be in place by 2008 when the Olympic Games are hosted in Beijing.

The delays seen have been due to internal problems in developing technology to base the networks around. Rather than relying on external standards and paying high royalty rates, China has been developing its own homegrown standard, TD-SCDMA, which was finally unveiled in January. Although the official news agency Xinhua claimed that Beijing would build a complete stand-alone platform based on the technology, some have expressed skepticism about whether a largely untested technology would be able to support this program. Rather than building everything around TD-SCDMA, industry observers have speculated that the Chinese technology itself will be used only as backup, and the major networks will be built around the European WCDMA and the U.S.-supported CDMA.

The introduction of 3G in China is eagerly awaited by equipment vendors in the telecommunications industry, not least at a time when the rest of the world is taking to 3G at a much slower rate, as the move could lead to sales of up to $12 billion on new equipment. There is concern from other quarters, however, about quite how this move will be implemented. One of the key advantages of 3G is the high-speed Internet access and e-mail services that the technology provides, but there are questions about quite how much of these services Chinese mobile-phone users will be able to access. The gateways that connect China to the rest of the global Internet are heavily monitored, leading to what has been termed "The Great Firewall of China." Additional to these worries are also the recent announcements in the People's Daily that China is implementing several new Chinese-character domains, which could potentially establish a Chinese Internet that would operate free from control of the U.S. government.

It is questionable as to whether any of these matters will concern visitors to the second Chinese 3G innovation summit that is being held in Beijing on March 22. With the value-added services market looking to reach $2.49 billion (20 billion yuan) by 2010, accounting for 18.5 percent of the total mobile added services market in China, innovation is already adding value. The main topics of debate at this event will be China's own 3G innovations and investment opportunities available once 3G licensing comes into effect.

Copyright 2006 by United Press International