China’s on-again, off-again plan to allow commercial deployments of Code Division Multiple Access networks looks like it’s on again.
The recent World Trade Organization pact between the United States and China and progress in negotiations over technology transfers appear to have paved the way for wide-scale deployments of
cdmaOne technology, say industry watchers.
After years of allowing just experimental cdmaOne networks, and in a roundabout way mandating Global System for Mobile communications technology because it wanted a seamless nationwide standard, the Chinese government this spring gave China Unicom permission to deploy commercially cdmaOne technology nationwide in part as a gift to the U.S. government as the two negotiated China’s WTO entrance.
But technology-transfer issues-in particular a royalty dispute with Qualcomm Inc.-and strained U.S.-Sino relations from failed WTO talks throughout the rest of the year-derailed Unicom’s plans.
And while the U.S.-China WTO accord signed last month makes it easier for China to adopt cdmaOne technology, negotiations over technology transfer still aren’t fully resolved, though significant progress has been made, said Perry LaForge, executive director of the CDMA Development Group.
Qualcomm declined to comment on its negotiations with the Chinese government, but the company’s Chairman and Chief Executive Officer Irwin Jacobs indicated in a conference call last month that discussions between Qualcomm and the Chinese Ministry of Information Industry continue.
“Whether they will result near-term in the free introduction of CDMA by various carriers, that is still open,” said Jacobs. “The political situation there continues to go up and down, and that is somewhat tied to that situation. We’re working hard to reach a conclusion with the MII to proceed to license other manufacturers … We both agreed that we are looking for an arrangement that is mutually beneficial.”
Qualcomm’s chairman is giving personal attention to the matter, and the company recently hired a general manager to head Qualcomm’s activities in China.
LaForge indicated China Unicom has issued to cdmaOne vendors initial requests for proposals, the first step before contract bids. Unicom’s move was a show of good faith that all negotiations will be resolved, he said.
China Unicom, which in March announced aggressive plans to roll out the technology by year end, now sees its deployment schedule delayed by about a year, said Hui Pan, chief economist and director of the Asia-Pacific region for Information Gatekeepers in Boston. New plans call for Unicom to deploy service by 2000, ending the year with a network covering more than 250 cities with a capacity of 10 million users. Unicom, which also operates a GSM network, expects to have about 30 million cdmaOne customers by 2003.
“China Unicom should have a one-third penetration rate in total mobile subscribers by the end of 2003,” said Pan. “China Unicom will rank among the largest mobile operators in the world.”
It’s unclear how the recent U.S.-Chinese WTO pact will affect China Telecom Great Wall, which has operated four experimental cdmaOne networks for years, some since 1996. Great Wall previously was owned by the MII and the People’s Liberation Army, but the MII last spring transferred its 50-percent ownership stake to Unicom. The PLA has not agreed to transfer its ownership half to Unicom, however, and has been operating the cdmaOne networks, said Pan.
Great Wall has been a source of concern for the Chinese government since the PLA owns 50 percent of the carrier. China has been trying to push the PLA out of the commercial sector and get rid of the corruption the government says is associated with the PLA. For that reason, the four networks were never allowed to expand beyond the experimental stage. Today it appears the PLA likely will separate itself into a commercial entity, making sure all its commercial interests are not associated with the military.
“A large expansion will occur, and we will see a clear picture of whether there will be one CDMA operator,” said Pan. “At this moment, the Great Wall is much smaller. It’s low-key in the CDMA game. They are waiting for the clouds to clear and see what the policy will be toward them after China’s WTO entrance.”
However, one of the carrier’s networks in the province of Guangzhou has aggressive plans for expansion, and signed a contract last spring with Lucent Technologies Inc. to widen service in the province. The system can support about 30,000 subscribers today, and the carrier wants to expand service by early next year to support 1.6 million subscribers, said Pan. Other Great Wall networks are hitting capacity limits and must be expanded, added Pan.
China, with its 2.2 billion people and antiquated telecom infrastructure, represents an unprecedented export opportunity for foreign wireless equipment suppliers. The same goes for U.S. carriers that are clamoring to invest in these carriers and provide technical and financial expertise necessary to build wireless systems. The returns could be enormous as the pent-up demand for service in China continues.
“It’s going to be a contested market, with all operators trying to partner with Chinese operators,” said Pan. “CDMA operators are trying to juggle positions and align themselves with the right CDMA operators in China.”
Global Wireless Editor Sandra Wendelken contributed to this article.
