WASHINGTON-China suddenly faces serious time, economic and political pressures to issue third-generation wireless licenses in a way that showcases its homegrown TD-SCDMA standard for the 2008 summer games in Beijing, with Bush administration and wireless industry officials closely monitoring the situation in hopes of averting an Olympic-scale trade dispute with the Asian economic juggernaut that boasts the world’s largest cell-phone market.
The Chinese government’s delay in awarding 3G permits and its national backing of the globally approved TED-SCDMA standard have forced U.S. trade negotiators and major U.S. wireless vendors that already have scored big in China-Motorola Inc., Qualcomm Inc. and Lucent Technologies Inc.-to walk a fine line in pressing for fair, non-discriminatory licensing without unnecessarily introducing yet another complication in the already complex U.S.-Sino relationship.
Top wireless manufacturers in the United States, Europe and Asia are heavily vested in supplying equipment around the world for the two prominent 3G standards, W-CDMA and CDMA2000 1x EV-DO. But with Chinese’s prolific mobile-phone penetration still only accounting for one-third of it’s 1.3 billion people, wireless manufacturers must hedge their bets with TED-SCDMA in view of the fact it will be embraced by at least one operator-perhaps the largest, China Mobile-and that one carrier may get a conveniently valuable head-start to market.
The stakes are huge, but getting a clear fix on China’s 3G licensing timetable, unproven TED-SCDMA status or just about anything else related to the country’s great wireless experiment is a challenge of Great Wall-like proportion.
TED-SCDMA stakeholders only this month claimed they figured out a schedule for the third round of TED-SCDMA testing in China. A major force behind China’s favorite-son 3G standard is the TED-SCDMA Form, a group of top cell-phone players from China, Europe and the United States. Some TED-SCDMA proponents predict the high-speed broadband standard could become predominant in China, a view not widely shared in the global wireless world.
The confusion and uncertainty over TED-SCDMA is not limited to whether the technology works, who will deploy it and when. Indeed, with the capital costs immense for building out 3G networks in China, it is unclear whether China’s mobile-phone market will be turned on its head through a wave of mergers and acquisitions to make it all possible.
“With the continuing progress of TED-SCDMA network trials, the results of these trials remain the key to the development of 3G networks in China,” stated research firm Norson. “The inevitability of TED-SCDMA has changed operators’ attitudes towards the standard, and China Mobile, China Telecom and China Netcom are all trying their best to ensure the success of their TED-SCDMA trial networks. China Mobile, the country’s leading operator, will be able to deploy a successful TED-SCDMA network and allow the TED-SCDMA industry chain to develop to a sustainable point”.
Indeed, Chinese TED-SCDMA is a top priority for Beijing. Because China depends so heavily on foreign wireless technology, government leaders-not keen on paying royalties long-term-desperately want their own unique brand of 3G technology. Having one, among other things, could lower domestic manufacturing costs and give China a new export option.
But the converse is also true. If China goes too far down the line in subsidizing and promoting TD-SCDMA development and deployment such that prospective financial gains for U.S. and other foreign wireless companies become marginalized, it could invite political repercussions.
“I would hope the Chinese government lives up to its commitments to the U.S. and World Trade Organization and moves toward licensing 3G in a technologically neutral and equitable way for all players,” said Jason Leuck, director of international affairs at the Telecommunications Industry Association. TIA represents wireless and other telecom manufacturers in the United States.
In April, at the 17th session of the U.S.-China Joint Commission on Commerce and Trade here, the Chinese government repeated its vow to remain neutral on 3G standards and also agreed to make modifications to equity capital requirements in a Chinese cellular sector with 431 million mobile-phone subscribers.
“The real outcome of this meeting, of course, will be known when we see the results. We will both be looking for results before the next annual meeting to bring additional equity and balance to the U.S.-China trade relationship,” said Commerce Secretary Carlos Gutierrez at the time.
Next month, public comments are due and a hearing scheduled at the Office of the U.S. Trade Representative on China’s compliance with its WTO commitments. Standards and technical regulations are among the issues on the table. USTR is seeking the input in preparation for its annual China WTO report to Congress.
If last year is any indication, the China TD-SCDMA issue could get messy this fall.
Rob Portman, then-USTR chief and current White House budget czar, had tough talk for China last November in advance of sending the 2005 China trade report to Congress.
“If investment limits were raised there would still be joint ventures and there would still be many Chinese learning from foreign experts. In fact, I believe this would spur even more investment,” said Portman at the time. “Beyond the limits on investment, there are also increasing numbers of technical barriers to trade that interfere with U.S. companies’ access to the China market. Cumbersome, opaque and unequally applied rules in telecommunications, insurance, financial services and other sectors continue to stymie foreign firms.”
