With third-generation (3G) wireless communications eliciting only a lukewarm response in the rest of the world, will China - the world's biggest mobile-telephone market - be the catholicon to breathe new life into the technology?

It's hard to give a quick answer but the enthusiasm for 3G in China has led to both foreign and domestic companies to eagerly await the launch of 3G.

It is widely speculated that the Chinese Government would issue the 3G licenses early next year - a source close to the Ministry of Information Industry said that the country's IT watchdog is studying the right time to issue 3G licences and accelerating testing on 3G-related projects.

Reliable sources said that China is likely to soon finish testing 3G-related technologies, which may result in licences being issued early next year.

The 3G TEG (China 3G Technical Trial Expert Group) and RITT (Research Institute of Telecommunications Transmission) at the China Academy of Telecommunications Research with the Ministry of Information Industry (MII) are responsible for testing equipment, terminals and systems based on all three 3G standards - European-backed WCDMA, US-based Qualcomm Corp's CDMA2000 and home-grown TD-SCDMA (time division synchronous CDMA).

The academy will hold a seminar on September 17-19, at which time details of the tests will be released.

Fixed-line operators China Telecom and China Netcom are expected to receive the licences along with China Mobile and China Unicom.

3G wireless services enable users to exchange phone calls, video images and Internet data at high speeds over mobile phones.

Standards' competition

Competition between the three 3G standards has become hotter, as the date for China's 3G launch approaches.

But seeing the lacklustre response in the global market, China has adopted a cautious attitude towards 3G licensing.

A total of 114 3G licences were issued worldwide by the end of last year with more than 100 experimental 3G networks set up.

However, due to the meltdown of high-tech stocks and enormous bidding fees for licences, most operators have delayed the commercialization of 3G networks as a result of heavy debt, lack of 3G terminals and immature technology.

According to a recent report by the China Information Association (CIA), compiled after a fortnight-long trip to European countries in April, 3G development has been slow on the continent.

So far, seven countries and regions in the area have launched 3G operations with the number of subscribers reaching 90,000.

Analysts in China believe that waiting for a comparatively mature market and technology; and the right application environment explain the country's caution in issuing licences.

In a report on the country's IT industry earlier this month, the MII pointed out that the lack of development in the 3G sector was one of the major obstacles for the development of the industry; and suggested that the issue of 3G licences would give a boost.

For example, that might encourage telecom operators and equipment manufacturers during a market downturn in which carriers are cutting spending on wireless equipment.

The first indication of a preference for a standard came from China Mobile last week.

"If the regulator rolls out its 3G policies, we would prefer to adopt WCDMA," said Wang Xiaochu, chairman and chief executive officer in Hong Kong.

"The launching of the 3G service will greatly enhance our profits given the various services based on a more advanced technology," he said.

Wang's remarks are a confirmation of analysts' predictions that the telecom giant would adopt the European-based WCDMA standard, which is regarded as technically logical and easier for China Mobile to update its networks.

Wang also said that the company would also choose the home-grown TD-SCDMA, which will be complementary to WCDMA.

China Mobile's choice of the European standard is likely to give a strong shot in arm globally for WCDMA, given the huge Chinese market, analysts say.

Figures from the MII indicate that China had more than 234 million mobile subscribers by the end of June this year; and China Mobile alone 153 million GSM users.

WCDMA has supporters mainly from European, Japanese and some American manufacturers who base their services on GSM system - such as Nokia, Ericsson, Alcatel, Lucent, NTT DoCoMo and Sharp.

China Unicom, the country's second-largest mobile operator, is expected to choose Qualcomm's CDMA2000 for its 3G standard, analysts say.

China Unicom, which has built a current-generation CDMA network together with its GSM (global system for mobile telecommunications) system, is the only CDMA operator in the country.

Figures from the company indicate that it has signed up more than 11 million CDMA subscribers by the end of June this year. It is further expanding its CDMA network, hoping to enlist more subscribers by providing better services based on the CDMA 1X network.

"Right at the moment, CDMA2000 is the most mature technology, though WCDMA seems have a stronger potential in the future," said Wei Leping, general engineer of China Unicom.

Figures from Qualcomm Inc indicate that there are over 154 million CDMA subscribers worldwide of which 51 million are reported to be 3G CDMA users.

There are 55 CDMA commercial operators in 29 countries with 283 3G CDMA devices from 41 vendors.

"As for TD-SCDMA, it still needs at least two years or more to become industrialized," Wei said.

Time to grow

Of the three acknowledged 3G standards, the home-grown one is the least mature.

As China considers both domestic and international standards when it issues 3G licences, analysts said that the nation would require at least one of the two big fixed-line carriers to adopt the home grown TD-SCDMA.

Reports have it that China Telecom will adopt TD-SCDMA as its 3G standard, or use TD-SCDMA in conjunction with WCDMA.

"It is unlikely that a telecom operator would use the TD-SCDMA network only," said Lu Tingjie, a member of 3G Development Committee of Experts under the State Information Working Office.

The regulator is likely to bind TD-SCDMA with WCDMA or CDMA2000 while issuing 3G licences, he added.

Analysts called for more efforts to help develop the home-grown standard so it can better position itself within the global context.

"The government should try to persuade more telecom enterprises to use TD-SCDMA to enhance its competitiveness," said the report by CIA.

To support the domestic standard, the MII last October located 155MHZ frequency resources to TD-SCDMA.

Tang Ru'an, chief executive officer of Datang said he expects the TD-SCDMA technology to go into large-scale commercial use sometime after the first half of 2004, and hopes TD-SCDMA can eventually win a global market share of up to 10 per cent; and higher in China.

Datang has joined forces with Siemens, Dutch chip-maker Philips and South Korea's Samsung to develop the new technology; and last year, China set up an alliance of eight domestic firms to back the standard.

Pros and cons

Top executives from equipment-makers such as Motorola, Sony Ericsson, Nokia and Siemens expect 3G licences to be rolled out as soon as possible.

Peter Weiss, general manager of Siemens' Information and Communications Group, said 3G should "not be introduced too late" in China.

"(Application of) new technology takes time. The Chinese Government needs intensive and careful study before making a right decision. But we should not wait for too long."

He said the government should issue licences no later than early next year "in order to keep China in the lead in the 3G market".

Siemens supports both WCMDA and TD-SCDMA, a situation which it bills as its "unique position" in China's wireless market.

"I am confident that 3G will see healthy development," said Xu Qiyu, marketing manager of the Telecom Solution Department of Motorola Asia Pacific Region.

The company's recent survey showed that about 24 per cent of mobile subscribers are keenly interested in 3G.

But Li Jinliang, senior engineer of the No 7 Electronics Institute of the MII, said China should be cautious in its 3G policy; and insisted that China use TD-SCDMA as the main standard.

Sticking to TD-SCDMA can enable China to form its own 3G industrial chains as the nation owns the royalty on the standard, he said.

However, some experts believe that China should roll out 3G as soon as possible.

Any delay will lead to telecom operators investing too much on 2G and 2.5G, which may result in price wars and a waste of resources, they say.

Also, the issue of 3G licences will enable telecom operators to provide comprehensive services including mobile and fixed line, which would further break market monopolies and lead to healthy competition in the domestic market.

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