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Shrewd 3G gambit won't necessarily mean market success

(Xinhua)
Updated: 2009-01-10 16:00

China's three mobile telecommunication service providers are launching large-scale promotions for their 3G mobile networks. Not surprisingly, the Ministry of Industry and Information Technology plays a shrewd gambit by simultaneously allowing the use of three 3G technical standards -- two globally prevailing and one indigenous -- in the world's largest mobile phone market.

Six years after many developed countries began commercially using 3G networks, the 3G application in China is nothing innovative. However, the timing of 3G licenses authorization is subtly strategic -- the government is trying hard to stimulate domestic need against the backdrop of the worsening global economic downturn.

The government hopes the two-year 280 billion yuan ($41 billion) investment directly related to 3G network infrastructure would trigger about two trillion yuan total investment in the coming three years. With this rosy picture in mind, the ministry gave the green-light to China Mobile, China Telecom and China Unicom to compete for enviable market shares.

Related readings:  3G is here, finally  China issues 3G licenses  China's telecom sector gets 3G licenses  China Mobile falls after 3G licence issue

The toughest task went to China Mobile, the undoubted market leader with 450 million subscribers out of the total of 630 million in China. The leading brand has been mandated to develop the homegrown, but most immature, TD-SCDMA network. China Unicom will use the the European standard WCDMA and China Telecom will use the North American CDMA2000.

All the three 3G standards, employing similar techniques of frequency division in mobile data transmission, are improved versions of the technology of code-division multiple access (CDMA) which was developed by the US military for more effective and secure mobile telecommunications.

TD-SCDMA is not in any way technically superior to WCDMA or CDMA2000. All three have their strong points as well as their Achilles' heel. The Chinese TD-SCDMA is reported to offer superb service in areas with the smallest coverage, or in hot spots such as hotels and airports. This data is supported by lab research.

Since April last year, the regulating ministry has been in a hurry to introduce the standalone 3G network before any license for the full 3G radio spectrum had been issued.

One rationale behind the rush might have been the intention to cater to global visitors swarming into Beijing for the Olympics in August. But this logic fails when you consider that sports fans who wished to glimpse athletic scenes would have to buy TD-SCDMA handsets that were incompatible to their own 3G networks. How practical is that? Perhaps the government was banking on the idea the world's sports game is usually a spending spree.

The first commercial launch of TD-SCDMA was more or less a public gaffe. China Mobile gave away free 3G handsets to 20,000 randomly selected customers who just happened to be celebrities, government officials and leaders in public opinion. They were offered a monthly subsidy of 800 yuan each -- which, according to the China Mobile rate plan, means chosen testers could basically do whatever they want with the new free devices as the network allowed.

Public pioneers were also wooed by discounted trial rates, with the cheapest monthly plan at a little more than $10.

Opportunistic investors even flocked to vendors to collect good phone numbers for the 3G network (Chinese tradition favors 8, 9, 6 over the rest numerals for good luck), thinking they might resell them for quick profits in future.

But early users grumbled over unstable signal reception and dropped calls -- unheard of with the currently prevailing 2G GSM networks -- delays in image transmissions, and hassles on logging on to a designated Web center to download limited video clips.

Is China a maverick for choosing to heavily push its own independent technology? Is it coincidental that the task of promoting TD-SCDAM fell to the leading service provider when the advantage of choosing TD-SCDMA is the avoidance of roughly 15 percent royalty fees to WCDMA or CDMA2000 technology holders?

The target of developing 3G, 4G, and whatever G, is to unify mobile gizmos into a unified technical standard. Global roaming is still a dream as mobile network operations in industrialized countries like the US and Japan are not yet unified.

Exactly as industry experts estimated, the Chinese regulator issued three 3G licenses, including TD-SCDMA and two alternatives, WCDMA and CDMA2000. The hasty launch of TD-SCDMA would rather be seen as a preferential strategy that allows the home-grown technology to take off first while its competitors are waiting in the wings.

Are TD-SCDMA and its two peers able to seduce GSM users as GSM did when it breezily dragged customers away from brick-sized analogue mobile phones in late last century? That's yet to be seen. The bells and whistles of killer applications and video telephony for 3G will be mute unless product quality and marketing models dramatically change. We simply don't need a 3G that only enables us to clearly hear the other party's breath or hiccup.

It is a little bizarre that in the low-tech Chinese society where hi-tech acronyms, like TD-SCDMA, WiFi and GPRS, are everywhere, all spoken in English. In contrast to Western marketing that avoids clunky technical brand names, China's high-tech toys are branded with lengthy, confusing technobabble in an effort to convey that the product is reliable and faddish.

3G will be obsolete soon. NTT DoCoMo plans to begin commercial 4G use by 2010 in Japan. Technically, 4G is 2000 times faster than 2G in transmitting data, and almost 20 times faster than standard copper cable-based ADSL services. 4G promises promises to deliver high-quality smooth video and data transmission. Doesn't that sound much juicier than the 3G we are going to have? We'll find out ... in six years.