With the issue of China’s third generation (3G) telecom licenses earlier this year, the country’s mobile carriers – China Mobile, China Unicom and China Telecom – started to battle for dominance in this massive, untapped market. What makes the competition all the more interesting is that the carriers are using separate 3G technologies, TD-SCDMA, WCDMA, and CDMA 2000. Zhao Houlin, deputy secretary-general of Geneva-based International Telecommunication Union (ITU), believes this unique approach will throw up some unique challenges for the three telecom giants. Zhao, who was with China’s Ministry of Posts and Telecommunications for over a decade before moving on to take up senior positions at the ITU in 1986, spoke with China Economic Review about 3G technology and the benefits of cooperation between Chinese and foreign carriers.
Q: What are your thoughts on China’s 3G technology?
A: Looking at China’s 3G market you will see it is the only one in the world where all three 3G technologies supported by the ITU co-exist, which is an interesting phenomenon. I hope that with the experiences gained in China the ITU might one day see all three 3G technologies interoperate with each other and so eventually we will be able to move into 4G with a globally-accepted solution.
Q: Who stands the best chance of gaining the upper hand in terms of China 3G market share?
A: China Mobile has a very strong subscriber base. However, its TD-SCDMA technology was only developed for the domestic market. China Unicom is the second largest mobile carrier and it also has a good subscriber base across the country, and the WCDMA standard it is using is widely used outside of China. This means the company has a lot of international support from a technology and product point of view. China Telecom, which received a license for CDMA 2000, can profit from the advantages of CDMA technology and it can upgrade from the current 2G technology to 3G very quickly while developing its subscriber base. In my opinion, the opportunities and challenges are there for all three operators.
Q: What about 3G handsets, is there enough of a variety available?
A: Handsets will become the key element for the success of 3G services in China. If you don’t have enough choices for customers to pick out a handset then it will be difficult for the technology to succeed. There will be a sufficient number of good handsets developed abroad to work with WCDMA technologies, which is good news for China Unicom. China Telecom uses CDMA 2000 technology which also has a wide variety of handsets available, although not to the same extent as WCDMA. There’s a real challenge for TD-SCDMA, on the other hand, because China Mobile can’t expect foreign markets to offer them the same choice of handsets.
Q: What are the chances of TD-SCDMA being promoted overseas?
A: I noticed TD-SCDMA was being promoted at a number of ITU events such as Telecom Africa and Telecom Asia held in May and August of last year as well as ITU Telecom 2009 in Geneva in October. However, compared with WCDMA and CDMA 2000, TD-SCDMA is at the early stages of promotion. There is still a long way for it to go. In my opinion, TD-SCDMA would have to venture abroad to secure its future.
Q: What do you think of the 3G infrastructure in China?
A: Because 3G licenses were only issued at the beginning of this year telecom operators could not set up base stations until they knew what kind of license they were getting. Now they have these licenses but China is such a large country you can’t expect everything will be done in a couple of months. There is also another issue: installation of base stations is not an easy matter because there could be local community opposition to having a base station nearby. In most cases you can’t use existing 2G stations for 3G operations so finding new locations will not be easy. But with the performance strengths of these three telecom operators, I am sure they will overcome these difficulties.
Q: What role do foreign telecom companies have to play in China?
A: As far as foreign equipment companies are concerned, they’ve already been there from the early 1980s. For mobile operators, there is already a lot of cooperation for roaming services – if you don’t have an agreement with foreign operators you can’t have roaming outside of China, and vice versa. By way of example, Vodafone has an investment in China Mobile and SK Telecom may be moving from China Unicom to China Telecom to cooperate on CDMA 2000 services.
Q: What benefit does the cooperation bring to Chinese telecom companies?
A: Cooperation with foreign operators presents a good opportunity for Chinese carriers to see how the telecom business outside China is run. Management at all three domestic operators have indicated they would like to go beyond China’s borders to improve relationships with foreign partners. But it’s not easy for them to operate abroad. At present China Mobile has limited operations in Pakistan, and China Telecom has limited operations in Europe and America. I expect cooperation between the Chinese operators and foreign investors will be further developed both in Chinese markets, and in the broader world markets.