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China set to delay issue of 3G licenses, says report

Posted: 27 Jun 2005 ?? ?Print Version ?Bookmark and Share

Keywords:3g? telecom?

Technical hang-ups with China's domestic 3G standard look likely to delay the handing out of 3G licenses this year, according to research firm iSuppli.

The development comes as little surprise to many observers of the Chinese mobile market. Many have been speculating for years about the timing of 3G licenses, and have been proven wrong time and again as Chinese officials look for a more auspicious confluence of applications and technology that would enable its domestic telecoms to make money from the necessarily large infrastructure investments.

Once again, the blame is being put on TD-SCDMA, the domestic standard that China wants to deploy alongside wideband-CDMA and CDMA2000 1X. Yet while the latter two are ready to go, the former is still teething. During the government's most recent round of tests, iSuppli said only a few handsets passed qualification.

"The decision makers in Beijing now face and awkward choice: Either they can give up on the indigenous TD-SCDMA standard - or they can delay the timetable yet again until the specification is robust and ready," wrote analyst Byron Wu in a recent report from iSuppli.

It is highly improbable that the government would trash the standard, given that it and various companies have sunk hundreds of millions of dollars into R&D. Moreover, the government has elevated TD-SCDMA onto a political pedestal, praising it as an example of China's technical prowess and ability to develop intellectual property.

"For this reason, there is only one viable solution to the TD-SCDMA problem: Delay the 3G service licenses until China's home-grown technology is truly ready for commercial use," Wu said.

Olympic deadline

By issuing licenses, an event that was expected late in the second half of this year, government officials will be loosening the reins on what will eventually be the largest 3G market in the world. The move will affect business interests ranging from semiconductor makers and cell phone designers to equipment companies and system integrators.

One of the key hurdles for TD-SCDMA is the relatively small number of companies involved in the supply chain. In trials completed late last year, only five vendors participated - Datang Telecom, ZTE, Putian, Huawei Technology and Nortel Networks. For handsets and chip sets, there were several domestic vendors, but that was still deemed as too few.

iSuppli suggested 2006 as the new time frame for licenses to be passed out. That could put operators uncomfortably close to the government's goal of having services up and running for the 2008 Olympics in Beijing - or maybe not.

Some users with 3G phones bought in foreign countries have said they have picked up 3G signals in a few of China's large cities, indicating the some operators are quietly executing a limited equipment rollout in anticipation of licensing.

Another delay may also benefit China's telcos. It would allow the main wireless firms to increase their return on current 2G/2.5G services, and provide the carriers who choose w-CDMA with a chance to deploy a more mature version of High Speed Downlink Packet Access, considered 3.5G technology.

- Mike Clendenin

EE Times

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