3G in China taking longer than expected

It seems like they have been talking about 3G for three generations in China—some pessimists quip that predicting the end of the world might be easier than nailing down when the government here will start issuing licenses.

Last week in Beijing, hundreds made the annual pilgrimage to the 3G Mobile International Summit—for the seventh time—and pretty much nobody knew much about licensing, the one issue that mattered. Officials who had some inkling weren't talking, and even those who usually talk—but don't know much—weren't talking either.

After years of wrong-footed guessing, even the pundits are exasperated. "The seventh annual conference—we've been talking about it for that long. It's really quite silly, isn't it?" said Duncan Clark, managing director of BDA China Ltd.

The irony is rich. In many parts of Beijing, it's possible to pick up a 3G signal from widespread test networks, and some operators have routed voice calls over the unofficial networks to alleviate capacity crunches—although they aren't supposed to. Yet the government refuses to issue licenses because China's domestic standard is still being tested in trial after trial.

"There are still some problems with handsets connecting to the networks, but these things go slowly. It isn't unusual," Chen Ruming, a senior official at the Ministry for Information Industry, which will issue the licenses, told EE Times.

The commercialization of 3G in China will depend on the readiness of time-division synchronous code-division multiple access (TD-SCDMA). It has long been considered the underdog standard because of the smaller amount of R&D funds invested in it and its relative immaturity compared with wideband-CDMA and CDMA2000 1X.

Right now, TD-SCDMA is being tested in Qingdao in Shandong Province, Baoding in Hebei Province and Xiamen in Fujian Province. The standard is in at least its third round of testing. Those tests were supposed to wrap up by the end of last month, but now aren't expected to be finished until later in the third quarter. After that, it will take more time to draft postmortem reports for government decision makers. That will delay licensing until 2007.

Industry executives and analysts are at a loss over the delays. Many thought the government would surely have issued licenses by now, in order to meet its goal of a functional nationwide network for the 2008 Summer Olympics in Beijing. The window of opportunity is closing on nationwide deployment, but smaller-scale trial networks could still be up and running for the Olympics. "They should just get on with it," said Jing Wang, a senior vice president at Qualcomm Inc. "We are seeing tremendous growth with 3G around the world, with the exception of China."

China is the world's largest cellphone market, with more than 400 million subscribers. Although much growth is happening at the low end, equipment vendors believe there will be huge opportunities in 3G. Operators here are interested, but aren't as bullish as vendors, who paint rosy pictures of gleeful Chinese gorging themselves on all-you-can-eat data plans and mobile multimedia. "The coming of 3G will certainly increase the use of data services, but it could be overestimated-just look at Europe," said Lai Yong Chee, an analyst at Accenture. "Voice and SMS [Short Message Service] will still be the main driver in China."

During tests last year, the trial TD-SCDMA data network was stable when running at 64Kbps. But at 128Kbps, it ran into trouble, meaning that it couldn't even differentiate itself from Edge-based networks. "It's running 128Kbits stably, but I'm not sure about 384," said Finabarr Moynihan, baseband marketing manager at Analog Devices Inc.

Telecom companies ZTE Corp. and Holley Communications are already using ADI's programmable SoftFone-LCR TD-SCDMA chipset. Moynihan said that two or three other customers will submit handsets for testing on the trial networks within a few weeks.

ADI's silicon was also used in the early trials, which started years ago. Despite being an early player, the company still hasn't received any volume orders for chipsets, indicating that handset makers and operators are probably at least several months away from any ramp-up.

Fine-tuning continues
A handful of other chipmakers are making changes to their platforms as they wait. Beijing-based T3G—backed by Philips, Datang Mobile, Motorola and Samsung Electronics—is expected to release samples of HSDPA-capable TD-SCDMA silicon and system solutions featuring single-carrier data rate support of up to 2.8Mbps in the second half of 2006.

Commit Inc., a Shanghai-based joint venture led by Texas Instruments, DBTEL and LG Electronics, is also sampling its second-generation TD-SCDMA chip set, dubbed Mars, which comes with added firepower in the form of a coprocessor for handling the TD-SCDMA algorithms.

One silver lining of the numerous delays is that they favor incumbent equipment makers, like Nokia and Ericsson, which dominate the 2/2.5G infrastructure business in China. China's operators still spend more than $20 billion a year on infrastructure, with more than half of that going toward expansion of mobile networks. Chinese telecom equipment makers like Huawei Technologies and ZTE Corp. don't do as well because their equipment isn't at the core of China's networks. "But for 3G, they will be able to compete on better footing," said Ted Dean, managing director at BDA China.

- Mike Clendenin
EE Times