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Shrewd 3G gambit won't necessarily mean market success

(Xinhua)
Updated: 2009-01-10 00:22

BEIJING - 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 (US$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.

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 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 ten US dollars.

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.

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