Qualcomm and Teleepoch Enter Into a 3G CDMA Subscriber Unit License Agreement, October 6, 2007

MTN chooses Cambridge Broadband Networks for multi-service wireless network in Rwanda, October 6, 2007

Brazilian government to publish 3G bidding rules soon, October 6, 2007

KTF 3G service suffers from technical problems, October 6, 2007

Argentina’s Personal lunches 3G service in Rosario, October 6, 2007

Russia has it's first 3G network, October 6, 2007

AT&T could drop Alcatel-Lucent as 3G mobile network supplier, October 6, 2007

Enea Extends License Agreement with ZTE for 3G Handsets, October 2, 2007

LG to unveil premium handsets in Brazil, October 2, 2007

KTF 3G subscribers doubled in less than 3 months, October 2, 2007

3G policy in India will be non-uniform, October 2, 2007

- previous news

China Mobile’s 3G Conundrum

March 11, 2007

By the end of 2006, China had over 460 million cell phone users, which translates to about 5.6 million new customers a month. This is an enviable growth rate for most other countries.

But more relevant to growth potential is that national cell phone density is still at a scant 35 percent. In other words, to double the density level, China will enjoy 6-7 more years of rigorous growth. And this does not take into account 3G service, which many predict will double current revenue in five years.

Although China is yet to roll out 3G service, it is actively and meticulously conducting trials since last November. Previously in this column, I wrote about the shift in government policy in favor of TD-SCDMA, a homegrown 3G standard, and expected it to begin commercial service during the Beijing Olympic Games in 2008.

To give TD-SCDMA a run for its money, MII has added trial sites from five cities to ten. China Mobile, which will run extended trials, reportedly has bought TD-SCDMA network equipment valued over 10 billion yuan (US$1.4 billion). ZTE won 30 percent of the contract, the rest is shared by Datang Mobile, Alcatel, TD Tech (a joint venture between Huawei and Siemens) and Putian-Nokia.

In Beijing, one of the trial sites and a main venue for the sporting event, TD-SCDMA networks are being upgraded to HSDPA aimed clearly at broadband media coverage.

Most trials are conducted with little fanfare and for a good reason. None of the operators running these trials has a 3G license and MII does not want to give any impression on who's in line to receive a license and nor what standard should be used. Therefore, it is premature to assume all operators running current trials will secure a license for a preferable platform.

China Mobile, for instance, has said publicly it wants WCDMA as a logical migration from

GSM/GPRS. But the government, which owns all operators, may think China Mobile is the best candidate for TD-SCDMA given the company's technical and financial strength.

This is exactly what's happening. The largest mobile operator is caught between its choice (WCDMA) and an essentially political obligation (TD-SCDMA). Regardless of technical merit and performance, TD-SCDMA will pump up national pride but can disrupt operation continuity for China Mobile, to say the least.

The good news is it may give China Mobile a unique advantage in the future 3G market. If TD-SCDMA is chosen for the Olympic Games, China Mobile will likely become the first licensee or the pioneer for the service, whichever comes first. The preemptive position China Mobile gains will last long after the Games is over.

Back in the field, preliminary results show "overall satisfaction" for TD-SCDMA network equipment, especially the so-called "smart antenna" and aggregate modulation, a key aspect for 3G signal processing and compatibility with 2G.

Despite great efforts, TD-SCDMA handset remains a soft spot. On the one hand, there are 17 models available from companies like ZTE, Datang Mobile, Lenovo and Samsung, but few have plans for volume production for concerns of trial results and change of specifications. Another concern is TD-SCDMA handset lacks international endorsement, which will affect R&D at home and acceptance in other countries; it also might negatively affect consumer confidence in handset purchase.

Then there is the issue of handset cost. In early February, the TD-SCDMA Alliance in Beijing called on chipmakers and handset manufacturers to collaborate on low-cost models with a target price of $100 or less. There is no timetable for the proposal, but new models could come out as soon as in a year.

The key to a low-cost handset is the baseband chipset, which is responsible for function, integration scale, development cycle and cost. Datang Mobile, a major TD-SCDMA chipset supplier, has no plans to develop a new chipset. Other companies like Commit and Spreadtrum Communications are still trying to reap profit from current designs.

Besides chipsets, handset form factor, display, features and components all play a part in cost reduction. So far, the idea of low-cost handset has met with little enthusiasm from the handset industry mainly because many companies are preoccupied with their handset performance in trials. After all, cost is a function of technological advancement and market adoption. For instance, it is time for WCDMA to develop low-cost handset after over 100 million users in some 60 countries. TD-SCDMA, on the other hand, is still a raw and unchallenged technology with no commercial basis. Nonetheless, it will be very interesting to watch TD-SCDMA unravel during the next 6-8 months.