Government at Crossroads on 3G Standards - International Law Office

As backers of rival third-generation (3G) mobile telephony standards compete for a share of China's rapidly expanding telecommunications market, China Telecom's announcement that it would be able to offer 3G services within seven or eight months of receiving official approval makes the government's forthcoming decision on licensing even more crucial.

China's largest fixed-line operator is taking part in trials of the Time Division Synchronous Code Division Multiple Access (TD-SCDMA) standard in three mid-sized cities, in addition to full commercial trials in Shanghai and Beijing. The results are due to be published in July or August 2006, with the announcement of the first 3G licences expected to follow within a month. China Mobile Communications and China United Telecommunications, the other trial participants, are thought likely to secure licences, but Wang Xiaochu, China Telecom's chairman, is confident that a third licence will be granted to a fixed-line operator. However, he stopped short of calling for the adoption of TD-SCDMA as the national standard at the company's annual general meeting in May, insisting that the choice should reflect the preferences of local consumers.

TD-SCDMA, developed by the China Academy of Telecommunications Technology in collaboration with Siemens and Datang Telecom, among others, offers a domestic alternative to Wideband Code Division Multiple Access (W-CDMA), the European standard, and to the Code Division Multiple Access Evolution - Data Optimized network, which is already well established in the United States. TD-SCDMA has received political and financial backing from the government and its promoters' position has recently been strengthened by the decision of more Western companies, such as France Telecom, to join its Chinese backers in the TD-SCDMA Forum, the standard's promotional body.

3G technology has enormous potential in the world's largest mobile telephony market. However, China is reluctant to remain dependent on Western technology, as royalty costs on the patents held by foreign vendors of W-CDMA equipment cut deeply into the thin profit margins of domestic companies. The Ministry of Information Industry's next move will be of global importance to the industry.

For further information on this topic please contact Don Hess at Allens Arthur Robinson by telephone (+852 2840 1202) or by fax (+852 2840 0686) or by email (don.hess@aar.com.au).