China is promoting the development of a local 3G mobile technology, but the government's reluctance to reveal its licensing plans has discouraged mobile phone companies from creating more products for the technology, which could damp consumer enthusiasm, industry insiders warn.
The Ministry of Information Industry, China's telecommunications regulator, endorsed TD-SCDMA as a national standard in January, ahead of the two competing technologies that are already used worldwide and could be used in China in the future – W-CDMA and CDMA2000. But it hasn't said when it will issue 3G licences, which operators will get licences, and which of the three rival technologies operators will use.
TD-SCDMA has never been used commercially, but it is part of China's drive to become a global technology leader as it seeks to stem patent payments by local companies to foreign operations.
"The problem with TD-SCDMA, whether it's for equipment or handsets, is that its main driver is the Chinese government. There's no market demand except that forced on the market by the government," said Dave Carini, a Beijing based analyst at Maverick China Research, a telecoms, media and technology market research firm.
Not all analysts are so pessimistic, but most agree that the market for TD-SCDMA hinges on how many and which carriers Beijing selects to deploy the new technology in the world's largest mobile market by users, with 437.48 million mobile phone users at the end of August.
China has four key telecom companies that are ultimately controlled by the government: fixed-line operators China Telecom and China Netcom, as well as mobile operators China Mobile and China Unicom. Analysts say a new mobile operator is likely to build a wider TD-SCDMA network more quickly than an existing operator, which would probably gradually upgrade existing equipment.
Dearth of TD-SCDMA handsets will hinder take-up
But until Beijing clarifies its plans, some handset makers are adopting a wait-and-see attitude, which analysts believe could lead to fewer TD-SCDMA handsets on the market compared with those available for other 3G technologies.
"When there is a sizable TD-SCDMA handset market, we will offer TD-SCDMA handsets," said Thomas Jonsson, China communications director for Nokia Corp. Nokia, the world's largest mobile phone maker by market share, doesn't have any commercially available TD-SCDMA handsets, while its joint venture with state-owned Potevio Co. is working on TD-SCDMA network equipment, Jonsson said.
Although Yang Hua, secretary general of the TD-SCDMA Industry Alliance, said in August he expects there will be 18 mobile phone models based on TD-SCDMA approved by the government, he didn't say when they will become available. The alliance, which includes companies involved in making TD-SCDMA products, aims to promote the new technology. There are even fewer dual- or tri-band phones that work with the other two technologies already used in China - CDMA and GSM. Many phones are designed to operate on one or two systems.
In the early stages, when TD-SCDMA networks won't cover the whole country, the inability to make or receive calls outside a TD-SCDMA network will further discourage users from paying for TD-SCDMA service, analysts say.
ZTE Corp., one of China two key telecom equipment makers, has developed more than 10 phones and data cards that work on 3G, a company official said. Of that total, two phones and one data card work on TD-SCDMA, she said, adding the company's investment in such products is based on TD-SCDMA's market prospects. The official declined to be named. ZTE sells W-CDMA and CDMA2000 handsets outside China.
Datang Mobile Communications Co., which leads TD-SCDMA development, has three phones and a data card that work on TD-SCDMA, said a company official who declined to be named.
"There's a high possibility that the lack of dual-mode handsets will reduce consumer enthusiasm for TD-SCDMA (services)," said Marco Xie, a telecom analyst at consultancy firm Analysys International.
Some problems solved; commercial use needed
But some analysts are taking a more sanguine view, saying that such hiccups are usual in the development of a new technology, and TD-SCDMA's progress compares well with that of CDMA2000 and W-CDMA.
China has overcome some problems that cropped up in TD-SCDMA trials in the five test cities: the capital city of Beijing; financial hub Shanghai, sailing port Qingdao in the eastern province of Shandong, Xiamen in the southern coastal province of Fujian, and Baoding in the northern province of Hebei.
Improved networks have helped to reduce heat generated by mobile phones, said Daisy Che, a manager at the TDSCDMA Industry Alliance. When signals are weak, mobile phones use a lot of energy to search for stronger signals, and can overheat, she said.
China has also attracted SK Telecom Co., South Korea's largest wireless operator by revenue, to build a test network based on TD-SCDMA in South Korea.
Still, further growth of TD-SCDMA will likely only take off when operators start to use the technology and give handset makers a whiff of profit. "Actual commercial use and experience are needed for the development of TD-SCDMA. Even if problems occur, they can be solved (when TD-SCDMA is used commercially)," said Zeng Jianqiu, a professor at the Beijing University of Posts & Telecommunications.
Already, some signs point to a brighter future for TD-SCDMA. Foreign companies are taking part in more meetings about TD-SCDMA, as the trials progress and the government becomes surer about the technology, said Wang Jing, secretary general of the TD-SCDMA Forum, a group that promotes technical exchanges on the Chinese standard.
"The market prospects are clearer now (than two months ago)," he said, adding he hopes the trials will end by the end of the year.
-----
