Guest column: Insight into China Mobile’s TD-LTE gambit
In this week’s guest column, Dr. Cheng Dejie, senior consultant at Sichuan Communications Research Planning & Designing Co. Ltd., a telecom network design firm, argues that China Mobile’s recent pronouncements on 4G are a gambit to secure its 3G interests. Translated from the original Chinese by Yu Chenxi.
China Mobile has widely trumpeted its development strategy for 4G TD-LTEnetworks, while recently, a senior China Mobile official publicly stated that 60 percent of China Mobile’s investment capital will be put into 4G over the next few years. This has triggered worries by industry insiders that the operator’s commitment to China’s homegrown 3G standard, TD-SCDMA, is half-hearted, and stirred up debate as to the prospects that a viable industry chain for TD-SCDMA has any chance to develop.
As the only operator shouldering the heavy responsibility of popularizing TD-SCDMA, any announcement regarding the standard by China Mobile will inevitably attract huge attention.
However, while many have criticized China Mobile for neglecting its responsibility to TD-SCDMA and warned of the impact that prematurely focusing on TD-LTE will have on the TD-SCDMA industry, most have missed the real reason why China Mobile has chosen to trumpet TD-LTE just before the government issues 3G licenses.
By my assessment, China Mobile’s advocacy of TD-LTE at this point is a tactical move designed to secure advantages for its TD-SCDMA business over other operators’ 3G networks.
Despite its declaration, China Mobile must attach great importance to TD-SCDMA and make it a priority, as beginning construction of a TD-LTE network before the TD-SCDMA network is established would be impossible.
TD-LTE’s immaturity makes it impossible for China Mobile to start construction of a network within the short term. According to international mobile broadband standards body 3GPP (The 3rd Generation Partnership Project), worldwide standards for LTE are expected to be fixed around the end of 2008. Even if the most optimistic estimates by Chinese telecom experts that China would be among the first batch countries to start construction of LTE networks were true, the earliest construction could start would be the second half of 2010.
Secondly, China Mobile has to develop its TD-SCDMA network if it is to compete with the 3G businesses of China Telecom and China Unicom. During the period between now and the possible deployment of China Mobile’s TD-LTE network, China Mobile will still have to deploy TD-HSDPA to compete with China Telecom’s EV-DO and China Unicom’s HSDPA services.
As such, fears that China Mobile may leapfrog 3G to enter 4G directly are unfounded.
So, what could have motivated China Mobile to highly publicize its TD-LTE strategy and invite so much criticism in the sensitive period before 3G licenses are released? China Mobile’s real aims for announcing its TD-LTE strategy are as follows:
Firstly, China Mobile is trying to assert its dominance over 4G so it can occupy a hegemonic position similar to what it enjoyed in the 2G era.
Secondly, by heavily implying that it regards 3G as an interim technology leading to LTE, China Mobile intends to put pressure on TD-SCDMA manufacturers in order to secure better deals from them in tenders. As is known to all, the contract prices offered by China Mobile in its second round TD-SCDMA equipment tender were not as low as insiders had expected.
Due to pressure from the TD-SCDMA Industry Alliance and other industry bodies, China Mobile’s prices gave winners in the tender profit margins of around 3 percent to 5 percent. On the other hand, prices offered by China Telecom for its CDMA network construction and terminals gave enterprises far less profit.
China Mobile has recognized that it will incur higher costs in constructing its 3G network compared to the other two operators, that this will be reflected in the price it charges consumers, and that this puts it at a competitive disadvantage. Therefore, by calling for early adoption of TD-LTE, China Mobile is pressuring TD-SCDMA enterprises to lower their costs by giving the impression that their window of sales opportunity will close sooner than they would hope. It also hopes to increase the support of government and regulatory bodies through the move.
Overall, China Mobile’s announcement of its 4G TD-LTE strategy before even entering into 3G service operation does not necessarily mean it will be entering into TD-LTE network construction, but rather that it aims to create a better environment for the success of its TD-SCDMA service.