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Posts Tagged ‘China Netcom’

 

   China Unicom to test W-CDMA 3G network in seven cities

picture-115Chang Xiaobing, chairman and CEO of China Unicom, has stated that he expected the Chinese government to speed up the issuing of 3G licenses. Once a W-CDMA (UMTS), one of the international 3G standards, license is issued to China Unicom, they will start testing their 3G network in seven Chinese cities by the end of this year, Beijing Times reported.

Yesterday, a source from China Unicom said that the company will set up trial W-CDMA networks in seven Chinese cities, including Shanghai, Shenzhen, Foshan, Liuzhou, Zhengzhou, Baoding and Wuxi, with about 100 W-CDMA base stations in each city. Meanwhile, Shanghai Unicom, Shenzhen Unicom and Wuxi Unicom were reported to have already begun works on the trial W-CDMA networks and base stations. Read the rest of this entry »

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 3G licensing to be unveiled soon

The Chinese government is currently studying the modalities of the 3G licensing policy along with ways to implement it and is likely to announce the policy soon, said China’s vice minister of Industry and Information Technology Xi Guohua.

Speaking at the China Mobility International Summit in Beijing today, Xi said the time is now ripe for China to issue 3G mobile licenses. Read the rest of this entry »

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BDA Connect

For iPhonAsia readers interested in learning more about the direction of the telecom industry in China and India, I highly recommend a PowerPoint presentation developed by Duncan Clark, Chairman BDA Connect – a Beijing based consultancy and investment advisory firm.  This material was presented at the January 2008 Pacific Telecom Conference in Hawaii. See > HERE

iPhonAsia thoughts on the future of 3G and Telecom in China

As outlined in detail through previous iPhonAsia posts, China has now initiated a sweeping restructuring of the nation’s telecom industry.  All of the major wireless and fixed-line carriers in China are majority state-owned and like it or not, they will follow the “encouragements” of central authorities.

In the aftermath of restructuring, there will be three (3) newly re-organized China carriers – China Mobile, China Telecom and China Unicom – and each will eventually receive a 3G license. Last May (2007) China made it clear that there would be three (3) third-generation (3G) standards approved for use: China’s “indigenously innovated” TD-SCDMA, along with global standards W-CDMA and CDMA2000.

TD-SCDMA May Not be an Eternal Flame

China has been deliberately coy about how the 3G licenses will be distributed amongst the newly constituted China carriers. According to the China Ministries overseeing this process, 3G licenses will be on hold until the China telecom industry restructuring has been completed (an estimated 3 to 18 months). This delay is really a subterfuge that buys time for the nascent “China built” TD-SCDMA 3G to overcome its many technical shortcomings. Billions have been spent on TD-SCDMA and it’s years late. The “TD” network was originally scheduled to launch in 2002 and there have been many missed deadlines. At this stage, there is serious doubt that China will ever see any return on their “TD” investment. Being late has its consequences. Movie buffs may recall the 1973 film the Paper Chase depicting life in the fast-lane at Harvard Law School… When the deadline for dissertations passes, they replace the inbox with a trashcan.  And in another poignant “don’t be late” moment… Mr. Hart (Timothy Bottoms) is asked to do an elective research project for the venerable Professor Kingsfield (John Houseman).  Anxious to impress, Hart labors diligently (all day and all night) yet far too long over his assignment.  When the thoroughly exhausted Mr. Hart rushes his finished product to the professor’s doorstep …

“You’re late Mr. Hart … When your contribution was not in my inbox on Tuesday as promised, I gave your assignment to a graduate student to finish … So you see Mr. Hart, your contribution to my treatise is no longer necessary.” (With that he closes the door in Mr. Hart’s face without even a “Thanks for the effort”).

See YouTube (different scene) > Paper Chase

The “hard cold truth” is that TD-SCDMA is very late and has major flaws.  Hence, there is serious doubt about it ever becoming a viable standard. The good news is that there are alternative world-standard 3G protocols that can be ramped-up quickly to meet the China users’ high-speed demands for mobile TV, video play-back (iChatting we hope) messaging and other value-added services.

The TD-SCDMA experiment will almost certainly go forward but China’s wireless consumers will vote their approval (or lack there of) through their keystrokes. If China Mobile’s Monternet platform usage drops-off, so to will average-revenue-per-user (ARPU).  It is my view that China Mobile will not long tolerate TD’s technical glitches.  If problems persist, China Mobile and its corporate allies will ratchet up their private dissention over the State’s mandate to support the TD standard. Despite TD’s dimming prospects, there is national “face” to be lost if TD-SCDMA does not demonstrate its ability to fly … Think Spruce Goose. 

Based on the political realities in China (SASAC vs NDRC) and State Council’s need to follow directives from the very top, China’s TD 3G may need to take flight and triumphantly circle the Olympic cities. Whether TD-SCDMA will then be parked in a giant hanger remains a subject for debate.

The Future of 3G in China

If China is adamant that TD-SCDMA must reign-supreme, the Ministry of Information & Industry may choose to delay issuance of the 3G licenses until late 2009. In my view China cabinet officials will be making a serious mistake if they drag out issuance of 3G licenses past the Olympics. Government shouldn’t be in the business of picking technologies and providing excessive advantages to TD-SCDMA would be folly. History often repeats and punishes those who fail to learn. China needn’t look far for a “state standards” failed experiment. In the 1990s Japan effectively walled off their telecom market by dictating a national wireless standard known as Personal Digital Cellular (PDC). Foreign tourists and business travelers couldn’t use their handsets while visiting in Japan and the PDC experiment ultimately failed. Now Japan has adopted world wireless standards, notably W-CDMA and CDMA2000, and they are taking a leadership role in advancing 3G standards.

China 3G License Sleuthing

It has been assumed that each China wireless carrier would obtain just one (1) of the state approved 3G protocols (TD-SCDMA, W-CDMA and CDMA2000). That assumption is most likely wrong. The only virtual certainty is that China Mobile will be assigned the TD-SCDMA standard and will be obligated to put forth “best efforts” to make TD-SCDMA work. Yet China Mobile understands that this task is daunting and hence they will need a backup plan. Call it a 3G disaster-recovery plan. One such plan would be to leapfrog 3G and developed a new standard based on the promising Long-term Evolution (LTE) protocol. China Mobile has in fact already committed to development of 4G LTE. Despite its promise, LTE is indeed “long-term” and practical implementation of an LTE network remains a 2010 and beyond project. China needs a reliable high-speed network now. China Mobile’s best disaster-recovery plan may be to obtain a second 3G license. Wang Jianzhou, China Mobile’s Chairman, was rumored to be retiring. Yet very recently we have learned that he will be staying on in his CEO role. Wang knows how to build out networks and it is possible that he is staying with the foreknowledge that W-CDMA is “in the bag” for China Mobile.

Bottom-line … my best guesswork suggests that China Mobile and China Unicom will both receive TD-SCDMA and W-CDMA 3G licenses. China Telecom gets CDMA2000. Update: 8/19/2008 – MIIT has rejected a plan by China Mobile to adopt both WCDMA and TD-SCDMA standards. Full Article > HERE

To carry my Spruce Goose metaphor a bit further, China Mobile will pilot TD-SCDMA. If the State has serious designs on a cross-China “TD” flight-plan, China Unicom will likely be in the Navigator’s seat for the journey.

As for the Apple “iPhone in China” angle? … simple … follow the W-CDMA.

Update 6/09/08: CNBC’s Jim Goldman sat down for a post WWDC 2008 Keynote interview with Steve Jobs … key subjects – 3G iPhone, lower price, SDK & new app store and “I think you’ll see those (China & Russia) happen later this year”

Discussion points: 3G launch, pricing and market-share + Steve Jobs’ mention of China & Russia + discussion of AAPL performance > HERE

Confirmed: 6 million iPhones sold since initial launch!

Steve Jobs June 9, 2008:

“The two big ones we just didn’t have a chance to get closed were Russia and China… and I think you’ll see those happen later this year… we have to get through the regulatory bodies in China, which we’re in the process of doing, and I think later on this year you’ll hear some announcements.  70 countries is a lot of countries and we’re launching 22 of the biggest on July 11th” 

Primary video interview > HERE

 

 

 

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  April 4, 2008

China Looks Set for Telecom Industry Restructuring

BusinessWeek has written a piece on China’s forthcoming telecommunications industry restructuring. 

See full article > HERE

EXCERPT:

Rumors of a restructuring build as the massive mainland industry eagerly awaits the debut of a homegrown 3G mobile standard

In recent months the drumbeat has quickened with speculation that the telecom industry may be on the cusp of a comprehensive restructuring that will pave the way for 3G.

The rumored scenario is as follows: China Mobile will merge with small fixed-line firm China Tietong. Fixed-line giant China Telecom will acquire China Unicom’s CDMA network, while the remainder of Unicom will merge with fixed-line carrier China Netcom and operate a GSM network. China Satcom will join a national aerospace consortium.

The three full-service telecom operators—each with a mobile and fixed-line business—would then be primed to receive licenses for one of three 3G standards. A CDMA2000 license would be given to China Telecom. A WCDMA license would go to the new Netcom/Unicom entity. China Mobile would run a network based on TD-SCDMA, the least mature of the technologies.

iPhone in Asia Editorial Note: “Follow the W-CDMA” … whichever China carrier(s) wins a license for W-CDMA 3G and the rights to build out the W-CDMA 3G network in China, will hold a key advantage and might just wind up as Apple’s carrier partner in China.  Albeit, iPhone is Asia is also predicting a dual launch strategy in China – a locked-to-carrier and unlocked iPhone distribution plan.  See post > Apple is open to new business models

image courtesy BDA 

 

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Update: March 17, 2008

Adding further credibility to the scenario outlined below is a March 17 report via China Trade Information – China Telecom seeking CDMA sales, technical staff

This report notes China Telecom is continuing to make active preparations for the acquisition of Unicom’s CDMA business.  

 

Li Yizhong – Newly appointed head of the Ministry for Information and Industry. xinsrc_562120321130659319751-1.jpg

 

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image courtesy BDA  

China Telecom Industry Restructuring Scenario (one of several) in Nutshell:

Analysts have speculated that following the reshuffle of China’s telecom industry (TBA post Olympics), China Telecom will be responsible for W-CDMA network construction (after it formally receives a license to operate in the mobile industry). In addition, China Unicom’s CDMA business will be taken over by China Telecom, China Unicom’s GSM business will be taken over by China Netcom, and China TieTong will be merged with China Mobile. These three reshuffled operators – China Mobile, China Telecom and China Netcom – will therefore all have fixed-line, mobile and broadband businesses, as well as 3G licenses.

 

There is also a behind the scenes battle (now being waged) over the rights to build out the W-CDMA 3G network.  After the industry reshuffle is complete, it’s likely that only one China carrier will be responsible for development of the W-CDMA network and China Mobile is planning to compete with China Telecom for the rights.

 

Confused yet? And what the heck does all of this have to do with Apple iPhone in China? … Read the articles below and the implications of “iPhone in China” may become a “bite” more clear…

TD-SCDMA may not be an eternal flame 

Forthcoming iPhone launch in China

 

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Here below is the latest from China Mobile as reported by Reuters. Note: iPhone in Asia editorial comment is interspersed – distinguished by blue italic font

China Mobile says keen on iPhone, but not in talks

Reporting by Kirby Chien; Editing by Edmund Klamann – [editorial comments by iPhone in Asia Editor – blue, italic font]

Mon Mar 3, 2008 10:47am GMT

 

BEIJING (Reuters) – China Mobile, the world’s largest mobile phone operator, said on Monday it had not officially entered into talks with Apple Inc to bring iPhones to the mainland, but was interested in doing so.

[key words above are “not officially” … China Mobile will only use the word “formal” or “official” when a deal with Apple is done.]

In January, China Mobile said talks with Apple on launching the U.S. company’s popular iPhones had been called off, although Apple has never commented officially on the issue.

[In January there were never any substantial or ongoing talks.  Accoring to Steve Jobs, there was just one informal meeting with a China Mobile executive in Cupertino … The “talks off” ploy was suspiciously timed for day-one of MacWorld 2008 when the world tech/business media would  be focusing on Apple.  See – Press gets Spun by China Mobile ]

 

“We have not yet officially begun talks with Apple over the iPhone problem,” China Mobile Chief Executive Wang Jianzhou told reporters on the sidelines of an annual parliament advisory body meeting.

[There’s that word “officially” again]  …. [“iPhone Problem?”  Problem how?  Problem as in so-called black-market problem for Apple?  Or problem as in we’d better sign Apple before the China telecommunications industry restructuring is announced?]

“As long as our customers want this kind of product, we will keep all options open,” said Wang.

[“As long as our customers want this product” …Translation = If we don’t sign Apple, we stand to lose some of our most valued customers when China Unicom acquires China Netcom and is then granted a W-CDMA 3G license]

Investors had cheered Apple possibly winning access to China Mobile’s 350 million subscribers — more than the population of the United States — when news of talks helped Apple’s stock climb more than 10 percent on November 13.

[Pacific Rim carriers deals will most likely be announced in late Spring or early Summer. ]

The iPhone, a hot-selling cell phone that allows Internet access and plays music, sells for about $500 in the United States — roughly double the average monthly salary in China.

[The iPhone is “too expensive” argument ignores tangible evidence to the contrary.  While the average salary is quite low compared to Western standards (see – China Mobile and Apple – The 2008 iPhone Games), there is a fast rising middle-class in China and they do not want a knock-off iClone or lesser “iPhone killer.”  InStat estimates that 20% of handsets sold in China in 2007 cost more than 4,000 RMB (US$533). In another words, there are an estimated 28 million (and growing) potential users for the iPhone in China… and growing.

What is most interesting is an October 2007 report on luxury goods consumption in China. The numbers tell a compelling story.  China currently has:

  • An estimated 300,000 millionaires and rising.
  • A middle class of 250 million (making an equivalent salary of $550 to $1,000 US dollars per month) and rising.
  • A total population of 1.3 billion, that according to Ernst & Young, spent $6 billion US on luxury goods last year (2006).
  • And a prediction by investment bank Goldman Sachs that the percentage of China’s populace that purchase luxury goods will rise from 12 percent to 29 percent by 2015.  This will place China second only to Japan in global consumption of luxury goods – worth an estimated $80 billion US a year.] 

iPhone would first have to resolve technical, content and fee issues unique to China, including Apple’s revenue-sharing agreement that China Mobile would find hard to accept, analysts said.

Apart from China, Apple had also initiated talks with NTT DoCoMo Inc and Softbank Corp to bring its multimedia device to Japan, although sources at both Japanese firms said revenue sharing was again a hotly contested issue.

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iPhone in Asia Editorial Comment: The impending restructuring in the China telecom industry is a prime reason why Apple has not rushed to immediately conclude iPhone negotiations with China Mobile.  Apple is very carefully considering how the landscape will be changing in 2008/09 and how this might impact their carrier partnership and iPhone distribution options in China.  Post restructuring, there should be legitimate competition for wireless customers.  A newly formed China Unicom, with a 3G license and rights to build out the W-CDMA network, can go toe-to-toe with China Mobile and their nascent (unproven) TD-SCDMA 3G network.    

The China telecommunications industry restructuring is being done with the direct involvement of the China Ministry of Information & Industry.  It has already been decided who is going to run each new business group.  Look for announcements following the 2008 Summer Olympic Games in Beijing. 

While much has been decided, there will be a few internal restructuring skirmishes.  China Mobile will battle the combined Unicom/Netcom for the W-CDMA rights (China Mobile has been saddled with responsibility to make the TD-SCDMA work and they’re anxious to hedge their 3G bet given technical and logistical problems with TD-SCDMA); however, the Ministry of Information & Industry is apparently (if my intel is correct), supporting China Unicom’s bid for the W-CDMA rights. What does this mean?  Real, actual, legitimate, serious competition in wireless!  Apple is aware of these developments and this is why (IMO) there has been no rush to conclude a deal with China Mobile.  Competition means the game is about to change!

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Why Apple has a fair chance to win a favorable deal with China Mobile or China carrier or distributor/partner to be named later:

·      287 million of China Mobile’s 356 million subscribers are monthly “pay as you go” vs “on contract with a data-plan.”  It should come as no surprise that China Mobile very much wants to grow its “on contract with data-plan” customers … they are far more profitable/important to China Mobile’s future. NOTE: China Mobile has been growing subscribers at a clip of 5 to 7 million per month and the uptake in data services has been impressive (now 25% of China Mobile’s wireless revenue).  While these numbers are positives for China Mobile, TD-SCDMA must be able to deliver wide coverage and high speed, or China Mobile stands to lose data-consuming customers to a carrier with the more scalable and reliable W-CDMA.  

·      The future growth in wireless revenues will come from value added services such as music, messaging, mobile video and mobile TV (CCTV on your phone).  To grab this business, you need a reliable 3G (LTE in the future) network, and subscribers who own handsets with excellent audio/visual capability.

·      There is no phone that offers audio/visual and boosts data use like the iPhone! Period end of story.  Net surfing increases 50 times and overall data-usage doubles or triples! 

·      A combined Unicom/Netcom w 3G license + W-CMDA with an iPhone exclusive, can steal a large slice of China Mobile’s customers (no jail-breaking or hack necessary).

·      The new 3G iPhone will be far more difficult (expensive) to hack. 

·      To further combat hacking, Apple can work out (with China Unicom’s blessing) a two-tier offering … Specifically, a locked iPhone with a 2-year contract (and presumably some rev share) and a premium-priced unlocked iPhone in the same market.  This would follow the iPhone in France via Orange model (French law prohibits handsets from being locked to a network for more than 6 months).  Such a move by Apple would preserve revenue sharing model (albeit slight less rev), as 70 to 80% would go with the locked phone, and at the same time deliver a death-blow to the black-market for hacked and jail-broken iPhones.

·      Unicom/Netcom would likely offer an attractive “amnesty plan” for China Mobile’s existing iPhone “pay as you go” owners.  They will be enticed to go on contract with Unicom with many TBA incentives and knowledge that they can upgrade their iPhones for free … no need to pay a black-market hack-a-phone shop for future Apple or developer upgrades.

·      The soon to be unveiled iPhone SDK will come with many cool apps.  All Apple and developer community apps will be delivered via iTunes (Apple apps will be free … no cost to iPhone owner, no cost to carrier, no black-market hack necessary).

The rich want to get richer and they (China Mobile) don’t want to lose ground to competitors.  China Mobile will likely push MII to win rights to run a dual TD-SCDMA/W-CDMA network.  Regardless of whether China Mobile wins that battle, there will be another serious 3G competitor (Unicom/Netcom) in wireless.  Given the dynamics in China’s telecom industry and important growth strategies (mobile video watching, on contract data-plan customers) it’s a fair bet that Apple can win a favorable deal in China.

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