Lost in 3G

10 Nov 2008

You may have missed it, but it's been a year of celebration for China's infant TD-SCDMA industry.

It's ten years since the wireless technology, based on specs originally developed in Europe, was submitted to the ITU as one of the 3G standards. The ITU duly approved it, and TD-SCDMA has since joined the space program and the Bird's Nest stadium as one of China's modern-day marvels.

China Electronics Publishing House has just published a book celebrating the 'successful realization' of the standard. Lou Qinjian, a vice minister at MIIT, wrote in the foreword that the past decade has been a period of 'unremitting struggle and hard work.'

In the deathless prose of Chinese officialdom, Lou said TD's 'research level has steadily risen, the industry chain has achieved clusters of breakthroughs and it has already entered the new development stage of scale commercialization.'

What he didn't mention was that this decade of unremitting effort has yielded just 270,000 subs. Stripping out the freeloading BOCOG officials and Olympic volunteers, the number of paying customers had reached just 38,000 by mid-September, according to China Mobile.

It's a long way short of the extravagant industry forecasts. In May last year, the TD-SCDMA Forum predicted 20 million customers by the end of 2008. Zhen Caiji, chairman of state-owned vendor Datang Telecom, which holds the government's TD patents, last month predicted 100 million subs by 2011.

Set against this dismal level of take-up is the billions of yuan the Ministry of Industry and Information Technology (MIIT), the Ministry of Science, the National Development and Reform Commission (NDRC) have tipped into the project. Some went to state research bodies, but a good deal went directly to loss-making Datang Telecom, which had to be rescued from near-collapse last year with a 60 billion yuan line of credit from government banks.

It's no surprise that China's secretive bureaucracy has made no public calculation of the TD-SCDMA business case.

What does surprise is that Datang Telecom owns only 7.3% of TD-SCDMA network patents. Foreign vendors like Alcatel-Lucent and Nokia Siemens are believed to own around 36% of the IPR of the supposed national champion.

But as Ted Dean, managing director of consultancy BDA, points out that's not how the project is being measured. 'They're using a set of criteria that are very different from a purely commercial exercise. If your main priority is domestic IPR, you look differently at the cost-benefit for the operator.'

TD-SCDMA is being forged in the furnace of the country's 'indigenous innovation' program - China's ambitious attempt to build domestic expertise in airliners, rocket ships and nanotech as well as telecom and IT, to name a few.

To Lou, the MIIT and the other boosters at the TD-SCDMA Industry Alliance (TIA), the TD-SCDMA Forum and the China Academy of Telecommunications Technology (the research lab that spawned Datang), just making the standard commercially available is a success itself.

'TD-SCDMA's successful industrialization is a huge breakthrough in independent innovation in the field of high-tech in China,' Lou wrote.

In a paper for Danish industry thinktank Druid, a researcher, Hui Yan, writes that TD-SCDMA is the 'breakthrough' technology intended to show the way for other key technologies in 'indigenous innovation'.

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