China plans 3G wireless in 3 flavors

SHANGHAI, China — After years of delays, the Chinese government said last week that it would issue licenses for next-generation 3G wireless services, which could fuel growth in what is already the world's biggest market for wireless services.

China's state council, or Cabinet, made the announcement late Wednesday on its Web site, saying the government would back three standards, including one chiefly developed in China.

The move, which has been expected for much of the past year, is significant because it paves the way for cellphone users here to have faster downloads of video, data and Web-browsing services, and for telecommunications companies to charge more for their high-speed services.

China also hopes that the licenses will be a boon to Chinese telecommunication and equipment makers, which have invested heavily in the Chinese standard, allowing them to play a larger role in the development of equipment and global standards.

China said it would issue licenses for each of the three major standards, the homegrown TD-SCDMA standard, as well as two international 3G standards that are favored in the United States and Europe.

The issuance of licenses means some of the world's biggest telecommunications companies could profit from huge spending on network and mobile-phone upgrades, including phone towers and switches.

The country now has more than 600 million cellphone subscribers, by far the largest number in the world, and there is fierce competition among international companies to capture market share. Some specialists say China's decision was delayed because of debates over which standards would be approved and which companies would get licenses, and to allow China to improve the standard it developed to better compete with the other two international standards, WCDMA, which is favored in Europe, and CDMA 2000, which is used in the United States.

Duncan Clark, the chairman of BDA, a consulting and investment-advisory firm in Beijing, says China had pushed its own standard but initial rollouts have been lackluster.

"TD-SCDMA has been an 'Emperor's new clothes' situation, with officials all professing admiration in public but steadily coming to the realization that this technology would never work," Clark said in an e-mail response to questions about the announcement.

"It is in fact more of a failed German technology (from Siemens) passed off on China and rebranded as 'indigenous,' " he wrote.

By using their own standard, Chinese telecommunications companies will be able to reduce high royalty and patent payments for the use of foreign technologies.

China's telecommunications industry is still not fully open to competition. International telecommunication-equipment makers and cellphone producers are thriving here, but only Chinese state-controlled companies can offer telephone services to regular consumers.

For much of the last year, China has been testing its 3G networks in limited areas, including Beijing and Shanghai. And some Chinese companies have developed special phones to work with the Chinese standard. The move could be a huge lift for some Chinese companies, including ZTE and Huawei Technologies.

To prepare for 3G, China earlier restructured its telecommunications industry into three major players.

By some estimates, China could have 150 million 3G cellphone subscribers by 2010, which would mean bigger revenue and profits for mobile operators.

The government did not announce which Chinese wireless-services companies would get which licenses.