An old Chinese saying may be relevant to the commercialization of CDMA mobile phone networks in China-“Those who know don’t talk, and those who talk don’t know”-at least on the record.
When will Code Division Multiple Access networks be launched commercially in China? No one knows for sure. It’s a sensitive subject-in particular because the People’s Liberation Army owns 50 percent of China Telecom Great Wall, China’s only mobile phone operator that has been experimenting with CDMA mobile phone networks.
“It is true that CDMA rollouts continue to be delayed in China,” said one source close to the situation. “But right now, there are no indications that the rollouts will continue to be delayed or protracted in any way. What is taking place is a review at a strategic level by senior officials in China because of the PLA affiliation in CDMA. They own the spectrum. The [president] is in strong opposition to the PLA’s participation in commercial affairs. The CDMA systems just got in the way.”
Sources say the PLA, part army and part commercial conglomerate, has tremendous economic strength and influence in China. It is estimated the PLA owns nearly 20,000 businesses, ranging from pharmaceutical factories to hotels to telecom businesses. Published reports indicate its disparate assembly of businesses potentially bring in as much as $20 billion annually. As China moves toward an economy shaped by market forces, it is aiming to push the PLA out of the commercial sector and get rid of the corruption the Chinese government says is associated with the PLA.
The effort is tricky, especially in the telecom sector, where the PLA owns a great deal of frequency. It doesn’t want to lose control of this important sector.
As it stands, the Chinese government is expected in early October to announce when CDMA networks will be allowed to grow commercially. Sources indicate the government had planned in July to allow CDMA service to expand into 10 provinces, but PLA influence stepped in the way. Great Wall currently is operating four experimental CDMA networks in the cities of Beijing, Guangzhou, Shanghai and Xian. Motorola Inc., Lucent Technologies Inc., Samsung Ltd. and Northern Telecom Ltd. supply equipment. Commercial rollout of the four networks was delayed previously because of the reluctance of the Ministry of Posts and Telecommunication to grant interconnection, said a recent report from Herschel Shosteck Associates Ltd.
Sources indicate the Chinese government is looking at three models of how to weave the PLA out of Great Wall’s ownership. One is allowing Great Wall to become a stand-alone enterprise. The other two consist of allowing the operator to become a subsidiary of either China United Telecommunications Corp. (Unicom) or China Telecom Ltd., China’s other two mobile phone operators.
“In all three of those cases, the PLA’s involvement would become a passive involvement,” said one source. “In some cases, they are looking at giving the PLA the equivalent of some proportionate ownership share in order to get a share of the revenues that would compensate them for use of the frequency.”
At any rate, CDMA technology won’t be dead in China, insists Terry Yen of the CDMA Development Group. China Unicom, set up in 1994 to break up the monopoly of China Telecom, plans to construct CDMA cellular networks and Global System for Mobile communications networks in the Yangtze and Pearl River deltas and in the Bohai Sea area. These networks will be expanded further to cover China’s most populous provinces.
“There are four separate wireless local loop trials at 1900 MHz in China,” said Yen. “Prospects on the WLL are still very big. WLL doesn’t face the same issues of army involvement.”
But CDMA technology will have a long way to go in China. China Telecom is the world’s biggest GSM operator with 13 million subscribers-one-seventh of the world’s total. The carrier, which also operates a TACS network, recently signed its 20 millionth mobile phone subscriber. China Unicom, which operates a GSM network, barely has been able to grab 3 percent of the mobile phone market, but hopes to have 1 million GSM subscribers by the end of the year.
Foreign competition isn’t likely to enter China’s mobile phone operations for several more years. The government’s latest proposal to gain entry into the World Trade Organization offered to open gradually its paging and mobile phone operating services to foreign competition.
