BEIJING-In early February, China’s Minister of Information Industry (MII) was apologetic about the prospects for CDMA in his country. The customers couldn’t care less which technology is used-as long as it works, said Wu Jichuan. And with the world’s largest GSM network, there seemed to be no need to build a CDMA network next to it.
Two months later the picture changed dramatically when China officially threw open its doors to CDMA technology and Minister Wu presided over the signing by Motorola and Lucent of US$20 million in contracts to supply CDMA equipment to expand networks in Beijing and Guangzhou, respectively. Together with Nortel and Samsung, both companies stand to earn millions of dollars.
CDMA trials have been going on in Beijing, Shanghai, Guangzhou and Xian, but the MII seemed up to now reluctant to move to the commercial phase in order to shield China Telecom’s huge GSM network from competition.
China Telecom Great Wall, a joint venture between premier operator China Telecom and a subsidiary of the People’s Liberation Army (PLA), has so far pioneered the CDMA trials, but its future has been in doubt since China’s President Jiang Zemin ordered the PLA out of business last year. The company had the advantage in that it could use military frequencies for commercial use.
Fledgling China Unicom is more likely to throw itself enthusiastically on the CDMA bandwagon. The ability to offer a different technology may boost its capacity to compete with China Telecom.
The company plans to spend US$2.86 billion this year to build cellular networks in 190 cities, many of which will use CDMA technology, covering 20 percent of the country and a 12 percent market share by year-end.
Unicom has long been plagued by management shake-ups, but seems to be on a steadier course since MII Vice Minister Yang Xianzu was named head of the company. The former chairman of China Telecom (Hong Kong), Shi Cuiming, will join him as a vice president.
China Telecom has expanded its capacity so fast that in the coming months much will remain idle. The Chinese government is waging a campaign against what it calls duplicate construction. The question, then, is whether China Unicom will be allowed to build a parallel CDMA network when China Telecom’s GSM network lies partly unused.
China in 1994 decided to use GSM technology because CDMA was at that time not commercially viable and could not fulfill China’s market needs. In July, mobile phone numbers will be lengthened from 10 to 11 digits to drastically increase the available numbers. And China now plans to use CDMA to try to cram more calls onto a limited number of frequencies; it has been reported that the country plans to add 40 million CDMA subscribers in the coming five years.
Foreign suppliers will face domestic competition right from the start. On 13 April Datang’s M30-C CDMA switch passed network tests with Motorola base stations in the northern city of Tianjin and was certified ready for commercial use. But according to deputy director Yan Liemin, it will still take some time before CDMA will be used on a large scale in China.
The green light for CDMA came during the China-United States Telecommunications Summit attended by U.S. Commerce Secretary William Daley, who days earlier in Shanghai witnessed another first: AT&T signed an agreement to provide Internet-based telephone services in Pudong, Shanghai, marking the first time a foreign investor has been allowed to provide telecom services in China.
A hoped-for agreement to join the World Trade Organization (WTO) didn’t materialize during Premier Zhu Rongji’s visit to Washington, but China has made more concessions in the last few weeks than in the previous 13 years. If admitted to the WTO, China said it would allow foreign-equity participation of up to 49 percent in value-added telecom services. Five years later, basic telecom services would also be opened.
Minister Wu has always staunchly shielded China Telecom, but now seems to go along with Zhu Rongji’s decision to liberalize the market. On 7 April, the MII announced China Telecom would be carved up into four companies specializing in fixed-line telephony, mobile communications, paging and satellite communications.
