China’s Wireless Option(s)

Industrial Policy: A long history…

Concorde was an Anglo-French supersonic turbojet powered passenger aircraft launched in 1969. It kept the British and the French engineers in the top flight of aeronautical engine and aircraft design. It was pure industrial policy, but as a commercial proposition it was not a success. It traunched money, only 20 were ever built, but by the time it was scrapped in 2003 it had done its job.

Is China emulating Concorde with TD-SCDMA? If so, at what opportunity cost, and where else could those resources go to further strengthen China’s penetration of the world’s telecommunication network equipment markets? Would WiMAX be a better bet for China as an alternative standard?

TD-SCDMA vs WiMAX: A choice?

The argument simply stated runs as follows: (i) TD-SCDMA is unlikely to ever find a significant market outside China; (ii) the demand in emerging markets for an alternative to fixed broadband networks is huge, and potentially WiMAX offers such an alternative; (iii) China’s vendors – primarily Huawei and ZTE – are exceptionally well positioned to take a major share of the WiMAX market globally, but by promoting TD-SCDMA through China Mobile, China is losing the opportunity to create the scale economies to turn WiMAX into a success; (iv) but, nevertheless there is still an opportunity in China if China Unicom could take up the challenge of Broadband Fixed Wireless Access (BFWA) presented by the lack of fixed broadband outside the major cities.

Taking these points in order

First, although the market for 3G+ in China is mammoth, TD-SCDMA has to compete for that market with W-CDMA, and even if the network and handset technology glitches can be overcome there is no guarantee the standard will be popular. There is also no evidence as yet that high-level China-Korea-Japan 4G R&D collaboration will translate into opening these markets simultaneously to such a standard.
Second, although the future of WiMAX as a standard is by no means secure, it does appear to be especially appropriate for emerging markets such as Brazil and other South American markets, many African markets, Central Asia and Russia, India, Indonesia and the Philippines. These countries along with China contain most of the world’s population. With this potential of scale, the major stumbling block for WiMAX could be easily overcome.

Third, China’s vendors already have WiMAX products in the pipeline, and along with companies like HTC which is now supplying handsets to WiMAX operator Yota in Russia, they have the R&D and investment potential to drive down unit costs to very competitive levels.

Four, turning around China’s industrial policy seems highly unlikely… but China could open another option by empowering China Unicom.

Given that 4G broadband wireless standards are all about shared bandwidth, they will never entirely replace the need for FTTH, DSL or Ethernet. But with the growth of bandwidth-hungry services such as streamed video in even the least developed economies the demand for spectrum-efficient technologies will grow unabated. It is most unusual to imagine a world in which only one standard survives and serves all purposes.

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