Telecommunications: Primacy of Power and Regulatory Battles for Promoting National Standards - Part 1

Wei Liang

Introduction

Telecommunications markets worldwide have changed radically since 1990s thanks to rapid globalization and advances in technology. Standards are the foundation of the new global technology economy. The growth and success of the global information and communication technology (ICT) industry is based on the development and use of standards and the subsequent “royalty fees” derived from the intellectual properties attached to these standards. Leadership in telecommunications equipment and services has for years come from the United States and Europe. However, the most rapid telecom/data network build-outs are now occurring in East Asia, including China, Japan, and South Korea.

As a new player in the global economy, with insignificant global market share and technology capacity, China has had difficulty achieving technological breakthrough and breaking the established production network by only following the developed countries' lead and being the assembling center without controlling any key technology associated with technical standards. In order to develop a robust domestic high-technology industry, the Chinese government is promoting indigenous innovation and globally competitive national standards. In an effort to foster a sustainable economy based on home-grown technologies, China has stated in its standards strategy that it plans to develop some mandatory domestic technical standards based on Chinese technology and intellectual property, rather than adopt all existing industry and international technical standards and having to pay license fees for non-Chinese technology (Congressional Hearing, 2005).

This chapter analyzes China's motivation/capabilities in standard-setting, the relative importance of the domestic market in China's standards strategy, and the role of multilateral corporations in determining the success of particular standard-setting activities. The research questions are: With the help of a predatory governmental telecommunication policy and the promise of a lucrative domestic market, will China upgrade from today's production base (made in China) to tomorrow's gravity for innovation (made by China)? What is the domestic mobilization process of China's telecommunication industrial policy and standards strategy? What is the impact on global competition? A main finding is that, although Beijing promotes the development of Chinese standards in upgrading China's less favorable position in the global production chain, economic globalization and the international regime (the World Trade Organization [WTO] Trade-Related Aspects of Intellectual Property Rights [TRIPS] and Technical Barriers to Trade [TBT] in particular) have effectively constrained the parameters and effectiveness of Beijing's standards strategy.

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