Telecommunications: Primacy of Power and Regulatory Battles for Promoting National Standards - Part 14

Though the government has never admitted that the 3G licenses were held in order to allow more time for the readiness of TD technology, it is not a secret, according to several MII officials the author interviewed in Beijing. According to them, such a delay would give TD-SCDMA the breathing room it needs to overcome certain technical hurdles and extend its coverage.

Fourth, the Chinese government has carefully chosen the strongest operator — China Mobile — to adopt the TD standard. Unlike the 3G auction practices in the EU, 3G licenses in China are granted to state-owned operators through an administrative tender procedure (Yu, 2005). Since 2001 there have been many speculations about the Chinese government's 3G licensing plan. But regulators in China tend to take very cautious steps because the policy consequences are both strategically and economically very serious. It will put a huge amount of investment at risk, as well as the development trajectory of China's ICT industry. In May 2007, MII approved the use of global wireless standards WCDMA and CDMA 2000, in addition to China's home-grown 3G standard, TD-SCDMA. The Chinese government has made assurances on many occasions, including at the U.S.–China Strategic Economic Dialogue, that the decision to provide 3G services should be a commercial one and the regulator should be agnostic regarding technology choice. However, the recent restructuring plan of China's state-owned operators unveiled in May 2008 revealed the government's obvious support of its home-grown TD standard. In this industry overhaul, China Telecom bought China Unicom's CDMA network and China Unicom merged with China Netcom. China Mobile took control of China Tietong Telecommunications Corp. The restructuring allowed China Telecom, China Unicom, and China Mobile to each provide both fixed-line and wireless services. China Mobile has more than 400 million mobile phone users, more than triple that of China Unicom (China Daily Online, 2008). The circular, jointly issued and signed by the Ministry of Industry and Information, the National Development and Reform Commission, and the Ministry of Finance, promised to issue 3G licenses after restructuring. If we read this circular carefully, the term “indigenous innovation” was mentioned ten times. Needless to say, this refers to the TD standard.

To date Beijing has not explicitly announced its decision about which network operator will receive which 3G licenses, but the recent restructuring has drawn a clear picture of China's 3G licensing strategy.

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