In the United States, Qualcomm pioneered CDMA. In Europe, a group of companies led by Nokia developed WCDMA. China has been pushing its TD-SCDMA. Despite pioneering 3G services, Japan has not yet replicated its success with service innovation in technology innovation that could be leveraged worldwide.

China is expected to issue its first 3G license to China Telecom in 2006, adopting the TD-SCDMA standard. Maturity and intellectual property negotiations are considered key factors in China's 3G development. By promoting the Chinese standard and issuing 3G licenses, Beijing hopes to play a key role in the standard rivalries to contribute to the success of Chinese firms in the key mobile segments--chips, infrastructure, handsets and software.

However, China's role in 3G innovation is certainly not limited to the Chinese 3G standard. Recently, China's Southeast University and Dongda Communication Co. jointly developed the country's first chip for WCDMA mobile phones, a major step forward in the 3G drive.

In 2009, the number of mobile subscribers in China is expected to reach nearly 610 million. Depending on various competitive scenarios and operator strategies, the proportion of 3G users will range from 23 percent to 58 percent. "3G licenses will be issued, at the earliest, in the beginning of 2006, after an industry restructuring of wireless network operators," said Anty Zheng, In-Stat analyst.

WCDMA technology is expected to be the dominant 3G technology in China, while TD-SCDMA will grow gradually over time. Voice will remain the dominant service for 3G in China, but mobile Internet access service will be the fastest-growing service, according to In-Stat.

The key to successfully enticing users to adopt new mobile services is pricing strategy. Owing to market skimming tactics, average revenue per user has not risen as fast as expected. The future, however, looks promising. "Once 2.5G and 3G gain penetration in China," contends John Gregg, "I see mobile marketing really exploding.''

Future scenarios

The 3G industry will begin yielding profits after 2008. In the nearest term, beneficiaries will comprise companies providing testing equipment, system integration and software services. Owing to increasing demand for new networks and handsets, as well as increases in the number of operators and service diversity, the next beneficiaries will be infrastructure and handset makers, mobile operators and service providers, according to China's Fortune Securities analyst Tian Dongwei.

Chinese IT consultancy CCID estimates China's 3G equipment investment at 200 billion yuan in 2005-09. According to CCID predictions, in 2006-10, 3G will make up more than 50 percent of the country's mobile communication revenue, up from the current 7 percent, and 30 percent of the total telecom revenue.

As wonderful as these projections sound, only half a decade ago similar dreams of wine and roses were conjured up by analysts on both sides of the Atlantic. In Europe, 3G efforts nearly bankrupted many leading operators, killed the weakest equipment makers and demolished most small software mobcoms.

Despite great promise, the 3G market in China faces much uncertainty. Government considerations will greatly influence factors such as technology maturity, handset availability, system compatibility, global roaming capability and construction costs.

In the 1990s, the GSM standard triumphed because the penetration was less than 10 percent initially. In the early 2000s, the penetration exceeds 100 percent in leading markets. Today, technology is no longer enough for leadership and marketing matters more than ever before. Subscribers do not care about technology, instead they are attracted by services that provide value.

Whether long-term projections will materialize or not, the Chinese mobile market has become fundamental to the global mobile industry-hence the interest of foreign operators and investors.

During a visit by Chinese President Hu Jintao to Spain last November, Telefonica invested $540 million to raise its stake in China Netcom, the second largest fixed-line operator, from 5 percent to 9.9 percent. In 2006, China is expected to open floodgates to foreign investments in the telecom sector.

In 2006, foreign companies will be permitted to establish a joint venture with up to a 49-percent stake in businesses related to mobile voice and data services, without geographical restrictions.

The time for a wait-and-see attitude has passed. Great opportunities await those who can act fast.

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Dr. Dan Steinbock (dsmba@hotmail.com) is the ICT research director of the India, China and America Institute, the faculty spokesman of the Forum to Advance Mobile Experience of the CMO Council, which represents 2,000 leading technology companies, and the author of The Mobile Revolution

Building 3G Telecom Network

China will build a stand-alone national mobile network based on TD-SCDMA, the homegrown standard for 3G wireless telecom services, Xinhua News Agency has reported.

Some industry observers took the announcement to signal that China is preparing to issue one or more 3G licenses in the near future, paving the way for licensees to build networks based on TD-SCDMA, WCDMA and CDMA 2000. The field of licensees is expected to include some or all of China's four major telecom operators--mobile carriers China Mobile and China Unicom, and fixed-line carriers China Telecom and China Netcom.

As 3G licenses are expected to be awarded by summer this year, the move is anticipated to unleash up to $12 billion in spending as the country sets up the high-speed data networks for the 2008 Olympics in Beijing.

Hoping to get a piece of the action, the world's leading equipment manufacturers have entered into partnerships to support TD-SCDMA. Major investors include European firms Siemens and Nokia, as well as Motorola, Ericsson, Nortel Networks and Lucent Technologies.

Recently, the Chinese government ordered a stop to building WCDMA networks in the country. Reportedly, WCDMA networks have been built in some 30 cities in the name of experimental 3G networks. In turn, the operators are trying to urge the government to approve the legitimacy of WCDMA.