3G: NO LICENCES IN SIGHT BUT PLENTY OF ENTHUSIAM

UNCLAS SECTION 01 OF 02 BEIJING 015110

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TAGS: ETRD EINV ECPS PGOV ASEC WTRO CH
SUBJECT: 3G: NO LICENCES IN SIGHT BUT PLENTY OF ENTHUSIAM


1. (SBU) Summary: A recent conference in Beijing brought
together an enthusiastic international group of academics
and software and hardware vendors who agree that China is
ready for 3G, although it is still unclear what the "killer
application" will be. The key challenge the industry faces
is uncertainty about when Ministry of Information Industry
(MII) will issue 3G licenses. End Summary.

The Conference
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2. (U) Organized by the Hong Kong based beacon Events Ltd,
the July 6-7 "3G Mobile China International Summit and
Exhibition" in Beijing was supported by the Chinese
Government and included senior officials from MII and the
Chinese Research Institute of Communication, as well
Chinese business representatives from China Telecom,
Unicom, Netcom, Huawei and International companies such as
Motorola, Nokia, Vodaphone, Qualcomm, Siemens, Alcatel and
Cisco. In contrast to many other 3G conferences in China,
this one focused on what 3G had to offer to the consumer
rather than touting the advantages of the homegrown TD-
SCDMA standard. More than 400 registered attendees
representing a swath of business ventures from
semiconductor companies to cell phone content providers to
mobile phone software and hardware producers attended the
conference. However, the organizers admitted that this
year many major sponsors registered extremely late due to
the uncertainty surrounding 3G licensing.


3. (SBU) Nokia's Vice-President for Marketing and Sales of
Radio Networks Mr. Robin Lindahl stated that his company
had had 5 years of experience in rolling out 3G around the
world. In China, Nokia is focusing on the transition from
2G to 3G. He underlined the importance of having a strong
2G network available throughout China to backup any new 3G
network, and the importance of the smooth transition to and
evolution of that network. He went on to say that most of
China's 3G networks will be built on already existing
topologies and that the market winner will be decided by
whichever company can launch its 3G networks the quickest.
Currently, Nokia has 2G/GSM base-stations that can be
upgraded to 3G by just adding a module. Nokia plans on
using the W-CDMA standard.

The Killer Application
--------------


4. (SBU) The success of any new tech product depends on the
"Killer Application" that will make that service attractive
to consumers. In China's 3G case this is as yet unclear.
Asked why China even needs 3G while the existing 2G
networks have yet to be fully deployed, a technical
consultant with Siemens' 3G division said that for most
young Chinese the cell phone will be their first and main
means of accessing the Internet. He argued that cell
phones are far cheaper than laptops or even home computers
and combine a variety of services and applications
(Internet access, music downloads, picture and video
taking, personal organizer and gaming) that potentially means a
whole generation of young people will be using them to
manage their lives as opposed to PCs. In order for such
phones to provide such services, a 3G network and the
associated increase in bandwidth will be vital. Charles
Yu, Vice General Manager of Unicom-Brew, said that his
company was betting on music and TV services as the killer
applications that will make 3G viable in China (Note: Since
Qualcomm and China Unicom jointly established Unicom-BREW
Telecommunication Technologies Ltd. in 2003, over 2 million
users have utilized Qualcomm's BREW platform for a total of
over 25 million downloads. End Note).

The Challenges
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BEIJING 00015110 002 OF 002



5. (SBU) The key challenge for the industry remains the
issuance of 3G licenses. MII remains vague about the
timeframe, yet many industry analysts believe that MII will
only issue licenses when TD-SCDMA is mature enough to
compete with W-CDMA and CDMA2000. Xie Feibo, Deputy
Director General of the MII Bureau of Radio Regulation,
meanwhile pointed out that radio frequencies for 3G had
actually been assigned back in 2002 and that an extra 100
Mhz of frequency had been set aside solely for 3G. Mr.
Michael Stork of the German electronics company Rohde &
Schwarz said that success in testing mobile networks was
another challenge for new 3G terminals. Today's cell phones
not only bundle more and more features, products,
standards, multi-bands and wireless applications, but also
utilize much more powerful chips than previous models. Mr.
Stork said unless companies can provide good customer
service with well priced phones that are easy to use,
interest in 3G will wane swiftly.

Comment
--------------


6. (SBU) Many of the attendeesat the conferene agree that
China is ready fr 3G and that the convenience of features
such TV, video, fast Internet access, and gaming will be
the killer applications that will spark consumer interest.
However, as evidenced by the last minute registrations to
this conference, MII procrastination over licenses has left
this multi-billion dollar industry in limbo.


Randt