China 3G: TD-SCDMA Behind the Great Wall

As requested by my friend in New Yorks Times, I re-post my Chairman's keynote speech at 3G'2000 in San Francisco, June 14-16, 2000.

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"China 3G: TD-SCDMA Behind the Great Wall"

Good morning, Honorable ITU commissioner Fabio Leite, Prof. Don Schilling, Distinguished Guests, Ladies and Gentleman:

It is my great honor to be chairman and co-founder of this historic 3G technology conference in San Francisco, sponsored by Qualcomm, Siemens, Lucent Technologies, Hughes Network Systems and Ericsson.

Today, I am going to talk about 3G in China - my home country, my business base and my market. I organize my talk into 4 parts and will discuss each by each. I believe MOST people may not agree with me on parts of my talk. But I suggest you keep my speeches today, and come back to read it again after five years or even after ten years. I was born in China near Shanghai area, raised up there, educated there and did the first illegal business when I was only ten years old (doing any private business was illegal in China before 80s).

Part 1: Why China was interested in TD-SCDMA?

Many people think China will start 3G industralization based on TD-SCDMA. I tell you it is not true and China is not so stupid to do that.

China was a very closed country until late 70s or early 80s. The first mobile radio came from Japan, and in most of 80s, we only knew everything mobile radios from Japan. That's why, I learned Japanese when I was a colleage student in department of wireless radio engineering of Zhejiang Uninversity, Hangzhou. In late 80s and early 90s, we started to get information about GSM. MPT (ministry of post and telecom) set up several mobile communication institutes in Beijing, Shanghai, Guangzhou and Xi'an. CATT (China academy of teleom tech) was one of them covering mobile as well.

Wireless communications was belong to semi-military based on former Soviet systems, and so China had no idea how to design mobile communication for the commercial markets. GSM was the first one to learn, then came the CDMA in 1993. At that time, we had lots of materials on GSM, but almost nothing on CDMA. Around 1995, CATT sent delegation to Austin, TX to learn CDMA with UT Austin, and then founded Cwill Telecommunications where Prof. Guanghan Xu (UT Austin) proposed TD-SCDMA for WLL (wireless local loop). Cwill got funds from CATT and late a VC in San Francisco. But in about 1-2 years, they run out of money, and decided to move everything back to CATT in Beijing. However, most CATT engineers did not want to go back to China, and joined other companies such as UTstarcom in Alameda, etc. In 1997, all TD-SCDMA had been transferred back to CATT. Austin trainings on CDMA were extremely important for China's TD-SCDMA. In about 2-3 years, China shifted from almost zero on CDMA to almost all konw-how on CDMA technologies. In 1998, based on CATT's TD-SCDMA WLL prototype, China tried to propose to ITU in response to the open call for contribution of IMT-2000 program. Meanwhile, Siemens joined together (discussion started from Austin time) to propose this TD-SCDMA to ITU.

The another issue is that China was a very under-developed country especially in wireless communications. The world bank loan to third world (underdeveloped country) for information infrastructure construction required ITU approved standards. The IMT-2000 gave China a very good chance to try a new ITU standard, and if approved, billions of dollars will be provided to China which was a very big cake. CDMA was very hot at that time, and we believed IMT-2000 will be something based on CDMA. Then, CATT decided to modify and refine TD-SCDMA for IMT-2000 from originally designed for WLL. I should say Siemens helped a lot both in finance and ITU support.

So, as a conclusion, China was interested in TD-SCDMA is primarily because of two:

a) Learning and Training on CDMA Technologies and commercial mobile communications
b) Proposal to ITU IMT-2000 standards for application of world bank loan

Part 2: Misunderstanding ITU Standard

As I said China was very closed before 80s. In early 90s, China started to attend ITU (formerly CCITT) meetings. However, everyone in the field knew CCITT standards which is an offcial international standards in telecommunications. China began to attend ITU mobile standards meeting from mid 90s, and wrongly translated to the central government that ITU standard is a MUST-adopted and enforced international standard. Yes or no, these so-called "experts" just undertstood half of the ITU standard. For international spectrum, yes, it is enforced. But for radio transmission technology (RTT), no, it is just recommendation.

Following this misunderstanding of ITU standards, people thought as long as we have ITU standard, it is like an international patent, everyone must use our technology and system, and everyone must pay us to use or develop it. Someone even boasted to the high-level government that in one day, TD-SCDMA will become next GSM and will be used by everyone all over the world, and would generate tremendous revenues to China.

Based on this "too optimistic misunderstanding of ITU standard", China decided to MAKE this TD-SCDMA system (to meet the rapidly increasing purchase demands from all over the world) rather than just propose this standard. Again, Siemens and other new comers helped a lot in developing the system.

Part 3: Who Cares about TD-SCDMA

The decision to develop TD-CDMA systems is easy to make. But who is going to pay the project? The central government did not have enough budget for such big project except the annual operating budget for CATT and little bits from local governments. The CATT and its division Datang are all government owned enterprises, and their employees are paid by the government. So basically nobody cares about TD-SCDMA project though orally everyone supports TD-SCDMA and hope to get bonus from that.

To be honest, TD-SCDMA is a very good technology, and the government had decided to develop the commercial system for both domestic and international markets. But the government did not have enough money to support it. The best way is to attract international investment for the "international market" because TD-SCDMA is an international standard. Of course, "international market" as muted because most international companies were more interested in China domestic markets instead of international market. As of today, China does not need TD-SCDMA because GSM is working very well, and the government does not want to invest too much at least in the next five years.

Someone had a big mistake to compare TD-SCDMA with PABX time from 1991-1994, and believed TD-SCDMA will repeat the PABX victory. In the PABX time, everyone made money from PABX business because China had near-zero PABX systems before 1991. But now we have well established GSM networks across the country, why everyone should go TD-SCDMA? Secondly, in PABX time, people just easily copied the brand name PABX systems, reverse engineered or improved the systems (that's why we have Huawei, Eastcom). But for TD-SCDMA, they do not have any system to copy, except a somehow reference from Qualcomm.

So, who cares about TD-SCDMA? Nobody in China, someone out of China.

Part 4: China will NOT issue 3G License before 2007

How many people agree with me on this prediction? Oh! Nobody! Do you all believe China will start 3G service very soon because China's TD-SCDMA is approved as an ITU standard?

This prediction is not just for TD-SCDMA, it is for all three standards - WCDMA, cdma2000 and TD-SCDMA. I do not think there is strong market before 2010, and no idea for long-term prediction.

Sorry I never means any negative issue for our sponsors who hope me to say something impressive, but as a chairman of the conference, I am more focusing on the value of the conference. Of course, small markets are always there, and I should reiterate that TD-SCDMA will be eventually Successful, because as long as China decided to do something, you can not find the word "Failure" from the dictionary.

The reasons of my prediction are based on several facts:
a) There is no big budget for TD-SCDMA in the next six years. The world bank loan and other loans are already planned completely.
b) Nobody really cares about the result of TD-SCDMA. Instead, most people care about the process and take it as a learning process and glory of being ITU standards.
c) Many issues remain unsolved for TD-SCDMA: lack of R&D activity, lack of policy support, network optimization, etc.
d) As long as TD-SCDMA is not ready, China will not open doors for other standards.
e) Mobile multimedia contents are still strictly frozen by the gov't, and will not expect to be released by 2010.

I only have 3 minutes left. So as a conclusion of my talk, please do not expect too much for your 3G business in China, at least before 2007, or by 2010. TD-CDMA will be successful and we should support it, but do not expect too much.

Thank you all for your attention.
Willie W. Lu, chair of 3G'2000, S.F.

Copyright (c) 2000. Delson Group Inc, the organizer of 3G'2000 in S.F.