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ftm analyzes the growth of mobile media. Who and what are the driving forces? Where and when will mobile media truly emerge? 60 pages PDF file (November 2006)

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The US Commerce Secretary Is Already Unhappy With Chinese Delays In Issuing 3G Mobile Licenses And Developing Its Own Standard So The Current Talk Of Building Another Trial Network Is Not What He Wants To Hear

US Commerce Secretary Carlos M. Gutierrez took the occasion at the recent consumer electronics show to blast China for its delay in introducing 3G mobile licenses and developing its own technology rather than accepting global standards.

China mobile phoneBut the word circulating in China this week is that there will be further delays in granting the licenses – not because of technical issues but rather political considerations as to how many operators there should be and who they are. That is going to upset not just the Americans but global equipment vendors such as Nokia and Ericsson who all hope to get a piece of the 100 billion yuan ($12.8 billion, €10 billion) investment planned to get the system, possibly systems, up and running

The US is annoyed because it is trying to promote global standards for the world’s new technology, and China’s insistence on developing its own TD-SCDMA (Time Division Synchronous Code Division Multiple Access) 3G system rather than adopting the existing CDMA (Code Division Multiple Access) flies right in the face of that.

It had been thought that the new Chinese system was at a stage where the licenses could be issued very soon, but China has instead announced it is building yet another trial network, this time in Shenzhen which is the Silicon Valley of Chinese mobile equipment makers. The Chinese are building the system there in a bid to get more suppliers to adopt the TD-SCDMA system.

ftm background

Chinese Mobile Usage And Equipment Sales Set To Go Through The Roof This Year Bringing Down Prices Globally With Multinationals Desperate For A Piece Of The Action
The mobile telecom numbers coming out of China are already staggering and they’re about to get a whole lot bigger. Cell phone users grew to 455 million last year, they sent 12 billion text messages during the 2006 seven-day Lunar New Year Holiday and on December 31 Shanghai Mobile alone handled 194 million text messages. China Mobile alone added some 50 million new users to reach 300 million subscribers. And they haven’t even started 3G yet!

Mobile TV To Hit Mass Global Viewers in 2008 Says An Ericsson executive, But A New Survey Indicates That There Is A Weakening Interest In New Mobile Technologies With Pricing The Main Culprit
An Ericsson executive boasted last week that about one-third of the world’s mobile phone users could be watching TV on their handsets within two years, but he may not have read a new study that indicates a weakening customer interest in new mobile technologies because of cost. If mobile vendors want customers to use their phones for more than just talk then they need to embrace low-cost fixed-price plans.

Which Country’s Entry Into the 3G Mobile World Will Reduce Handset Costs Globally? Which Country in 2005 Added 59 Million Mobile Customers? Which Country Expects to Have 440 Million Mobile Users This Year? One Answer Fits All: China
The statistics coming out of China recently has staggered the mobile telephone world. China expects to add 48 million mobile subscribers in 2006, which actually means things are slowing down a bit –it added 58,604 million new mobile subscribers last year. And according to the Information Industry Ministry that means a third of China’s population will have a mobile phone by the end of the year. Is it any wonder that you mention China to content and equipment providers and their eyes glaze over?

With More than 2 Billion Mobile Phone Users in the World Of Which 236 Million Use 3G, Can Advertisers Be Very Far Behind?
It’s already well understood that advertising money is flowing away from traditional media to more unconventional channels, and a survey by eMarketeer points out that the two tactics that advertisers want to experiment with this year over any other are video and the mobile phone.

With Global Sales of Mobile Phones Set to Reach 1 Billion This Year, and 3G Carriers Fighting It Out To Launch Their TV Services First With World Cup Coverage, Is This The Year We Really Use the Phone for More Than Just to Say Hello?
Deals are beginning to be signed In Europe for mobile phone operators to enter the TV business in a big way. In the UK, Virgin Mobile has signed up for BT’s Movio system with the hope one of the five terrestrial TV stations on offer will have World Cup coverage. But Deutsche Telekom’s T-Mobile, a World Cup sponsor, is in talks with FIFA to see if it can show England games live, or at the very least highlights.

Meanwhile, politics has entered the arena as to who should have a piece of the huge 3G pie and while it is still thought that 3G licenses could still be issued this year it is now looking later rather than sooner and the full service rollout may not be until 2008. The political delay also buys time for operators to continue fixing bugs in the new standard. 

Gutierrez, who led a trade mission to China last November, believes the Chinese government should keep its fingers out of the standards discussion and leave those decisions to the marketplace. “When a government uses its heavy hand to decide what is best for its citizens, it warps the marketplace. We look with great concern when any country obstructs or hinders competition, ” he told the consumer electronics conference in Las Vegas last week.

Or, in other words, American suppliers are fine with the CDMA system but there’s a big learning curve ahead in order to compete on the TD-SCDMA platform.

The internal politics is over who should get the licenses. It had been thought it would go to two vendors -- China Mobile, the country’s largest telecommunications carrier with about 70% of China’s mobile business, and China Unicom, the state-owned telecom operator that is listed on the New York Stock Exchange. But there is a belief now that authorities think 3G would be the perfect opportunity for the country’s fixed network operators to really get into the ever growing mobile business – they really need such an opportunity since the fixed line business is declining as people prefer just to have mobile phones.

So now China Telecom, the country’s largest fixed-line supplier, and China Netcom, the second largest fixed-line operator, are lobbying hard for 3G licenses and are thought to be front-runners.

Giving an inkling to the government’s thinking was Minister of Information Industry Wang Xudong who noted recently, “As the substitution of fixed line service with mobile service grows, the fixed line operators need mobile licenses to enhance market competition.”  The ministry said that 33.9% of people in China now own a mobile phone, compared with 28.3% with fixed lines.

Complicating issues even more is whether the first licenses will be just for the homegrown TD-SCDMA system, or whether the government will allow the CDMA system to go ahead at the same time. The latter decision would benefit China Unicom that already operates a CDMA network so without too much complication it could upgrade that network to CDMA2000 – the international 3G standard – and that would make Commerce Secretary Gutierrez back in Washington a happy man.

But complicating the political arena even more could be the unsubstantiated talk there might be a merger in the works between China Unicom and China Netcom.

What is true of all these companies, however, is that their senior managements are very close to the leading policy makers in the Chinese government. The lobbying is fierce, the decision-making very touchy, and the government is obviously buying more time to come up with the winning formula that will please everyone.

The government had promised that 3G would be available for the 2008 Beijing Olympics that will be held August 8-24, 2008. China Mobile has built a large number of ‘trial’ TD-SCDMA base stations and China Unicom has also started trial CDMA 2000 services. If those two do get their licenses the thinking is that within six months they could have their 3G networks operating across the country.

If that is the case, then while the Chinese seem to be cutting it close they still have a little time more to work out the politics.


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