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New 3G infrastructure still requires time to improve

JOYCE Cai wanted a "cool" new handset after her iPhone was stolen near People's Square last month. One week later, the 27-year-old woman chose a 2G Dopod model, which also has a touch screen.

"I would have chosen a 3G phone if they were nice and smart,'' she said. "In the end, I couldn't find one attractive enough."

The lack of variety in 3G models in China has been a sticking point in the domestic market since the government issued third-generation mobile communications, or 3G, licenses in January.

But the problems don't end there. The 3G industry is also hamstrung by a costly and complicated price structure, inability to transfer mobile numbers when switching carriers, lack of content and limited network capacity.

New handset models smuggled into China or bought by Chinese when traveling overseas have also undercut domestic sales as well as 3G phone sales.

The Chinese government and telecommunications carriers are promoting the new 3G technology everywhere, from prime-time TV commercials and front page newspaper ads to large advertising posters in Metro stations.

China's 3G carriers

In January, China issued 3G licenses to China Mobile, China Unicom and China Telecom. Users can enjoy high-speed services such as video calls and film downloads on their handsets.

China Mobile launched its 3G services, branded G3, in April, while China Telecom kicked off its eSurfing 3G services in March. China Unicom launched the Wo 3G services last month.

China Mobile, which is using the domestically developed TD-SCDMA (time division-synchronous code division multiple access) technology, has attracted about one million 3G users, compared with its more than 400 million customer base. It adds up to 100,000 TD-SCDMA users every week, compared with 1.5 million to 2 million new 2G users a week, according to the TD-SCDMA Industry Alliance.

About half of the 363,000 people recently surveyed online by cited fees as the biggest barrier to 3G, followed by 21 percent who don't want to have to change their mobile numbers if they switch carriers, and almost 18 percent who said they are unhappy about lack of content and application.

"Mobile content is still in its initial stage in China and it takes time for attractive content to emerge," said Lu Tingjie, a professor at Beijing University of Post and Telecommunications.

In overseas markets where 3G has been available for several years, the most attractive 3G content is games, gambling and girls. Obviously, such content won't be allowed in China, said Lu., a major online video Website in China, aims to provide 3G content but it has to obtain a license from regulators, which can take a long time, Wang Wei, Tudou's chief executive, said recently.

In China, Nokia opened its online store Ovi last month. China Mobile and China Unicom are prepared to follow suit, but it could take years before that segment of the market matures.

That means Apple Inc's App Store won't come to China, at least in the short term, because Chinese carriers are not willing to share application sales with Apple. The App Store, with 50,000 applications and a high popularity in Western countries, provides software applications for iPhone and iPod users.

The mobile phone number, a valuable personal asset, is another barrier to 3G popularity in China.

"If I wanted to buy an iPhone 3G, I would have to change my mobile number," Cai said. "That's too much to ask, even for an iPhone."

That's not all. Cai would be forced to switch providers and subscribe to China Unicom, which uses the WCDMA (wideband code division multiple access) technology that's compatible with the iPhone 3G. That would also be the case with other popular 3G phones such as the Nokia N97 and the coming HTC Magic.

China has started small trials for mobile number transfer between carriers in some places including the city of Tianjin. Most industry analysts don't think there will be a nationwide system allowing users to retain numbers when changing carriers for another two years to three years because of system connection problems and sensitive negotiations among carriers.

"I will be the last person in my office to switch to 3G if I have to change my number," said Nancy Chao, a public relations executive with more than 1,000 numbers stored in her phone memory.

Switching number

It's a dilemma, especially for China Mobile, which has the most 2G mobile phone users - about 70 percent of China's total - but chose to adopt TD-SCDMA, a home-grown technology with limited 3G mode variety. For China Mobile users, switching to the snazzier latest 3G models will mean giving up a mobile number they've used for years.

"It's nice for China to adopt a home-grown technology, but the mobile number transfer issue is the cost of that," said Sandy Shen, an analyst at Gartner Inc, a United States-based IT consulting firm.

Though not a problem for China Unicom's WCDMA, the lack of model varieties remains a stumbling block for China Mobile's TD-SCDMA and China Telecom's CDMA 2000, though that is starting to change, analysts said.

Nokia, Samsung and Motorola have announced they will kick off 3G phones in China based on TD-SCDMA models. But each firm is expected to offer only one or two models, compared with dozens of WCDMA models.

If Apple and China Unicom sign an agreement to introduce the iPhone into China, the iPhone will give China Unicom a competitive weapon in the high-value subscriber segment," said Sherrie Huang, analyst at Ovum, a United Kingdom-based consulting firm.

Although the iPhone hasn't officially been launched in the mainland, people in Shanghai can buy smuggled models easily at sites around the Shanghai Railway Station. Generally speaking, young people prefer shuihuo, or grey import models, which include Nokia, HTC and Samsung, because they are relatively cheaper and have more functions, such as Wi-Fi, which is banned on domestically made phones.


The 3G phones often feature built-in applications, like YouTube, Google Maps and GPS, which help carriers obtain high-value data income. The booming data services market will help carriers get a bigger return on the huge investments they've made in 3G, analysts said.

Direct investment in 3G, from equipment and chips to handsets, will reach 400 billion yuan (US$58.5 billion) within three years, according to the Ministry of Industry and Information Technology.

To meet consumer demand, carriers, especially China Mobile, launched the 3G data card and netbook combination. It bundles mobile broadband packages through 3G networks.

ZTE Corp, the country's biggest telecommunications equipment maker, forecasts that 3G data card sales will hit 10 million units this year, triple last year's level.

China Mobile and China Telecom have also cooperated with Lenovo Group Ltd, Hewlett-Packard Inc, Acer Inc and Dell Inc to jointly launch 3G netbooks.

But the current capacity of the 3G network may not be able to support the data demand from all handsets and data cards of so many netbook users, said sources at China Mobile who declined to be identified.

Some users are already complaining of a sharp drop in speed at peak times when people are using the 3G network.

Last but not least, the 3G fee package is too complicated for the public, analysts said.

Besides the traditional voice and short message fees, carriers have introduced various data service packages. China Mobile charges users by consumption of data traffic, while China Telecom and China Unicom charge users by time.

China Mobile's Shanghai branch told Shanghai Daily it will adopt a dual model, charging users either by traffic or time.

Meanwhile, China Unicom charges users on different standards between "multimedia data traffic" and "text content traffic."

"It's crazy,'' said Cai Zhe, a mobile phone industry editor of, a professional IT Website in China. "It takes a long time to understand the fee structures, and I find it difficult to explain it all to our readers."



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