ASIA China : Analysys International, a leading Internet-based business information service provider, says with China Telecom starting off the 3G pilot network of TD-SCDMA, China's negotiation progress on 3G intellectual property rights with overseas owners will speed up.

ZTE is currently cooperating with China Telecom, the biggest fixed-line telephone operator in China, to build pilot 3G networks in Shanghai based on TD-SCDMA technology. By now, Shanghai Telecom has built 30 3G base stations, covering the Caohejing Development Zone in Shanghai. Recently, at an internal meeting about 3G in Beijing University of Posts and Telecommunications, experts recommended that China should issue a 3G license to China Telecom first and adopt TD-SCDMA as the 3G technology standard, so as to obtain a head start in the huge 3G market in the future.

Quick Analysis
Analysys International thinks that 2 conclusions can be drawn from this news:

1. The authority shows its support to TD-SCDMA;
2. It also shows the authority's intention to put pressure on overseas holders of 3G intellectual property rights.

Regarding the maturity of standard, TD-SCDMA is far behind WCDMA and CDMA2000. By now there have been more than 160 3G networks deployed worldwide, among which more than 80% of them are WCDMA networks, while as yet there is still not proven commercialized application of TD-SCDMA. Considering the maturity of technology, TD-SCDMA hasn't got many proven projects like WCDMA, and the industry chain is not as developed as WCDMA.

Therefore, if China Telecom is issued the license first, it will have sufficient time to build up wireless communication infrastructures (mainly capital structures like machine rooms for base stations, lines, etc.) which will enable them to compete with China Mobile and China Unicom as well as get relatively more time of service tuning. This will offset the weakness of an incomplete TD-SCDMA industry chain and lack of proven projects for technology maturity and help TD-SCDMA to make a better performance when competing with WCDMA and CDMA2000. Analysys International thinks that issuing a TD-SCDMA license to China Telecom also shows consideration to put pressure on overseas holders of 3G intellectual property rights. Vendors who own most WCDMA and CDMA2000 patents such as Qualcomm have been negotiating with the China Academy of Telecommunications Research of MII on patent fees. Analysys International thinks that if China Telecom starts to build TD-SCDMA, it will put pressure on those overseas owners who hold a strong position on the 3G (particularly CDMA2000) patent fees negotiation. The longer the negotiations last, the more likely that WCDMA and CDMA2000 will be in an adverse position in the competition in China's future market.

Analysys International's Position:
Analysys International thinks that this news will speed up the progress of the negotiation between China and the overseas holders of 3G intellectual property rights.