Christmas comes early this year for China Mobile

For many smartphone users in China, the launch of 4G services this month will mean seamless internet connections that beam high-definition video to the palms of their hands.

In government offices and at the country’s three mobile operators, however, the long-awaited kickoff of the technology – a homegrown version of 4G called TD-LTE – carries a much more different meaning. TD-LTE is a major “political undertaking” with little consideration for market forces or the expressed wishes of China’s telecom operators.

The Chinese want TD-LTE to succeed first before giving other, internationally adopted standards a chance. The deployment of 4G in China might be a technological success but it bodes poorly for the future of competition in one of the country’s most heavily guarded sectors.

Early Christmas

Chinese media dubbed the earlier-than-expected award of TD-LTE licenses on December 4 a “gift from God.” At least it was for China Mobile, the world’s biggest telecom operator with more than 760 subscribers as of October.

This year alone, China Mobile emptied about US$7 billion into its TD-LTE network. It can now reach 500 million people in more than 300 cities across the country. For this operator, getting the license to employ this technology last week was an early Christmas present from the Ministry of Industry and Internet Technology (MIIT).

The license is a green light to start the selling of 4G connections which have been in commercial trials for months. Anyone with a device that supports the technology should be able to subscribe as early as Wednesday.

For China Unicom and China Telecom, the two smaller operators on the mainland, however, the awards from MIIT are like a lump of coal in their Christmas stockings.

Earlier this year, the two companies expressed the desire to use FDD as the standard for their 4G networks. FDD is a better-tested and likely cheaper system developed by a consortium of several global telecom companies. It will also be relatively quick to roll out.

Getting a license for TD-LTE therefore doesn’t mean much for the two smaller companies. Neither is prepared to significantly deploy the technology for which China holds 30% of the patents and likes to consider “homegrown.”

In 2013, China Telecom, the smallest of the three operators, built 60,000 4G towers, 50,000 of which were FDD, according to The Economic Observer, a weekly Chinese newspaper. The remaining 10,000 were TD-LTE. China Telecom can launch 4G on those towers in select cities but coverage will be sparse.

China Unicom has made few investments into TD-LTE. The company plans to continue building out its profitable 3G network for now.

The one and only

As the year draws to an end, some analysts expected TD-LTE and FDD licenses to be issued simultaneously, allowing all three companies to take some share of the 4G market early on.

With the handout of TD-LTE licenses alone, however, MIIT has given a strong signal that China Mobile and TD-LTE will prevail. The company will now sign up hordes of new users to its 4G network with little competition. A long-awaited but only recently confirmed deal with Apple will bring it more subscribers that had kept off the network because it wasn’t compatible with iPhones.

At a time when China’s top leadership looks increasingly to market forces as a guiding light for economic growth, it’s a mistake for MIIT to give China Mobile, by default, a monopoly on 4G services. The regulator should speed up the issuance of FDD licenses, introducing at least some diversity in the world’s biggest markets for mobile data services. 

If not, it risks sending the telecoms sector back to the days when China Mobile was the only game in town.

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