China has just awarded 3G contracts. The numbers of subscribers there are huge, with ten times as many mobile subscribers as there are people in the UK, and twice as many as there are people in the US, but the decision to use three different technologies is puzzling. China Mobile gets TD-SCDMA, the uniquely Chinese standard, China Telecom gets Qualcomm’s almost as proprietary CDMA-2000 and China Unicom the WCDMA we all love and use.
Like betting on three horses in a race you know that you are going to have more losers than winners. As a quick run down it’s bad for Nokia which is great at cheap GSM phones and will see that market eroded. Nokia is good at WCDMA, but has it’s opportunity curtailed as they are weak on CDMA-2000 and TD-SCDMA is new and a level playing field for all entrants. Of course that’s what the Chinese government wants to help domestic manufacturers. The real handset winners however will be Samsung and LG who have the CDMA experience and have shown handsets. Nokia has said it will produce TD-SCDMA but hasn’t shown anything yet.
China Unicom will have the benefit of a very much broader choice of handsets and more price competition. It’s not just handsets it’s laptops with built in connectivity, USB dongles, netbooks, satnavs and whatever else has connectivity.
The biggest loser however will be China. We’ve seen from the last big experiment in multiple standards that competition doesn’t always lead to more choice and lower prices. That experiment was the US, the place that leads in technology, internet and computer design yet trails in mobile phone technology. US phone websites constantly bemoan the lack of availability there of the cool phones we have in Europe.
It’s ironic comparing US legislation with China, but the way the US awarded contracts led to a mess of technologies: AMPS, TDMA, CDMA, GSM (at new frequencies) and iDen, made network roll-out expensive. America, like China is a big place and as a result coverage is unreliable. It also makes networks more demanding of RF performance from the phone. There is no opportunity for network sharing.
The top reason for someone churning is poor coverage at home. The us has very high churn rates and penetration is lower than most Western countries (82%) and replacement rates slower.
The US is the only place in the world where the carriers (networks) brand is more important than the handset. People buy a Verizon, Sprint or T-Mobile phone rather than a Nokia, Samsung or Sony Ericsson. A couple of exceptions are the iPhone and the Razr. The number of SIM-Free phones is insignificant. China is setting itself up for the same situation. TD-SCDMA might be aimed at protecting the home market and driving innovation but it could have the opposite effect.
The different technologies led to interworking problems. US Text messaging is still behind most other countries. The volumes are comparable but when you look at who uses text it’s only about half the phone owing population. The other half uses text twice as much. Pre-pay is a very small, around 6% of the market (contrast with Europe’s 70%).
It will be interesting to see what the Chinese do about security. Take a GSM phone to China today and you’ll get a warning that there is no encryption. WCDMA has much better encryption and you can be sure the Chinese authorities will want to be able to intercept calls. Perhaps they will have to rely on listening through the network operator. Of course that’s not an option they have in the UK which might account for some interesting network planning issues around the Chinese Embassy in London. They wouldn’t perhaps be running a phantom cell so that they can listen to calls and read the text messages of the Free Tibet protestors outside would they?
Cat Keynes publishes her thoughts on the mobile phone industry every Sunday at www.catkeynes.com you can read the column the previous Friday by subscribing here.
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