TD-SCDMA's headstart to ensure foothold

update China's homegrown 3G standard may have issues, but its headstart over competing technologies will likely ensure its foothold in the market, say analysts.

update In spite of its deployment troubles, TD-SCDMA will likely be given more than a fighting chance to see it take off in China, according to analysts.

China's homegrown 3G standard has seen its fair share of bumps on its road to deployment.

Initially slated for wide deployment during the Beijing Olympics, connectivity issues including dropped network connections and spotty coverage prevented China Mobile--the country's largest mobile operator and the one leading the TD-SCDMA rollout--from making this a reality for the Games.

Mark Natkin, managing director at Beijing-based Marbridge Consulting, told ZDNet Asia in an interview TD-SCDMA's reception is still lukewarm--a result of the standard not delivering as promised.

Natkin said consumers in the country have been slow to jump over from their existing 2G subscriptions partly because of the prohibitive cost associated with acquiring new handsets, but also because TD-SCDMA has not delivered the performance jump over 2G as promised, he added.

But reports of user response have been varied. According to China Mobile, the number of TD-SCDMA users have hit 52,000 as of July. But China Business News reported in June that only 2,000 handsets have been purchased.

China Mobile's window of opportunity
Nonetheless, the standard has a chance to gain a foothold in the market because of its headstart over competing standards, said analysts.

A government official said last month China will issue 3G licenses in six months, although this is not confirmed, in which case "TD-SCDMA has a healthy headstart to get a customer base locked in before the competition comes", said Natkin.

Hwai Lin Khor, wireless research analyst at ABI Research, also said users are exploring TD-SCDMA for lack of other choices. "Being the only high speed 3G available in China now, China Mobile subscribers do not mind giving it a chance to improve," she said, via e-mail.

Khor added that China Telecom, which has bought over China Unicom's CDMA operations, will still "take some time for infrastructure deployment and manpower allocation...hence, the soonest we can see WCDMA and CDMA2000 go commercial will be some time in the third quarter of 2009".

This gives China Mobile over a year to work through TD-SCDMA's kinks, she noted.

Analyst firm, Ovum, sees potential in China Telecom's CDMA business to pose a threat to TD-SCDMA. While CDMA faces challenges similar to TD-SCDMA--poor coverage and limited handset choices--China Telecom "should be optimistic" about CDMA's future, said Ovum in a statement.

Ovum expects China Telecom to be able to reach its goals of having 100 million CDMA subscribers and a market share of 15 percent in the next three years.

Although the current 43 million CDMA subscribers make up just 7 percent of the overall 601 million subscribers in the country, CDMA's comparatively lower cost and faster network upgrades will play in China Telecom's favor, said Ovum.

ABI Research's Khor said China Mobile's main goal should be improving TD-SCDMA coverage. China Mobile will also likely have to provide heavy subsidies for handsets "for at least another two years" to entice buyers, she said.

TD-SCDMA handsets lack economies of scale and wide community support due to fewer manufacturers making them, so they are still pricier than their 3G counterparts at this stage, she explained.

Motorola, LG and Samsung won a contract to collectively deliver 30,000 units to China Mobile by last month.

Motorola told ZDNet Asia not to underestimate TD-SCDMA's uptake in the market quite yet. "The sheer number of early-adopters in China who cannot wait to give the network a try would amaze you. The service has just started, and devices have only been in the market for a couple of weeks. I think you need to wait for a few months before even beginning to evaluate success or failure," said Motorola, by e-mail.

Motorola declined to specify on whether it successfully delivered the units by the operator's deadline last month, saying the terms are confidential.


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