With Chinese 3G roll-out finally set to start this year, and the country already assessing its 4G options, the infrastructure majors are positioning themselves for a belated windfall. Of the non-Chinese suppliers, Alcatel-Lucent has grabbed pole position so far, but Ericsson has now moved in for the kill, setting up a mobile technology research center with Datang, the main company behind the Chinese 3G standard TD-SCDMA, and agreeing to help co-develop the next generation of this platform, an effort that could have far broader applicability outside China than the 3G system.
China has been determined to reduce its IPR obligation to the west at the 4G stage, and to create its own standards. In the 3G phase, this put the country into isolationist mode, with the government putting heavy pressure on operators to adopt TDD-based TD-SCDMA rather than FDD-based W-CDMA. There was a real risk that China would continue to be an island in the next generation too, with the authorities remaining lukewarm towards WiMAX and playing with homegrown platforms such as McWLL and FuTure Network, that appeared to bear little resemblance to the systems likely to be adopted elsewhere, primarily LTE and WiMAX. However, the giant economy now seems prepared to see its standards converge more with the mainstream, looking to create, in effect, a TDD implementation of LTE (TD-SCDMA LTE). And as its TDD focus becomes a dominant issue in most parts of the world for the first time, it has the opportunity to see its own innovations adopted into global systems, and to influence rather than stay outside the evolution of worldwide standards.
This is obviously highly attractive to the hard-pressed infrastructure giants, always looking for new growth markets and also to invest in R&D programs that can be applied to as many platforms as possible. The Chinese market is valuable enough in itself because of its size and projected growth rates, but if Ericsson and Alcatel-Lucent can help create a platform that also becomes the basis of a global TDD platform, the return on their efforts will be all the greater.
In Ericsson’s case, there is also the issue of gaining greater TDD expertise and weakening WiMAX, whose main implementations to date have been in TDD and which is generally regarded as a technology optimized for TDD (though there will be FDD profiles, making the system look even more similar to LTE). In 3G, the potential threat of a TDD technology has not mattered greatly to Ericsson. Some economies have not allocated TDD spectrum at all, except for fixed wireless purposes, and even where it has been offered, as in the TDD licenses handed out in western Europe along with the main 3G rights, there has been little interest in build-out, hence the failure of the main non-Chinese mobile TDD technology before WiMAX, IPWireless’ TD-CDMA (now part of NextWave). In the true mobile broadband era, however, there will be far greater allocation of TDD spectrum, and greater interest in investing in TDD systems, with their advantages for data-driven applications, and this could put Ericsson at a disadvantage, since rivals like Nortel and Motorola are gaining TDD experience through WiMAX developments. Already we can see the tide changing, in the strong interest in WiMAX, the only viable data-optimized TDD platform currently available; and in the rising operator demands for more TDD spectrum. For instance, European body CEPT has recommended 50MHz for TDD and 2x70MHz for FDD in the upcoming 2.5GHz auctions, but regulators can make their own decisions and, under pressure from carriers, many will weight the balance more toward TDD. In Norway, for example, the regulator plans to offer larger amounts of TDD spectrum (100MHz against 2x40MHz) to satisfy high demand from the WiMAX community. Sweden and Norway will both allow operators to change from TDD to FDD even after acquiring the licenses. UK regulator Ofcom also expects to exceed the 50MHz guideline for TDD allocation.
So with the spotlight on TDD, China has the chance to push its platforms from the sidelines into the mainstream and reap the political and economic benefits, a process in which the big three infrastructure vendors will need to become deeply involved, or risk losing the initiative to Chinese suppliers like Huawei and ZTE, or to other rivals like Samsung that are gearing up to influence TD-SCDMA LTE (especially if China, as seems likely, proves stony ground for Mobile WiMAX). Datang, the main creator of TD-SCDMA, has great influence and Ericsson certainly needed to deepen its alliance with the Chinese firm. Its major rivals already have close bonds, Siemens’ longstanding work on TD-SCDMA has translated into benefits for the Nokia Siemens joint venture, while Alcatel has always been an aggressive presence in China through its Alcatel Shanghai Bell subsidiary, now part of Alcatel-Lucent. The latter deal has actually borne commercial fruit, with Alcatel Shanghai Bell and Datang last year winning the contract to deploy TD-SCDMA networks for China Mobile’s major trials in Shanghai and Guangzhou. In 2004, Alcatel Shanghai Bell invested €25 million ($37 million) in Datang Mobile.
Ericsson has had mixed fortunes in gaining a key role in new Chinese networks so far. In 2006, it joined forces with ZTE to cooperate on TDD systems but it captured only 2% of the early market through this partnership, well behind its two main rivals. The Datang agreement could prove far more significant to the mighty Swede, which will also work with the Chinese company on further refinements of HSDPA and HSUPA specifically for TD-SCDMA (the Chinese version of HSPA is snappily called TD-SCDMA HSDPA/HSUPA Enhanced). According to Zhang Jianhui of Datang Mobile, HSDPA is deployed in the same way for W-CDMA or TD-SCDMA, since it is a software upgrade, but ‘some advantages can be found in TD-SCDMA HSDPA compared with its rival upon an evaluation in an overall manner’. The main ones are higher peak rates because of TDD efficiencies (16.8Mbps versus 14.4Mbps for W-CDMA) and better performance in limited bandwidth.