Protectionist US technology companies won a significant lobbying victory through the US Trade Department this week, as the Chinese government pledged not to promote its home-grown TD-SCDMA technology for 3G and not to interfere with royalty negotiations between Chinese carriers and foreign interests.
China has invested heavily in funding its home grown technologies, ranging from microprocessors to communications standards. The implicit threat of its investment in TD-SCDMA, a 3G overlay for GSM networks, was that China reserved the right not to pay royalties. Both major flavors of 3G - Qualcomm's CDMA 1x and the 3GPPP's W-CDMA (known in Europe as UTMS) have royalty strings attached; Qualcomm's is a straight five to six per cent, while the 3GPPP's is more complex, with some of those royalties winding their way back to Qualcomm, of course. The 3G Planning Group of the PRC's State Information Office said it wanted to waive royalties for TD-SCDMA, which was reckoned to be thirty per cent cheaper than W-CDMA.
But the agreement reached this week - which also saw China agree to modify its go-it-alone stance on WAPI 802.11 encryption - drew major concessions with respect to 3G from the PRC.
China has vowed to "support technology neutrality with respect to the adoption of 3G", to allow "telecommunications service providers in China … to make their own choices as to which standard to adopt, depending on their individual needs," and not to get involved in royalty negotiations.
(The US also forced China to take genetically-modified crops in the same agreement; it’s not often you see soybeans and CDMA in the same short press release.)
How closely China will follow the agreement remains to be seen. Qualcomm's first and some of its most important patents expire towards the end of the decade, with LM Ericsson's following. By then, Scandinavian and US manufacturers will be hoping there's enough of a market established to prevent a wholesale switch. On the other hand, the PRC is playing a long game, and has plenty of patience. ®