China Faces a Major Wireless Test

The Olympics have always provided a vehicle for the host countries to captivate the world with their unique architecture, culture, and capabilities. With the Beijing Olympics quickly approaching, the Chinese government is hoping that everyone will see and hear what China can do in mobile communications by promoting the launch of its homegrown third-generation (3G) wireless technology.

To meet that goal, China's largest cellular-services company, China Mobile (NYSE: CHL  ) , announced that it will begin trials of a domestically developed next-generation technology in eight cities starting April 1. The trial is the first step toward a commercial launch of services based on a technology platform called TD-SCDMA and will include passing out discounted phones and laptop cards with services for a limited number of customers.

Developing its own "homegrown" standard was intended to help Chinese companies gain more leverage in the global market for communications products and services, including the ability to avoid paying royalties for the use of other standards. But technology developer Qualcomm (Nasdaq: QCOM  ) , for one, claims that the TD-SCDMA technology still uses its intellectual property.

And even though many in the industry see China's 3G technology as being not yet ready for prime time, global equipment providers such as Nokia (NYSE: NOK  ) , Motorola (NYSE: MOT  ) , and Alcatel Lucent (NYSE: ALU  ) eagerly await the opportunity to bid to supply huge volumes of equipment, should the government formally license and encourage operators to deploy new networks.

To date, nothing has happened, though rumors have swirled for years that the government would revamp the communications sector and consolidate the major players -- China Mobile, China Unicom, China Telecom (NYSE: CHA  ) , and China Netcom (NYSE: CN  ) -- in connection with issuing new licenses.

Many Chinese and other industry media sources cite the nascent nature of the technology as the primary reason it has taken so long to deploy commercial networks. With major trials now commencing, the world will get to see just how close the platform really is to prime time. At that point, investors will get a better chance to gauge the potential of having hundreds of millions of Chinese cell-phone users upgrade to more feature-rich services -- and pay service providers handsomely for it.

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