Analysis of the 3G diffusion and adoption in China.

Author:Li, Xiaoqing
Position:Report
 
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  1. INTRODUCTION

    In the past few decades, China has experienced significant economic development. In particular, telecommunication is one of the fastest growing areas. Twenty years ago, only very few people had a fixed line telephone at home. But today, China is the world's largest wireless communication market in terms of the number of subscribers. As of October 2008, China has about 627 million mobile phone subscribers, and about 74 million subscribers of XiaoLingTong (i.e., Personal Access Phone System) (www.mc21st.com). XiaoLingTong is a quasi mobile phone service that is based on the fixed telephone network and provides wireless communication services in local areas ("China Telecom," 2006). This means that almost half of Chinese citizens use mobile phone services. People are increasingly relying on cell phones in their daily communications.

    Compared to some developed countries, the wireless telecommunication market in China is still at an early developmental stage and the market is dominated by voice and short text message services with very limited adoption of data services. In October 2008, Chinese mobile phone users sent about 581 billion text messages (www.mc21st.com). Second generation (2G) wireless communication, such as GSM and CDMA, is the dominant technology used in Chinese mobile communications. Many potential benefits of cell phones remain to be realized. Using 3G phones, users can access various data services from the Internet. This allows content providers to bring new information services, such as mobile health information services and mobile education to the mobile phone users.

    Despite the great promises, implementation of 3G in China faces many challenges. Many people have doubts about 3G because they cannot find enough special applications for 3G networks. Successful 3G implementation needs participation and cooperation of actors from different realms, including government, network operators, equipment manufacturers, content providers, and users. These actors often have different or even conflicting interests (Yoo et al., 2005). The process of 3G implementation in other countries varied greatly. South Korea and Japan have successfully implemented 3G. Other developed countries such as the U.S. and some European countries, however, have experienced difficulties in adopting 3G. Compared to these 3G pioneers, China has a different and more diversified situation. Culturally, China has many commonalities with Japan and South Korea. Some suggest that the adoption of 3G in China will be similar to that in Japan and South Korea because of the popularity of mobile phones and wireless communications in all three countries ("China's 3G Puzzle," 2007). However, the economic development of China is quite different from that of Japan and South Korea. China's society is much more diversified than Japan and South Korea. Therefore, China cannot simply copy the successful implementation of 3G of South Korea or Japan.

    Different from Japan, South Korea, Europe, and the U.S., adoption of 3G in China is still at the very early stage. There are many implementation issues that need to be resolved. An analysis of 3G implementation will help us better understand the current status of 3G in China. Our goal in this paper is to identify the key successful factors for the implementation of 3G in China and to develop meaningful recommendations based on the current status of 3G in China. Our analysis will be grounded on the framework of Actor Network Theory (ANT). The ANT can be used to interpret the translation process of the diffusion and adoption of an innovation (Callon, 1986). ANT has been applied by researchers to analyze 3G implementations in other countries, such as South Korea and the U.S. In this paper, the implementation of 3G in China will be analyzed based on published articles and officially published data from both industry and government domains. This paper will do the following: review the development of wireless communications in China, describe the actor network theory and its applications, describe our research methodology, conduct a prospective analysis of 3G in China, summarize findings, and draw conclusions.

  2. DEVELOPMENT OF WIRELESS COMMUNICATION IN CHINA

    In 1987, the first generation analog mobile phones were introduced in China. Due to the high cost of the phone and the expensive usage charges, only very few people could afford to use it. The second generation (2G) mobile phones were introduced in China in 1993. Field tests of the 2G networks were slow during the first two years. A wide adoption of 2G mobile phones started in 1995 (Song, 2007). Since then, wireless communication in China has been developing rapidly. Today, China is the world's largest wireless communication market in terms of the number of subscribers.

    Currently, China's wireless communication is dominated by 2G technologies and uses two standards: GSM and CDMA1X. China Mobile and China Unicom had been the two dominant network operators up until May 2008, when the telecommunication industry was restructured. As of December 2007, China Mobile had about 387 million mobile phone subscribers, and China Unicom had about 162 million mobile phone subscribers (CMII, 2008). In addition, China has about 84.5 million subscribers of XiaoLingTong (i.e., Personal Access Phone System) (CMII, 2008). XiaoLingTong (XLT) service was initially offered in 1999; this technology is used by two operators: China Telecom and China Netcom ("Key Events of XiaoLingTong," 2005). However, the number of XiaoLingTong users has been declining in recent years. In 2007, the number of XiaoLingTong subscribers decreased by about 6 million (CMII, 2008).

    Chinese mobile phone network operators have been collaborating with content providers to offer value-added services to users for years. The network operators opened their networks to content providers, such as Tencent, Sina, Netease, and Sohu, who uploaded their contents to the operator's mobile portal, which are then downloaded by users (Lu and Weber, 2007). The network operator charge a percentage, say 9%, of the price of the service and content providers keep the rest of the revenue (Lu and Weber, 2007). This business model was pioneered by Japan's NTT DoCoMo in its popular i-mode service (Ratliff, 2002).

    Chinese telecommunication manufacturers pay substantial patent fees to foreign companies, such as the U.S. based Qualcomm and Sweden based Ericsson for using their 2G technologies (Saugstrup and Henten, 2006). Qualcomm and Ericsson also hold many key 3G patents, with Qualcomm focusing on CDMA2000 and Ericsson focusing on WCDMA (Saugstrup and Henten, 2006). Aiming at avoiding high patent fees, the Chinese government embarked on developing its own 3G technology in the early 90s (Wildau, 2008). In 1998, China proposed a new 3G standard, TD-SCDMA to ITU, which was accepted by ITU in 2000 as one of the three official standards of 3G together with WCDMA and CDMA2000. All three 3G standards have been approved by the Chinese government for implementation in China. The adoption of 3G in China has experienced lots of debate (Song, 2007). Currently, the 3G is still in its early implementation stage in China. The slow adoption of 3G can be attributed to many reasons, including the unsuccessful implementation in some other countries, lack of killer 3G applications, high cost of implementation, and dispute over intellectual property issues, etc.

  3. ACTOR NETWORK THEORY AND THE APPLICATION IN MOBILE INDUSTRY

    Actor Network Theory (ANT) is a framework used to study the roles of different actors, including human and non-human actors in a translation process (Callon, 1986). In the translation process, "the identity of actors, the possibility of interaction and the margins of manoeuvre are negotiated and delimited" (Callon, 1986, p203). This process involves four phases: problematisation--the primary actor defining a problem and convincing other actors that they can solve the problem through the cooperation; interessement--the primary actor assigning other actors their specific roles in the problem solving process; enrolment--the primary actor working to create the alliance networks of the actors; mobilisation--the primary actor working to ensure the supposed spokesmen are the right representative of each group of actors (Callon, 1986). During this process, the primary actor plays the important role of initiating, organizing, and leading. The primary actor uses various ways such as persuasion and incentives to enroll new actors to join the network (Hardy and Williams, 2008). When adopting an innovative technology, various actors including human and technology work together to form a dynamic but robust network. Each actor plays a unique role in this network. The process of adopting an innovative technology is the formation process of this network.

    Since its introduction in 1986, ANT has been used in explaining and investigating the adoption of new technologies. Alcouffe et al., (2008) used ANT to analyze and compare two management accounting innovations that have had different diffusion processes. In recent years, researchers have been applying ANT to the innovation diffusion process of mobile technologies in different countries. Using actor network theory, Yoo et al. (2005) analyzed how CDMA standards in South Korea helped the rapid transition from 2G mobile infrastructures to 3G services. With actor network theory, Wang and Yuan (2006) explained the development and adoption process of mobile data services in China through a case study.

  4. METHODOLOGY

    The Chinese government plays an important role in adopting new technologies in China. One of the major responsibilities of the Ministry of Industry and Information Technology of China is to organize the implementation of strategic planning of communications industry (China Ministry of Information Industry, 2008b). To introduce a new technology, the government will organize...

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