The second internet revolution - the WTO Column

(later also at Chinabiz)
In another medium I wrote about the bloody battle that is going to take place now China is spending dozens of billions of euros in rolling out its third generation mobile phone. I described how China is going to give the lead role to the Chinese standard, the TD-SCDMA, leaving the European and American technology far behind at the domestic market.

"What about the World Trade Organization", one of the commenters wrote Yes: what about the ideal of a level playing field in the global economy? The difference with a few years ago is that then the ideal was still alive. Nobody sticked to it, but as an idea it was still hanging around. After a few textile wars, shoe wars and a few trade wars I might have missed, it is obvious that the idea was an illusion nobody takes serious anymore.

China has been for a few years, as a relative new kid on the WTO-block, behaved better than its European or American counterparts. But with the new government in place, new priorities have emerged and it is very clear that the WTO is not one of them. Who can blame them, since nobody else in the world takes it very serious?

Some of the smarter foreign companies have joined China half a decade ago in developing its own standard for the third generation mobile phones. Now the big roll out is going to take place, the foreign telecom companies who have developed the European and American standard need to have a good look at themselves. Unless there will be a massive technical disaster pending, there is only one signal for foreign telecom's in China sticking to the European or US standard: abandon ship.

It seems very unlikely China is going to adopt more than one standard, companies developing other standards maybe still need a standard bearer in China, but their commercial opportunities may lay elsewhere in the world. The development of three different standard might mean that global travellers will end up dealing with three different mobile phones.
China seems at this stage so busy in rolling out the system in its own country, expansion into other countries might not be at its agenda right now. But that might change in a few years time and the expected cost-effective Chinese solution might offer than a more solid competition.
In China itself, a market of now close to 400 million mobile phone users might be enough of a challenge to deal with.

Some telecom providers might still put hope at the current resistance by for example China Mobile, who would rather upgrade their current GSM-network in stead of investing into a fully new network. They are wrong.
If something can be learned from the past fifteen years of change in telecommunication in China it is that - like elsewhere in the world - the existing telecom companies are a barrier for change. If it would have been up to the Chinese telecommunication companies, China would have had no cheap mobile phones, hardly an internet and certainly no large scale broadband connections.
Two factors decide about change in China, and the telecom companies are basically barriers that try to prevent change. First, top-down government policies define change. Especially previous prime minister Zhu Rongji has been instrumental by splitting up the arch conservative China Telecom. Second, an enthusiastic consumer base. When the consumers discover what they can get, they wipe away struggling telecom companies.

When those two factors, a clear top-down government policy and eager consumers find each other, China will see its second internet revolution.

Fons Tuinstra