Why is China taking so long to implement 4G?

China, expected to be the largest market of TD-LTE, is sending out mixed signals: China Mobile demoed LTE of a sort in Hangzhou in March. After more than a year in testing, the event was intended to impress media and government officials. Meanwhile, Shenzhena in south China is rumored to launch LTE service in late May to a small number of customers.

You’d think LTE is in the offing, but China Mobile says more testing is needed for dual-mode terminals and chipsets. And there is no indication that a license for commercial services is anywhere close.

All this makes the near-term outlook for LTE somewhat murky. Despite promising technology shown in a few countries, large-scale roll-out is unlikely until at least late 2013. The prolonged testing is having a negative effect on public expectations and China Mobile’s creditability as a TD-LTE world leader, a title the operator claimed when it led GTI (Global TD-LTE Initiative) a year ago.

Clearly this is not what China Mobile has in mind. While running more testing, the operator hints it might run “pre-commercial” services in select cities including Hangzhou, Shenzhen and Beijing, but no timetable has been given.

Meanwhile, China Mobile plans to install up to base transceiver stations (BTSs) in nine cities, bringing its total up to 20,000 by year’s end, ready for commercial service. Shenzhen will lead with 3,000 BTSs, up from 220 at present, incidentally being built by archrivals Huawei and Ericsson. A few miles away in Hong Kong, China Mobile launched TD-LTE service in late April and performance was reportedly impressive.

Apparently the drag is in terminals, including chipset. During the latest round, Leadcore, owned by Datang Telecom, ZTE Microelectronics and Innofidei joined a dozen chipmakers to test their products on a range of terminal equipment, mostly data cards.

According to Leadcore, a major supplier of TD-SCDMA chipset, the weakness lies in unstable performance and high power drain. Huawei and ZTE have made TD-LTE handsets, but they are not considered as commercial products and aren’t ready for shipment in large quantities.

China Mobile is trying to put a positive spin on a painful crawl. In March, China Mobile showcased an LTE service on a bus route in Hangzhou with up to 80Mbps (30Mbps in average) in downlink. But the speed was delivered through a Wi-Fi gateway mounted in the bus, to let non-LTE handsets experience the speed advantage of LTE.

This is disappointing for China Mobile as it is trying to reverse slow growth and fight increasing competition in 3G. Profit growth plunged to just over 5% in 2011 from 32% in 2007 while new customers fell to 11% a year from 23%. Worse, China Mobile is losing high-end customers in its 3G service TD-SCDMA because of inferior speed and network coverage. All this clouds the outlook of TD-LTE and how much it will turn the tide.

Finally, the key player, the government, is not lending a hand to help. The Ministry of Industry and Information Technology (MIIT) has reiterated its view that it is “premature” to grant an LTE license now because time is needed until more BTSs are in place and terminal performance improved.

At least in the short term, this throws China Mobile in the old game: Find ways to grow 3G service, which is already an uphill battle.

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