China Gets WTO Head Start

Country turns to Western vendors to satisfy growing need for wireless and broadband services.

China is turning to Western telecommunications vendors—and vice versa—as the Asian nations blossoming economy fuels the need for more and better wireless and broadband Internet services.

As the communist country continues to campaign for admission to the World Trade Organization, companies such as AT&T Corp., Qualcomm Inc., Nortel Networks Corp. and Compaq Computer Corp. are establishing new footholds or strengthening old relationships there in an effort to move gear that has of late been hard to sell domestically.

Nortel, which has been selling equipment to China for nearly three decades, expects the countrys Internet use to grow from approximately 5 million subscribers today to more than 20 million in 2003.

"Walking through Beijing or Shanghai, you cant go a block without seeing at least one Internet café," said Warren Fuson, director of international business strategy for Nortel.

Nortel, of Brampton, Ontario, supplies switches and other infrastructure equipment to the government-owned carriers China Telecom, China Unicom and China Mobile. Its CVX 1800 switches are deployed throughout the country, most recently in the provinces of Liaoning, Hebei and Shanxi. Last month, the manufacturer also signed a deal to provide Chinas State Bureau of Taxation with $10 million worth of routers, switches and network management infrastructure.

The biggest opportunity for communications in China, however, may be up in the air. In this large, mostly rural nation, many in the telecom industry see wireless technology as a means of bringing the country state-of-the-art communications.

Chinese officials havent yet settled on a wireless standard, but last month, CDMA (Code Division Multiple Access) made inroads.

After months of uncertainty, San Diego-based Qualcomm signed a memorandum of understanding with Chinas Ministry of Information and Industry detailing the ministrys support for an agreement made early last year with China Unicom to deploy CDMA technology.

In addition, Compaq and Chinese manufacturer Xian Datang Telephone Corp. recently inked a deal to deploy CDMA in Datang networking products for China Mobile.

Last week, AT&T became the first U.S. carrier to create a joint venture with a Chinese carrier. The Basking Ridge, N.J., long-distance company signed agreements with Shanghai Telecom and Shanghai Information Investment Inc. to provide broadband IP services to business customers in an industrial area of the city by the middle of this year. AT&T will hold a 25 percent interest in the venture, called Shanghai Symphony Telecommunications Co. Ltd.

But the Chinese market isnt just for large vendors. Smaller companies such as Edge2net Inc., of Kirkland, Wash., are making inroads as well. Edge2net, for example, agreed to a joint venture with China Motion, a Hong Kong-based carrier that offers paging, Internet service provider and cellular resale services.

"Its a very controlled evolution of regulatory change in China," said John Rivenburgh, co-founder and president of global development at Edge2net. "The regulator is trying to pick winners and see how the market reacts."

The new partnership will provide voice-over-IP and other broadband services throughout China.

Such telecom vendors are succeeding where many have failed. Sprint Corp., for one, invested millions of dollars over the past decade in complicated indirect joint ventures, only to have the Chinese government force them to disband.