China Bends on Wireless Encryption, Continues Chip Tax

The Chinese government is now more responsive to the realities of wireless standards and the global wireless enterprise market.

BEIJING—During conversations with several executives working in the Chinese wireless industry here, it became clear that the Chinese government is becoming increasingly aware of domestic technical problems and is now more responsive to the realities of the standards and procedures of the global wireless enterprise market.

The Chinese government dressed up its decision to delay the implementation of a new wireless security standard as part of a wider trade deal with the United States. But the Chinese never agreed to give up on its plan to create its own wireless encryption standard at some point in the future.

However, Chinese Vice Premier Wu Yi has said that when China implements any of its technology standards it will ensure any rules will be fair to U.S. businesses. China has agreed to drop a June 1 deadline for its WAPI (Wireless LAN Authentication and Privacy Infrastructure) encryption standard and will work with international standards-setting bodies such as the ITU going forward.

"The whole government mentality has become very practical, and [there is] a recognition that domestic Chinese companies need more time to improve their performance before any new standards are ready for the market," says Joan Wang, director of 3G strategy and planning at UTStarcom (China) Ltd.

U.S. chip and telecommunications companies objected to a Chinese decision to extend free access to the WAPI standard to a select group of more than 20 Chinese telecommunications equipment makers.

Under Chinas original WAPI plan, foreign vendors would then have to license the technology from the Chinese telecom companies, which many U.S. companies argued would be in strict violation of international free trade rules. Intel, Texas Instruments and Broadcom have been steadfast in their refusal to comply with Chinas original WAPI rules.

Another critical issue for U.S. companies is that Chinas WAPI standard is not compatible with current Wi-Fi security standards. China has said it is not comfortable with the security provided in the 802.11 WLAN protocol, arguing that it poses a threat to its national security. The IEEE has been working to improve Wi-Fi security with additions such as the 128-bit Advanced Encryption Standard in the upcoming 802.11i specification.

Meanwhile, moves are afoot for the Standardization Administration of China (SAC) to work with the IEEE on wireless broadband standards development. From May 17-20, the IEEE 802.16 broadband wireless working group will hold its first-ever meeting in China in the city of Shenzhen.

"By next year, there will be more development of wireless broadband services in China, and greater importance is being attached to Wi-Fi," says Xie Linzhen, vice president of the China Mobile Communication Association. Xie added that any controversy surrounding Intel and other chipmakers over WAPI "will be solved through negotiations."

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