The decision, made earlier this week, is a significant milestone in the development of the TD-SCDMA (time division synchronous code division multiple access) approach to 3G communications and a sign that the government is still willing to back the standard, even though its success is far from certain. Yet as China already has the world's largest cell phone subscriber base and with much more growth to come, a lot is at stake. Backers of the technology interpreted the favorable allocation as a signal that the government is serious about making sure it has some IP involvement in the mobile space.

At the end of 2001, China had 145 million mobile subscribers, surpassing the United States. Observers believe the country now has about 180 million subscribers. "China was not there in 2G and they missed out on a lot of money. If they miss 3G, they will have to wait 15 more years to get 4G," said Philippe Gaglione, chief technology officer of Commit, a Sino-foreign joint venture that is developing TD-SCDMA chipsets. "So they have to be there and this is why they have invested in TD-SCDMA. I am completely convinced that they want to give it a go."

On Wednesday, at a government-arranged ceremony, the main backer of TD-SCDMA, Datang Telecom Technology & Industry Group, formed an industry alliance with seven Chinese firms, including Huawei Technologies Co. and ZTE Corp., to prove that there is wide support for implementing the standard. However, no firm commitments were made by the attending companies.

China has spent several years developing the homegrown 3G specification, which is now one of three 3G standards approved by the International Telecommunication Union. Backers of the technology say it is more bandwidth efficient when compared to the two competing technologies and thus suited to deployment in China's dense cities. They also say it is at least 20 percent cheaper to implement and has higher data transfer rates for Internet access.

Only a few companies are actively researching network backbone gear as well as handsets, which has led to speculation over whether the standard can ever achieve the critical mass necessary to be a success in the market. Until now, Datang has worked most closely with Siemens AG to develop network gear based on the protocol, ranging from base stations and switches to handsets. Field trials began last year and Siemens had hoped that a small commercial rollout would begin this year. But a senior Siemens executive said last month that isn't likely to happen.

So far, the country's major carriers, China Mobile, China Telecommunications Group Corp., China Netcom Corp. Ltd. and China Unicom have not committed to using TD-SCDMA technology for data delivery. Indeed, No.1 provider Unicom has invested in a CDMA2000 network that it will likely upgrade to CDMA2000 1x to handle data. China Mobile, the No.1 carrier, is already rolling out a GPRS network and looks likely to go with W-CDMA in future.

Still, despite the cloudy picture, two other companies have made clear they believe in the technology's viability in the commercial market. Earlier this year, a coalition of companies that included Texas Instruments, Nokia, LG Telecom and DBTel formed Commit, which is focusing on chipsets and handset reference designs. First silicon is expected in early 2004. Additionally, Dutch concern RTX Telecom is working with Siemens to develop silicon solutions.

In an effort to spur further research and development efforts, Datang said it would share IP with the alliance formed Wednesday. Another sweetener for companies is the government's decision to allocate an additional 100-MHz block to TD-SCDMA, but that must be shared with other applications that weren't made immediately clear.