Kan Kaili: 3G is an economic disaster, the telecommunications industry is facing a revolution

JasonYoo

Kan Kaili: 3G is an economic disaster, the telecommunications industry is facing a revolution [Copy link]

Kan Kaili, Institute of Information Industry Policy and Development, Beijing University of Posts and Telecommunications

　　Original title: 3G and the future of telecommunications industry

　　The key to 3G's problem is insufficient demand

　　In recent years, 3G has become the focus of debate in China's telecommunications industry. What is the core issue of 3G? As Wu Jichuan, former Minister of Information Industry, repeatedly emphasized: "The development of 3G is not a technical issue, nor is it a question of what standards to adopt, but a market issue, that is, whether 3G can bring the services needed by the market." "The reason why China has not launched 3G networks should be attributed to the cold market response and the lack of strong applications." "It is impossible to form an effective profit model if there is only technology but no real application. Blind development will inevitably lead to bubbles."

　　It has been three years since Wu Jichuan said these words, but the 3G market has not changed fundamentally. Overseas, more than 80% of the revenue of European 3G operators still comes from voice, while more than 99% of the services can be completed by 2G systems, causing 3G operators to lose money. In China, China Unicom's CDMA1X is a 3G system internationally, providing almost all 3G services, but the demand is very small and it is also seriously losing money. Therefore, just like the historical lesson of Iridium, large-scale investment in 3G when there is insufficient demand will lead to economic disaster even with the most advanced technology.

　　In my country, the hasty promotion of 3G is particularly harmful. First, consumers do not buy networks, but services. China Unicom's CDMA1X has provided almost all 3G services in my country, but there is a serious shortage of users, and the use of 3G services by existing users is even negligible. Practice is the only criterion for testing truth. The current situation of my country Unicom's CDMA1X has fully demonstrated that the demand for 3G services in the Chinese market is seriously insufficient. Simply changing CDMA1X to TD-SCDMA, WCDMA or CDMA2000 networks cannot fundamentally change the reality of insufficient consumer demand for 3G services, and insufficient demand will inevitably lead to serious losses for operators. This is an indisputable consensus in my country's telecommunications industry.

　　Second, my country has the best 2G network in the world (GSM and CDMA), which is far superior to Western countries in terms of scale, quality and coverage, and has not formed a bottleneck in the development of frequency resources. In contrast, Japan's 2G network is a PDC system that is incompatible with the rest of the world and has extremely poor quality; and Western European countries are facing the dilemma of frequency shortage. Therefore, even if the demand for 3G services is insufficient, 3G in Japan and European countries can largely fill the market demand for 2G (which is exactly the case). However, in my country, since the main income of 3G networks will still come from services that 2G networks can fully provide (especially voice), future 3G operators will inevitably face strong competition from 2G networks. In this way, when 3G operators around the world are still suffering from serious losses, the profitability of my country's 3G will be even more distant, and even its survival is worrying.

　　Third, the main body of 3G investment in my country must be state-owned assets. Whether it is government funding, loans from state-owned banks, or investments by operators themselves, they are all investments of state-owned assets. Even if foreign capital or private capital is used, it must be at the cost of selling state-owned assets (shares), which is also an investment of state-owned assets. According to the calculation of the Development Research Center of the State Council, the investment in 3G in my country will be as high as 600 billion yuan. However, the main problem in my country at present is not the problem of the telecommunications industry, but the problem of rural areas, medical care, education, housing, and the problem of narrowing the gap between the rich and the poor in my country as soon as possible. In comparison, the investment in the Three Gorges Dam project is only more than 100 billion yuan; during the five years of the "15th Five-Year Plan", my country's total investment in rural compulsory education is only 7.63 billion yuan; and the total subsistence allowance for the poor population in the five years is only 64.5 billion yuan. Therefore, we must seriously consider what the 600 billion yuan to be invested in order to promote 3G, which is not urgently needed in my country and will inevitably cause serious losses, means to my country, to the people of the country, and to the tens of millions of rural people who are still in poverty? This is no longer just a question of economic responsibility, but a question of political responsibility, and a question of principle as to whether or not to be responsible for the fundamental interests of the broad masses of the people.

　　Fourth, in the formulation and development of TD-SCDMA standards, China has achieved a breakthrough in major international technical standards, greatly improved China's scientific research strength, and trained our scientific research team, which is of great significance. However, technical success does not mean that large-scale industrialization is necessary. China has much more intellectual property rights and technological innovations in "Shenzhou VI" than TD-SCDMA. Does it mean that "Shenzhou VI" must also be industrialized? Comrade Wu Jichuan once clearly stated that whether TD-SCDMA will be used as China's technical standard and whether it will be used on a large scale in China depends first on the market. We have always opposed various "image projects", "performance projects" and "label projects". Even if TD-SCDMA is a technical standard proposed by China itself, it is the same as the other two 3G standards. It was hastily promoted under the condition of severe lack of market demand. The result is that it will inevitably cause harm to the country and the people in the name of "innovation". This is completely contrary to General Secretary Hu Jintao's purpose that innovation should "serve economic and social development and the people".

　　Leaping over 3G and entering the all-IP era

　　As we all know, the proposal and development of 3G technology has a history of nearly 20 years. Its original intention was to increase the data service bandwidth of 2G mobile communication systems and provide better broadband data services. However, just as ISDN in the 1980s was inevitably replaced by DSL and set-top combination technologies in the 1990s, 3G is also facing the fate of being replaced by all-IP wireless local area network (WLAN) and wireless metropolitan area network (WiMAX). First of all, the performance of these technologies is far superior to 3G. For example, the bandwidth of Wi-Fi of 802.11g is 54 Mbps, while that of WiMAX of 802.16d is as high as 70 Mbps, both of which are more than two orders of magnitude higher than 3G. Second, because they are completely based on IP, they only need to provide the physical layer and connection layer of the network. The simple structure makes its cost several orders of magnitude lower than 3G. Because of this, dozens of countries and regions in the world, including Taiwan, have or are in the process of achieving WLAN and WiMAX coverage, and a universal trend is forming worldwide.

　　At present, some people are worried that WiMAX is "immature" and "not worth promoting" in my country. This is completely unnecessary. The fact is that the "mobile" version of the 802.16e standard has been determined and implemented, and the "fixed" version of the 802.16d standard has long been mature and popular. In fact, the "fixed" version only lacks the handover between cells compared to the "mobile" version, and the coverage radius of its base station is 50 kilometers. In this way, even if the coverage radius is calculated as 30 kilometers, the coverage area of each base station is 2,800 square kilometers. In other words, the terminal can move unrestricted within this 2,800 square kilometers, which not only realizes complete wireless broadband mobile communication, but also has a cost-effectiveness that is many times better than 3G. As for the "micro-cell" WLAN, because of its low price, it has long been adopted by a large number of institutions, enterprises, shops, and even families, forming a large number of "hotspots" in society. In some Nordic countries, local governments or operators have encouraged these hotspots to be open to the public through some policies, and on this basis, they are supplemented with WiMAX or a small number of WLAN base stations, realizing WLAN and WiMAX dual-mode IP wireless coverage over a wide range with very little investment. This model, led by the government or operators and built by all, can be used as a reference for our country.

　　Some people even believe that WiMAX or WLAN and 3G are "technically complementary", so 3G is "insurable", which is completely wrong. The advocates of Iridium also said that Iridium and ground mobile systems are "technically complementary" and that Iridium, which covers the world, is "insurable". However, with the rapid development of ground mobile networks, the market left for Iridium (deserts and oceans) is far from enough to make up for its huge costs, making it bankrupt. As mentioned above, the full IP wireless technology of WLAN and WiMAX can not only meet the needs of most users for various services, but also has performance and cost advantages that 3G cannot match. Therefore, in the competition for the market and users, they are by no means "complementary", but competing with each other. Under the dual competition of full IP networks and 2G, my country's hugely expensive 3G cannot maintain a user market sufficient to survive, and will inevitably quickly follow the same fate as Iridium. Looking back at the history of my country's telecommunications industry in the past 20 years, it has leapfrogged from the vertical and horizontal system to program-controlled switching, and leapfrogged from microwave and coaxial cables to optical communications, thus achieving leapfrogging development. Similarly, in order to promote informatization in our country, our country should and can completely skip 3G and enter the all-IP wireless era.

　　The telecommunications industry is facing a revolution

　　Since all-IP technology has incomparable advantages over 3G, why are telecom manufacturers and operators desperately promoting 3G, but so indifferent to WLAN and WiMAX? In a word, it is because of profit. 3G can not only enable manufacturers to recover their R&D costs, but also bring them huge profits; 3G can also enable telecom operators to maintain their current operating model and avoid or postpone their forced transformation. On the contrary, manufacturers have almost no profit from WLAN and WiMAX, and the promotion of these technologies will endanger the survival of operators.

　　Looking back at the history of the past half century, information technology (IT) represented by computers and the Internet, and telecommunications technology represented by optical communications and program-controlled switching, can be said to be twin brothers, both of which have achieved extremely rapid development. On the one hand, the development of computer technology doubles every eighteen months according to Moore's Law; on the other hand, the development speed of telecommunications technology far exceeds that of computers. For example, the transmission rate of optical communications doubles every six to nine months, reaching tens of terabits per second (each terabyte is 1000 gigabits), and the speed of packet switching has long reached tens of terabits, far exceeding the tens of gigabits that can be applied at present. However, the price of computers has plummeted according to Moore's Law, while the decline in telecommunications charges has been minimal. For example, although the transmission cost per voice channel minute on the transatlantic submarine optical cable was less than one hundredth of a cent (RMB 0.8 cents) ten years ago, the decline in international long-distance charges in my country has not even reached an order of magnitude.

　　The difference in prices between the IT industry and the telecommunications industry is due to their completely different industrial structures. First, the IT industry has always been fully competitive; while the telecommunications industry has been a monopoly since the AT&T era. Second, the IT industry is highly specialized, and each company competes with other companies in its own specialty, and the upper and lower professional levels are standard protocol interfaces. However, in the telecommunications industry, from the physical network to the application layer, the entire industry is vertically integrated, and the upstream and downstream are "all-inclusive". The hot topic in my country's telecommunications industry in the past two years was to build the telecommunications industry value chain, but this has never become a problem in the IT industry because its industrial value chain exists naturally. Third, the IT industry is mainly based on applications, and the needs of the market and users are passed down layer by layer; while in the telecommunications industry, whoever has a physical network is the "boss", and the market demand is curbed or promoted according to the goals and interests of the operator. As a result of this industrial structure of the telecommunications industry, on the one hand, each operator must build its own physical network, laying pipelines, burying optical cables, erecting iron towers, and setting up antennas, which not only causes a lot of duplication of construction, but also greatly restricts competition; on the other hand, operators often deviate from market demand and make large-scale investments according to their own subjective will, resulting in serious mistakes like Iridium. It can be seen that the difference between IT technology and telecommunications technology in terms of transformation into social productivity lies in the difference between the horizontally competitive industrial structure of the IT industry and the vertically integrated industrial structure of the telecommunications industry. It is the industrial structure of the telecommunications industry established by AT&T more than a hundred years ago that has severely restricted the transformation of telecommunications technology into social productivity. In essence, the backward production relations have restricted the development of productivity.

　　From the perspective of my country, 20 years ago, the telecommunications services were extremely scarce, which was once a bottleneck for the development of the national economy. Under such circumstances, my country's telecommunications industry adapted to and met the needs of society and achieved super-fast development in the 1990s. However, today, on the one hand, my country's telecommunications infrastructure (especially optical cable capacity) has been seriously oversupplied, and large-scale duplication and waste of resources are everywhere. On the other hand, the vertically integrated industrial structure of the telecommunications industry has seriously hindered the transformation of telecommunications technology into social productivity. Under such circumstances, telecommunications operators who insist on the vertical integration system are increasingly focused on their own commercial interests, increasingly deviating from their due role as the national economic infrastructure, deviating from the goal of serving the development of all walks of life and improving people's living standards, and have become a resistance to further developing productivity. Because of this, it is no coincidence that the reform of the telecommunications system has become the focus of public opinion in recent years.

　　The Internet has revolutionized the vertical integration model of telecom operators since the 1990s. It is highly decentralized, ubiquitous, and built by all industries and the entire population. It is "of the people, by the people, for the people." IP technology has made various services independent of any physical network, realizing "network-industry separation," freeing all industries and society from the constraints imposed on them by telecom operators through the network, and fundamentally subverting their vertically integrated industrial structure.

　　At present, IP technology has two main focuses on the impact of telecommunications services: WLAN and WiMAX, and VoIP ( Internet Protocol ). WLAN and WiMAX directly impact the basis for mobile operators to bundle their wireless access and network with various services, while VoIP will replace the voice services that all telecommunications operators rely on as their main source of income. If they become popular, especially if VoIP becomes popular on WLAN and WiMAX, the vertical integration of physical networks and various services will be completely destroyed, and the telecommunications system established by AT&T more than a hundred years ago will be eliminated by history. This will be a revolution in the telecommunications industry. As a result, on the one hand, modern telecommunications technology will be rapidly transformed into social productivity, greatly promoting the informatization process of the national economy and the whole society, and on the other hand, it will make telecommunications operators face the dilemma of "suicide and homicide": either insist on vertical integration and face a catastrophe, or transform into a simple bandwidth and access provider and lose the glory of the past forever. Therefore, the current debate in China on whether to launch 3G or promote full IP wireless coverage, and whether to promote or ban VoIP, is actually a debate between two futures and two destinies.

　　It is the fundamental law of human history that productivity determines production relations. Under the guidance of the strategic policy of "using informatization to drive modernization", modern information technology represented by IP cannot be constrained by the operation model based on backward productivity. It will inevitably promote the fundamental change of production relations in the reform of the telecommunications system, and will inevitably become a powerful driving force for the development and modernization of my country's national economy, laying a solid foundation for the great rejuvenation of the Chinese nation in the 21st century. This is the irreversible historical direction of the development of the telecommunications industry.