China has the world’s biggest population of mobile phone users and adoption of 3G — which has been long delayed — was eagerly anticipated by equipment suppliers, which are seeing demand elsewhere decline due to the global financial crisis.

“The 3G licenses will be issued either later this year or early next year,” Li Yizhong, whose ministry regulates telecoms, said at a news conference.

Third-generation mobile phone technology supports Web surfing, video downloads and other added services. Its adoption in China is expected to boost demand for mobile service and spur growth of new services.

China’s mobile phone market has grown to 650 million accounts, Li said.

Foreign suppliers such as Nokia Siemens Networks and Sony-Ericsson will be competing with fast-growing Chinese rivals Huawei Technologies Co. and ZTE Corp. to sell switching gear, base stations and other technology.

Read the fullsroty in Associated Press here.

However, yesterday’s Wall Street Journal (March 15, 2007) seems to suggest that high speed 3G wireless technology like HSDPA can bring broadband on a large scale to Indonesians. It (misleadingly) implies that since HSDPA is merely a software upgrade to 3G networks it will not require any new major telecom infrastructure investment in Indonesia. The fact is that 3G services have just been launched in the last quarter of 2006 in some urban areas concentrated in and around Jakarta. The Indonesian operators have a long way to go to upgrade all their base stations to support 3G. Even if the base stations were upgraded to 3G standards there are no shortcuts to building backbone infrastructure (preferably fiber optic) to connect the base stations. Furthermore, large parts of eastern Indonesia do not have any connectivity leave alone 2G or 3G.

Realistically, HSDPA will be a connectivity solution for those customers who have been starved off ADSL connectivity thanks to Pt Telkom’s “Dog in the manger” attitude. Those customers who can afford HSDPA compatible handsets will be a very small subset of potential Internet users in Indonesia. 2+G connectivity solutions will continue to remain relevant for a vast majority of Indonesians.
Indonesia Embraces 3G to Get Up to Speed on Web (Wall Street Journal March 15, 2007)
JAKARTA, Indonesia — Indonesia’s rapid adoption of cutting-edge cellphone technology for Internet access is helping Southeast Asia’s largest economy to catch up with its technologically savvier neighbors.

A sprawling nation of 220 million people and more than 13,000 islands, Indonesia has one of the least-developed communications systems in Asia. Getting a phone connection without echoes or distortion is a matter of luck, and Internet connections relying on cable networks are among the slowest in the region.

The arrival of High-Speed Downlink Packet Access, or HSDPA — a software upgrade to 3G mobile-phone technology that allows users faster access to the Internet through cellular networks — could help change that[..]

HSDPA technology, pioneered in Indonesia by PT Indonesia Satellite Corp., or Indosat, offers Internet download speeds at least six times as fast as connections relying on cable, a wider difference than in a more-developed economy. And because it’s an add-on to 3G technology, it doesn’t need any major new telecom infrastructure — just some equipment attached to existing mobile base stations.

Indonesia also is primed for expansion because less than 30% of its population currently uses cellphones, compared with 80% in Malaysia and 40% in the Philippines. Indonesia has 65 million mobile users; industry analysts forecast that number will reach 100 million by 2010.

Since starting its service in November, Indosat has signed 60,000 customers in Jakarta and Surabaya, Indonesia’s second-largest city. Working with Ericsson and Nokia, the company hopes to add coverage to eight other major cities by the end of March. “It’s going to be very popular,” predicts Djarot Handoko, a spokesman for Indosat.

Nokia is working with another local telecommunications company, PT Telekomunikasi Selular, to start an HSDPA service in Indonesia later this year. Indonesia is one of the biggest potential markets for 3G, says a Nokia executive advising the company[..]

Dev Yusmananda, an executive at PT Excelcomindo Pratama, which has just started a similar service, says the prospective Indonesian market is huge. “We’re talking about it [HSDPA] as a substitution for a broadband connection,” he says.

Ironically, the interest generated by the arrival of HSDPA is a consequence of Indonesia’s failure to build a decent national cable grid. The country had plans to lay an extensive network in the 1990s, but the Asian financial crisis in 1997-98 intervened, and many projects were shelved. Many of the cables that were installed were poorly laid. Recent flooding in Jakarta damaged networks and left many people without Internet access for days[..]

One of the most effective methods of policy argumentation in the US is “we are falling behind [fill in the blank].” Those days, the country that was forging ahead of the US was Japan, in most cases (e.g., Fifth Generation Computing, High Definition Television) . The argument was that the strong government bureaucracy in Japan (in particular, MITI–the Ministry of International Trade and Industry) was picking winners, while the potential winners in the US who were spending their energy fighting each other in the marketplace were ending up as losers.

The abysmal state of the Japanese economy and the failure of MITI led to a lull in this debate, but looks like it has started up again, this time around the Internet. The opposing view has already been articulated by the Economist, in its latest issue.

These debates are applicable to developing countries too. The key difference is the quality of the bureaucracy and the politicians in charge. Would you trust the Indian, Sri Lankan, or Indonesian bureaucracies and politicians to be competent in picking winners, even if you think the Americans are?

Down to the Wire
Thomas Bleha
From Foreign Affairs, May/June 2005

Summary: Once a leader in Internet innovation, the United States has fallen far behind Japan and other Asian states in deploying broadband and the latest mobile-phone technology. This lag will cost it dearly. By outdoing the United States, Japan and its neighbors are positioning themselves to be the first states to reap the benefits of the broadband era: economic growth, increased productivity, and a better quality of life.

Thomas Bleha, the recipient of an Abe Fellowship, is completing a book on the race for Internet leadership. Previously, he was a Foreign Service officer in Japan for eight years.