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Technical base, interests, and power in the two-level game of international telecom standards setting: the political economy of China's initiatives

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Technical base, interests, and power in the two-level game of international telecom standards setting: the political economy of China's initiatives

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TECHNICAL BASE, INTERESTS, AND POWER
IN THE TWO-LEVEL GAME OF
INTERNATIONAL TELECOM STANDARDS SETTING:
THE POLITICAL ECONOMY OF CHINA’S INITIATIVES

by

Zhou Liuning

___________________________________________________________

A Dissertation Presented to the
FACULTY OF THE GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirement for the Degree
DOCTOR OF PHILOSOPHY
(COMMUNICATION)

December 2007

Copyright 2007 Zhou Liuning
ii
ACKNOWLEDGEMENTS
I would not have been able to finish this project without the support of my
dissertation committee, friends and family.
I’d like to acknowledge the support and guidance of my advisor Jonathan
Aronson. Over the years, I have benefited from his expertise in international
telecommunications and his knowledge about China’s telecom sector. I am indebted to
him for his valuable comments on my manuscript. I am also grateful to my other
dissertation committee members, Francois Bar and Shui Yan Tang, for their helpful
feedback on my dissertation proposal and draft.
All the Ph.D. students in my cohort who finished ahead of me served as role
models. I thank them for being great friends and moral support. Special thanks go to my
friends in the Physics Department at the USC, Weifei, Manjiang, Rong Yu, Bobo, and
Xiao Pang. Their friendship made my life as a graduate student delightful and rewarding.
Thanks go to the Center for Digital Future at the USC Annenberg School that
provided me with financial support through a research assistantship over the past two
years. My colleagues at the Center also provided me with moral support. Particularly,
Michael Suman edited my manuscript. I wish to express my gratitude to him.
Finally, I would not have been here without the love, devotion, and support of
my family. Since I finished high school, my parents had encouraged me to get the highest
academic degree I could get. My sisters offered me mental breaks from research and
iii
writing with weekly telephone conversations. My wife believed that I could do it. And
my daughter simply kept asking me when I would graduate, which pushed me along the
way. My love goes out to them.
iv
TABLE OF CONTENTS
ACKNOWLEDGEMENTS................................................................................... ii
LIST OF TABLES................................................................................................. vii
LIST OF FIGURES .............................................................................................. viii
ABSTRACT............................................................................................................ ix
CHAPTER 1: INTRODUCTION .......................................................................... 1
1. Compatibility Standards: An Overview ............................................................. 1
2. Research Problem and Objectives ..................................................................... 3

CHAPTER 2: TECHNICAL STANDARDS
AND THEIR RAMIFICATIONS ................................................ 7
1. Dimensions and Strategic Importance ............................................................... 8
2. The Economics and Politics of Technical Standards ....................................... 12
2.1 The Economic Dimension of Technical Standards .................................... 14
2.2 The Political Dimension of Technical Standards ....................................... 18
3. Institutional Context of Telecom Standardization ........................................... 20
4. Telecom Standardization Under International Systems ................................... 22
4.1 Telecom Standards Under the International Telecom Regime .................. 22
4.2 Telecom Standards Under the International Trade System ....................... 26
5. What Is Missing from the Current Literature ................................................ 28

CHAPTER 3: DOMESTIC-GLOBAL LINKAGE IN INTERNATIONAL
TELECOM STANDARDS SETTING:
AN EXPLANATORY FRAMEWORK ...................................... 33
1. The Two-level Game Model and Its Relevance to This Study ........................ 34
2. Interests and Power in the Two-level Game of Standards Setting ................... 36
2.1 Interests and Power at the National Level ................................................. 38
2.2 Interests and Power at the International Level ........................................... 42
3. The Domestic-Global Linkage between
National and International Standards ............................................................... 46
4. Scenarios of Comparable Technical Base and Hypotheses ............................. 50
5. Data and Methods ............................................................................................ 55

v
CHAPTER 4: TD-SCDMA: LIMITED SUCCESS
IN ANTICIPATED DEBUT ........................................................ 58
1. Introduction ...................................................................................................... 58
2. The Standard: Key Players and Alliances ........................................................ 59
2.1 TD-SCDMA and Its Key Players .............................................................. 61
2.2 Industrial Alliances as Cooperation Platform
for TD-SCDMA ......................................................................................... 64
3. Games at the National and International Levels .............................................. 67
3.1 Domestic Games ........................................................................................ 69
3.1.1 The Standard Setting Group: Strong Interests and
Limited Manufacturing Capabilities ................................................ 69
3.1.2 Bureaucrats: Strong Interests and High Expectations ....................... 73
3.1.3 Network Operators: Interested in 3G but not in TD-SCDMA .......... 76
3.2 International Games around TD-SCDMA ................................................. 80
4. Domestic and International Games: Determinants for TD-SCDMA ............... 83

CHAPTER 5: WAPI: AN UNSUCCESSFUL BID FOR
NATIONAL AND INTERNATIONAL STATUS ...................... 87
1. Introduction ...................................................................................................... 87
2. The Standard, Key Players, and the Supply Chain .......................................... 89
2.1 The Short-lived Standard and Its Key Player ............................................ 90
2.2 The Competition Strategy and Supply Chain of WAPI ............................. 93
3. Political-Economic Games at the National and International Levels .............. 97
3.1 Domestic Games around WAPI ................................................................. 97
3.1.1 The Moves Favorable to WAPI ........................................................ 98
3.1.2 The Moves Unfavorable to WAPI .................................................. 101
3.2 International Games Unfavorable to WAPI ............................................. 106
4. Technical Base, Interests, and Power around WAPI ..................................... 110

CHAPTER 6: A COMPARATIVE ANALYSIS OF
TD-SCDMA AND WAPI............................................................ 115
1. Comparing TD-SCDMA and WAPI .............................................................. 115
1.1 Shared Technological and Political Backgrounds .................................... 116
1.2 Different Development Processes and Outcomes .................................... 119
2. Understanding the Success of GSM .............................................................. 121
2.1 GSM Standard: Rationale and Background ............................................. 121
2.2 Interests and Power behind GSM ............................................................ 122

CHAPTER 7: FINDINGS AND CONCLUSIONS ........................................... 125
1. Two-level Game in International Telecom Standards Setting ....................... 125
vi
2. Lessons from the TD-SCDMA and WAPI Process ........................................ 130
3. Contributions of This Study ........................................................................... 133
4. Study Limitations and Directions for Future Research .................................. 134

REFERENCES ....................................................................................................137

APPENDICES .....................................................................................................157
Appendix A. Members of the TD-SCDMA Industry Alliance ............................157
Appendix B. Members of the TD-SCDMA Forum .............................................159
Appendix C. Members of the China Broadband Wireless IP Standard Group ....161
Appendix D. List of Interviewees ........................................................................163

vii
LIST OF TABLES

Table 1: Interests and Power of Actors in Telecom Standards Setting ................ 38

Table 2: Technical Merits of TD-SCDMA in Comparison with WCDMA and
CDMA2000 .......................................................................................................... 62

Table 3: Technical Merits of WAPI in Comparison with the IEEE 802.11 ........ 94

viii
LIST OF FIGURES

Figure 1. Interaction of Players at the National Level ....................................... 42

Figure 2. Interaction of Players at the International Level .................................. 46

Figure 3. Linkage between Domestic and International Standard ....................... 49
ix
ABSTRACT

Current literature on international telecom standards setting ignores the
two-level game nature of the technical process, and also fails to address current telecom
standards-setting initiatives in China. This study addressed these two gaps from a
theoretical and empirical perspective. In the study, I propose, using Robert Putnam’s
two-level game metaphor, a domestic-global linkage model to theorize the development
of national telecom standards into international ones, arguing that international telecom
standards setting is a two-level game involving standards setters, network operators, and
bureaucrats at national and international levels. I also argue that three key
factors—technical base, interests, and power—interact with each other in transitioning
national standards into international standards.
Two case studies of China’s recent standards initiatives are provided:
TD-SCDMA for third-generation mobile communications and WAPI for wireless
networking. These case studies present the developmental background of the two
Chinese standards under study, analyzing the reasons for their setbacks from a two-level
game perspective.
I contend that conflicting interests and unbalanced power among Chinese actors
diminished the influence of the local standards setter, and as a result, the competing
interests and stronger political-economic power of international competitors subjected
China’s initiatives to rules of international trade, causing the Chinese standards to suffer
x
setbacks in the international standards arena.
The TD-SCDMA case reveals that a telecom standard with a comparable
technical base may succeed in its global adoption efforts when it has strong domestic
interests and power behind it. The WAPI case shows that a telecom standard with a
comparable technical base can fail in its global adoption efforts when it has weak
domestic interests and power behind it.
Conceptually, I theorize that interests and power interact with a technical base at
national and international levels to influence the outcome of international telecom
standards-setting initiatives. Thus, national telecom standards must make a
domestic-global linkage to become international standards.
For empirical analysis, I provide a systematic, comprehensive study of the
political economy of China’s telecom standards-setting efforts within a global
framework.

1

Chapter 1: Introduction

1. Compatibility Standards: An Overview
Technical standards, deceptively far away from our day-to-day work and life,
are at the core of human social, financial, and commercial activities. For instance,
compatibility standards underlying information and communication technology (ICT)
make communication between technical systems more efficient and communication
between human beings easier. There has been an increasing interest among social
scientists in technical standardization, especially in the ICT sector, due to the strategic
importance of technical standards in the diffusion of new technologies.
1
Technical
standards are also crucial components of national information infrastructure to provide
seamless connectivity and facilitate communication. In the telecom sector, technical
standards are an important aspect because they “set limits on uncertainty about new
technologies by reflecting agreements about how they will be developed and operated”
(Salter, 1999, p. 102). In the international telecommunications regime, technical
standardization, whether in networks or equipment, has been an accepted,
institutionalized rule (Aronson, 2001; Cowhey, 1990; Drake, 1994). With technical
standardization implemented across countries, interconnection and global service can be
ensured and communication across national boundaries can be facilitated.

1
Hawkins (1995) provides a brief discussion on the rise of industrial and academic interest in
technical standards over the past 20 years (p. 3).

2

Compatibility standards serve as the technical foundation of the ICT, as they
allow different components within the technical system to communicate with each other.
In particular, compatibility standards or network standards, traditionally a norm in
international telecom, have become increasingly important because of the increasing
sophistication of telecom networks and greater demand for communication and
information sharing. A technical process, standardization involves non-technical
dynamics in the economic and political realms, either national or international in scope.
Multinational telecom equipment vendors desire international standards so as to benefit
from increasing market size and lowered production costs. Service providers also seek
international standards so that they can attract more customers with the same technical
platform. Nation-states want to play the standards game because they can use standards
setting as a political tool to formulate domestic industrial policy and influence
international trade.
Study of standards setting in telecom has been informed by four major
approaches. Political economy scholars look at how economic motivations and political
decisions interact to influence the standards-setting process and outcome.
2
Economists
have mostly concentrated on network externality and compatibility as well as the ensuing
competition strategies because standards can be an effective competitive tool in building

2
For instance, Hawkins (1996), Mansell & Hawkins (1992), Mattli (1997), Silverstone & Mansell
(1996), and Sung (1997).

3

an installed base, expanding network effects, and preempting opponents.
3
Scholars of a
historical perspective, who have analyzed the evolution of the international telecom
standards regime and standards under special historical circumstances, have implied that
history counts.
4
Scholars of an institutional orientation have argued that institutional
context and the telecom regulatory regime shape the telecom standards-setting process.
5
2. Research Problem and Objectives
In spite of the wealth of research into the different facets of international
telecom standards setting, certain issues, both conceptual and empirical, still need to be
explored. First, its two-level-game nature has been inadequately addressed. Not enough
attention has been paid to the linkage between the national and international. As a result,
an analytical framework coupled with an empirical investigation focused on the growth
of national standards into international standards is missing. Second, even though
coverage by journalists has prompted heated discussion in the media (e.g., Biggs, 2004;
Chen, 2004), there has been a dearth of research into the recent telecom standards-setting
efforts made by China.
6
Therefore, this study attempts to answer some questions that
have not been adequately dealt with in the literature. Some are general to telecom

3
Arthur (1989), Besen & Farrell (1994), Besen & Saloner (1989), Farrell & Saloner (1988), Gandal &
Shy (2001), Katz & Shapiro (1986), Katz & Shapiro (1994), and Liebowitz & Margolis (1994) have
conducted excellent research on the economics of technical standardization.
4
Such argument is explicit or implicit in Drake (1994), Rutkowski (1995), and Selian (2001).
5
This line of argument can be found in Abbott & Snidal (2001), Bonino & Spring (1991), Egyedi
(2000), Genschel (1997), Schmidt & Werle (1998), and West (2000).
6
Fan (2001), Kennedy (2004), Qiu (2005), and Tan (2001) have provided descriptive or preliminary
analysis of China’s standards-setting efforts.

4
standards setting, and others are specific to China’s recent initiatives. For instance, what
are the forces behind the growth of domestic telecom standards into international ones?
Why do some standards succeed in developing into a global standard while others fail?
Why does China want to develop its own technical standards in the presence of globally
favored standards? Why did Chinese-set standards not succeed as international
standards?
Therefore, the goals of this study are twofold. First, it proposes, within the
general framework of two-level game theory, a domestic-global linkage model to
theorize about the development of national telecom standards into international ones.
With this framework, I look at international telecom standards setting as an intricate
interaction of technical work and political economy, and examine the interaction of
technology, interests, and power that shape the technical process and outcome. Within
this framework, I argue that international telecom standards-setting process is a two-level
game that involves standards setters, network operators and bureaucrats at the national
and international levels. I also argue that three key factors—technical base, interests, and
power behind the technical process—interact with each other in enabling the transition of
national standards into international ones.
This study also enriches the literature by providing two case studies of China’s
recent initiatives, TD-SCDMA (time division synchronous code division multiple access)
for third-generation mobile communications, and WAPI (wireless authentication and

5
privacy infrastructure) for wireless networking These two communications standards
have been well publicized by the popular press and trade journals but are missing from
scholarly examination. In this regard, I intend to provide a systematic, comprehensive
study of the political economy of China’s global telecom standards-setting efforts within
the international telecom and trade regimes.
I make the following arguments. First, conflicting interests and unbalanced
relative power among Chinese actors (i.e., standards setting firms, service providers and
government agencies) weaken local standards setters’ influence. Second, competing
interests and political-economic power of international competitors have made China’s
initiatives subject to rules of international trade, thus weakening China’s bargaining
position in standards setting, and causing China to suffer setbacks in its standards-setting
ambitions. As a result, TD-SCDMA has only achieved partial success in its global effort,
while WAPI suffered from failure. China needs more innovative strategies in its attempt
to set global telecom standards if it still expects to achieve competitiveness and reap a
share of the global standards market.
This study draws from several bodies of literature: political economy of global
telecom standards setting, telecom standardization under international systems, and
institutional analysis of standards setting. While the international telecom regime and
trade system serve as a broad context within which to formulate the conceptual
framework, the political economic logics and dynamics of China’s standards-setting

6
initiatives and setbacks form the core of the case study part of this dissertation.
There are seven chapters in this dissertation. Following the introduction,
Chapter 2 reviews the literature relevant to this study, with focus on three components:
the political and economy of standards setting, the evolution of the telecom
standardization regime under different international systems, and the institutional context.
Chapter 3 focuses on the theoretical framework and methodology for the present study.
Chapters 4 and 5 are devoted to the histories and analyses of the two cases, TD-SCDMA
and WAPI. Chapter 6 is a comparison of the two cases, with an eye to the similarities and
differences in the limited success and failure of the two standards. It also presents the
success case of the GSM standard as a contrast to the partial success of TD-SCDMA and
the failure of WAPI. Chapter 7 concludes the study with a summary of the findings, as
well as lessons learned from China’s initiatives, strategies for promoting domestic
standards, contributions of the study, and limitations of the study and directions for future
research.

7
Chapter 2: Technical Standards and Their Ramifications

One prominent characteristic in the rise of modern society has been the
emergence of large technological systems such as railroads, electrical power lines, and
communications networks. These large systems, comprising interconnected parts, rely on
compatibility standards as the underlying mechanism that links all system elements
together. This ensures the harmonious functioning of the system as a whole. The
importance of technical standards, which has been credited with facilitating compatibility,
diffusing technology and enhancing public welfare in modern society, cannot be
exaggerated (e.g., Egyedi, 2000; Farrell, 1987; Hanseth, Monteiro, & Hatling, 1996;
Hawkins, 1996; National Research Council, 1995; Salter, 1999; Schmidt & Werle 1998;
Wilson, 1997). However, the term “standards” defies an easy, clear-cut definition. For
instance, standards have been variously defined as “decisions about the acceptable
design” (Salter, 1999, p. 101), technical specifications “to provide a common design”
(Lemley, 2001, p. 1), formal agreement (Shurmer & Lea, 1995, p. 379), or “a point of
reference” (Hawkins, 1996, p. 158). The variegated definitions, rather than reflect
disagreement among scholars, actually attest to the breadth and omnipotence of the term.
Regardless of the specific way in which it is defined, the term implies agreement among
participants in the technical process. This agreement requires adherence to technical
specifications so that a common platform is ensured to achieve maximum efficiency. As

8
Salter (1999) summarizes succinctly, standards represent “agreements about the
parameters of the new products and systems to be developed, about acceptable levels of
impingement or harm, and about the points of interconnection among products and
systems” (p. 109).
1. Dimensions and Strategic Importance
Technical standards can be classified into three major categories: reference,
minimum quality, and compatibility (David & Greenstein, 1990, p. 4). They may also be
defined by the ways in which they are developed, namely, formal, de facto, and de jure
standards. Formal standards, also called voluntary standards, are agreed upon by
members of a standards development organization and recommended for voluntary
adoption in the market. This usually involves technical and political agreement among an
expert committee (Schmidt & Werle, 1998, p. 43). For example, Ethernet standards for
local area network and MEPG (Moving Picture Experts Group) standards for audio/video
compression were developed by working groups of ISO (International Organization for
Standardization)/IEEE (Institute of Electrical and Electronics Engineers). ISDN
standards for high-speed Internet access set by the ITU are also formal or voluntary
standards. De facto standards come into being as they evolve through market competition.
These become the actual standards adopted in the market, and they are determined by the
competition strategies of certain dominant standards setters in a commercial environment.
Microsoft’s DOS for personal computing, Ericsson’s Bluetooth for data transmission, and

9

Sony and Philips’ CD format for audio storage are all de facto standards. De jure
standards are those imposed by regulatory agencies that anticipate compliance from
players in the marketplace. In this case, the standards are mandatory, issued as “binding
solutions to coordination problems” (Schmidt & Werle, 1998, p. 43).
Beyond the aforementioned types, standards can also be categorized as
proprietary and non-proprietary, depending on whether or not a claim is made to the
intellectual property rights of the technical standards. Traditionally, firms treat their
standards as proprietary. They claim intellectual property rights because of the huge
investment required to develop the standards and the incentive to capitalize on them to
generate profits. Formal standardization organizations, on the other hand, may treat their
standards as non-proprietary public goods and make them available for use in the general
market (Salter, 1999).
7
The interface standards developed by Microsoft are proprietary
standards, as are the compatibility standards developed by Qualcomm for mobile
communications. However, interface standards developed under the open-source
movement in the computer industry are non-proprietary.
No matter how they are set and how they are designated, common standards
bring positive externalities to the market. Underpinned by technical compatibility, they
yield benefits for both consumers and producers (Hjelm, 2001; Shapiro & Varian, 1998).
8

7
De facto standards are usually proprietary, while de jure standards are non-proprietary, or
open standards.
8
In some rare case deliberate adoption of a different standard proves crucial to a country. For instance,

10

Consumers benefit from the extensive adoption of a standard that enables them to be
interconnected with others within the system, while producers benefit from the enhanced
value of their products arising from a large installed user base.
9
However, the market
“will act in its best interests” (Cargill, 1997, p. 65), which may not correspond with the
interests of a standards setter. In this type of situation, due to non-technical factors, the
better standard may not prevail in the market. The classic example of an inferior
technology dominating the marketplace is the case of Betamax versus VHS in the VCR
market.
10
Scholars have attributed strategic importance to compatibility standards in the
ICT sector (e.g., Lundvall, 1995; Hanseth et al., 1996), as they “ensure that one
component may be successfully incorporated into a larger system because it adheres to
the interface specification of the standard” (Hanseth et al., 1996, p. 411). Standardization
in the ICT sector makes it possible for different components of an information system,
whether national or regional in scope, to achieve seamless connection for voice and data
transmission. In the national information infrastructure, technical standardization has
been crucial, as it makes the modern information infrastructure functional and enables
information to flow from terminals to terminals and from households to households. In a

Finland’s railway gauge is different from that of Russia. So in the event of a Russian invasion, the
different railway gauge would help delay the transportation of Russian troops.
9
Gandal, Salant, and Waverman (2003) argue that in mobile communications, a single, unified
standard is less important than interconnection and coverage, and can be less valuable to consumers
than network interconnection and coverage.
10
Betamax is arguably a better standard than its rival VHS, yet due to marketing and licensing
miscalculations, Betamax machines have been phased out, while VHS has emerged as the winner.

11

larger context, technical standardization has deep implications for the global information
infrastructure, enabling steady transmission of information from one nation to another,
and eventually transforming our globe into a single information society.
11

As an integral part of the ICT sector, telecom network components interconnect
and interoperate thanks to compatibility standards. In the international
telecommunications regime, technical standardization, or standardized networks and
equipment, is one of the major norms (Cowhey, 1990; Drake, 2000; Rutkowski 1995).
12

With compatible and interoperable technical standards underlying the worldwide telecom
infrastructure, network components among different national telecom systems can
communicate with each other without any notable obstacles.
Yet the diffusion of compatibility standards throughout telecom networks at the
international level is not an easy process; it entails the support of service providers,
equipment manufacturers, and common users across national borders. Behind the growth
of compatibility standards in the international telecom regime, there are technological
forces (David & Shurmer, 1996; Genschel, 1997; Schmidt & Werle, 1998) and economic
rationales (Bekkers, Duysters, & Verspagen, 2002; Sung, 1997; Wallenstein, 1990).
13

11
For the importance of standards for information infrastructure, see Baron (1995), Hanrahan (1995),
Johnson (1995), and Schoenberger (1995).
12
The other two norms are jointly provided services and organized global commons (Cowhey, 1990).
13
For instance, Sung (1997) attributes technical standardization in international telecom to the
technical complexity in telecom networks and the aggressiveness of multinational equipment
manufacturers and service providers. The technical complexity of telecom networks calls for
compatibility standards, as it is efficient for national networks to operate on a compatible platform.
Multinational equipment manufacturers and service providers seeks technical standardization because
with it they can benefit from low cost and economies of scale (p.335-336). Bekkers, Duysters and

12

As Hawkins (1996) points out, standards for communication networks are
“products of social, political, and economic relationships” (p. 157). Given the interaction
of the social, economic, and political elements behind the technical process, social
scientists interested in the non-technical dynamics have studied technical standardization
from various perspectives. Three bodies of literature relating to the current research are
reviewed and discussed below. The first examines the economic and political dimensions
of compatibility standards. The second traces the evolution of the telecom standards
regime under the umbrella of the international telecom regime and the international trade
system. The third investigates the broader institutional context that influences the process
and outcome of standards-setting efforts. The remainder of this chapter first offers an
overview of the three complementary views, and then discusses what is missing from the
current research.
2. The Economics and Politics of Technical Standards
Primarily an engineering practice, standards setting fundamentally reflects the
strategic behavior of the players involved, whether standards setters, manufacturers, or
national governments. The strategic behavior stems from the economic and political
motivations that cause the players to act in certain ways within and outside of their
defined realms. Standards setting in telecom as a technical process has important

Verspagen (2002) contend that the increasing technical sophistication of telecom terminals and
infrastructure and growing communication between nations justify the surge of common technical
standards for the purpose of economies of scale (pp. 1144-1145).

13
economic and political dimensions to it; the process impacts and is impacted by
economic and political priorities (David, 1995; Mansell, 1993; Silverstone & Mansell,
1996; Wallenstein, 1990). For instance, David and Shurmer (1996) point out that
standards “can have long-term political and economic implications” (p. 797). Similarly,
West (2000) argues, “product compatibility standards are tightly interwoven with
economic and political institutions” (p. 198). The economic stakes lies in the huge
financial investment committed to the technical process and the incentive to reap
financial gains from the successful adoption of the standards. For instance, in 2005
Qualcomm made 451 million USD from royalty earnings by licensing its CDMA
technology (“Royalties drive,” 2005), while in 2006 Nokia paid to Qualcomm six USD
for each of its cell phones sold using Qualcomm’s technology (Helper, 2006).
The economic stake also lies in the role of compatibility standards as an
effective competitive tool to drive out opponents. The battle between JVC and Sony for
the video recorder market that ended in the dominance of JVC’s VHS is a classical
example. Also important are the political interests involved in the standards-setting
process, the political will behind the process, and the political decisions made due to it. A
recent illustration is the Chinese government’s mandate that by June 1, 2004 all devices
for its domestic wireless networking market must be governed by its home-grown WAPI
standard. This apparent political move to promote its domestic standard led to protests
from the Wi-Fi Alliance and other international chipmakers. The dispute concluded with

14

a suspension of the mandate, largely due to political pressures from the U.S. government.
which aims to protect its own domestic wireless industry. In other words, parties
concerned may utilize telecom standards as economic and political weapons to advance
their interests or make concessions in exchange for results more desirable.
2.1 The Economic Dimension of Technical Standards
Although it is a technical and engineering process, technical standards setting
also has an important economic dimension to it. It is “a form of competition” (Besen &
Saloner, 1989, p. 189) for market players formulating their competitive strategies, and
also an “economic infrastructure” (Tassey, 1995, p. 161) crucial for national economy.
The economic literature on standards setting has discussed the economic benefits of
compatibility standards in realizing a network effect and reducing costs (e.g., O’Connor,
1988; Farrell & Saloner, 1987; Hergert, 1987; Gabel, 1987; Reddy, 1987; Tassey,
1995).
14
In the same light, some scholars link technical standards to the competition
strategy of firms, examining their impact on corporate and national competitive positions
(David & Shurmer, 1996; Hjelm, 2001; Krislow, 1997; Shapiro & Varian, 1998; Sung
1997). Basically, if a standard is established in the marketplace with a sufficient installed
base, the firm can create a competitive environment favorable to itself. It can then
promote its proprietary standard and gain large returns from its leadership in the market.

14
This section focuses on general economic concepts as they relate to technical standardization; for
instance, the economic explanation of technical standardization. The discussion does not necessarily
refer to econometric modeling of standards setting.

15

It can also prevent competitors from establishing a foothold and challenging its market
dominance.
15
This type of competitive advantage enabled by established standards, when
replicated in the larger context of a national economy, can translate into national
technological supremacy and economic clout in the global arena.
On the other hand, the economic literature has explored ways to achieve
standardization in the presence of network effects, competitive market conditions,
contentious committee situations, or rival standards (Besen & Farrell, 1994; Besen &
Saloner, 1989; Berg, 1987; Farrell & Saloner, 1988; Grant, 1987; Grindley, 1995; Katz &
Shapiro, 1986; Katz & Shapiro, 1994; Pelkmans & Beuter, 1987; Shapiro & Varian, 1998;
Swann, 1987). For instance, Besen and Farrel (1994) discuss developing an early lead,
attracting suppliers, committing to price reductions and making pre-announcements as
effective tactics for competition. Besen and Saloner (1989) examine how two factors
affect the nature and outcome of standards-setting process. The first is interested parties’
private incentives to promote the standard, and the second is their preferences for a
certain standard (pp. 178-179). These two factors translate into four scenarios: the pure
coordination case, the pure public goods case, the pure private case, and the conflict case
(Besen & Saloner, 1989).
16
In each of these four cases, the magnitude of the parties’
comparative interests and preferences is the key to the success of the standard, as they

15
The rivalry between VHS and Betamax standards provides a good example in this case.
16
For a detailed discussion of the nature and outcome of standards setting in these four cases, see
Besen & Saloner (1989, pp. 180-186). Noam (2001) develops similar scenarios: pure coordination
case, pure public goods case, pure private goods case, and conflict case (Noam, 2001, pp. 200-202).

16

largely determine what scenario to follow in order for a company to succeed in a
particular standards-setting battle.
17

Among the crucial economic leverages that standards setters can exploit to their
advantage in standards wars are intellectual property rights (IPRs), which allow standards
setters to collect royalties as rights owners. IPRs are fundamental components embedded
in telecom standards and critical to technological innovation. IPR issues have long
attracted the attention of scholars who argue that ownership of IPRs is crucial for a
company’s competitive strategy in that they help shape market structure and maintain
rights owners’ competitive advantages over competitors in the marketplace (Farrell, 1995;
Lemley, 2000; Naemura, 1995; Prins & Schiessl, 1993; Shurmer & Lea, 1995).
18

Powerful in market competition, IPRs determine which company is the market leader and
which is the market follower. Correspondingly, they bring in huge profits to the leader
who sets market trends and licenses its technology.
19
As Brooks (1975) reveals, the
dominant share of IPR ownership by AT&T determined the structure of the U.S. telecom
market in the early 20th century. Bekkers, Duysters, and Verspagen (2002) empirically
demonstrate that Motorola and Nokia’s dominance in essential IPRs has determined in a

17
However, standards setters do not always come up with the standard that users want. For a
discussion of the situations where this may occur, see Besen (1990, p. 5).
18
Weiss and Spring (2000) identify distinct intellectual property issues associated with different
phases of technical standardization, development, dissemination, and implementation. For instance, in
the development stage, patent and copyright issues arise, and in the dissemination stage, copyright of
standards documents is involved (pp. 64-65).
19
Firms do not always manufacture products that operate on the standards they develop; they can
make profits by licensing their technology to manufacturers. For instance, Sony licenses their CD
technology to manufacturers, and Qualcomm licenses its CDMA technology to chip manufacturers.

17
major way the market structure of second-generation mobile communications.
However, IPRs are a double-edged sword. Although intended to protect the
incentives for innovation, if the IPR holders assert their rights to an excessive and
harmful extent, they may entrench the dominance of original rights owners, and thus
hamper diffusion of technology and innovation. Standards setters’ decisions on the
licensing terms and conditions affect the pace of diffusion of technology, and scholars
have called attention to the tension between private interests of standards setters and the
public interest in technology diffusion (Bekkers et al., 2002; Bekkers & Liotard, 1999;
Brooks, 1975; David & Shurmer, 1996; Farrell, 1995; Iversen, 2000; Shurmer & Lea,
1995; Weiss & Spring, 2000; Updegrove, 1995).
Between the two poles of private creative incentive and public interest, a
balance has to be maintained. Some have proposed ways to ease the private-public
tension in this dilemma. For instance, Shurmer and Lea (1995) state that policy makers
have to decide “how far IPRs should be overridden in the public interest of common
standards” (p. 378). Farrell (1995) argues that excessive IPR protection warrants policy
intervention on the basis of the essential facility and merger doctrine. It might be
relatively easy to envision a middle ground in theoretical terms, but compromises are
always harder to make in practice. So in practical terms, the tension between private
incentives and public interests will continue to haunt policy makers in a long time to
come. The challenge resides in formulating policy options that promote private creativity

18
and ensure public needs at the same time.
2.2 The Political Dimension of Technical Standards
The standards-setting process is also a politically charged activity due to the
public policy issues and national interests involved. In technical standards setting,
national governments have always played a prominent role. In the telecom sector, for
instance, the ITU (International Telecommunications Union), as an intergovernmental
organization, provides a platform for national governments to debate and negotiate their
national interests in international telecom. As Sung (1997) puts it, “the negotiation and
enactment of technical standards is a form of political behavior,” incorporating “all the
dilemma of international relations” (p. 324).
Thus the standards-setting process may often be used “to advance national and
regional industrial policies” (Sung, 1997, p. 324), imbuing a seemingly technical and
economic activity with political implications. For Hawkins (1996), public policy goals
are always in the center stage of standards setting. In discussing the political economy of
standardization, David and Shurmer (1996) point out that growing politicization of the
standards-setting process serves to “raise the level of vested interests” (p. 800), and
intervention in the name of national interests often complicates the international process
and makes international consensus hard to achieve. For instance, national governments
may gain economic advantage by using technical standards as an instrument to protect
domestic industry against foreign competition, or to entrench monopolization to restrain

19

internal competitors (Krislov, 1997).
In essence, because of the huge economic stake, standards setting is not
conducted in a political vacuum. Instead, political forces attempt to exploit the technical
process for benefits, causing tension between market players and even nations. These
tensions eventually demand a political explanation and solution. The
European-developed GSM standard is a good example of the politicization of technical
standardization. It has been deliberately adopted as the pan-European standard to serve
the political ends of European unification.
Because of the economic and political stakes involved, standards setting has
become a matter of public policy that solicits government participation (Mansell, 1995;
Schmidt & Werle, 1998; Updegrove, 1995). As a result, public involvement in the
technical process is prominent; however, the optimal role of public participation has been
subject to debate (e.g., Ferne, 1995; Repussard, 1995).
20
This line of research delves into the economic incentives, competition strategies,
and political motivations behind the technical process of standardization. This approach
has showed the economic and political dynamics surrounding and influencing the
standards-setting process. Nevertheless, conceptual discussion and empirical
investigation of how political-economic interests and political-economic power interact

20
For instance, Ferne (1995) outlines different ways by which governments can participate in
standards-setting activities (p. 464), and Repussard (1995) differentiates between public sector
involvement in “upstream” and “downstream” standardization (pp. 64-66).

20

with each other and how they affect the technical process at national and international
levels remain absent from the literature. Political and economic decisions lie at the core
of the technical process, and the political economy literature provides a conceptual
framework to rationalize the setting of technical standards as determined by political and
economic choices.
3. Institutional Context of Telecom Standardization
Institutional analysis is often used to evaluate the constraints on telecom
policy-making under different regulatory contexts (Grindle & Thomas, 1991; Levy &
Spiller, 1996; Noll, 1986; Noll, 1999; Singh, 2000; Sinha, 1995). Inquiry into standards
setting in the telecom industry is also informed by institutional analysis. The main
argument is that the institutional context frames and shapes the process and outcome of
technical standardization (e.g., Bonino & Spring, 1991; Egyedi, 2000; West, 2000). For
instance, Hawkins (1996) argues that technical, political, economic, and social
institutions characterized by “structural alignment and realignment” (p. 158), which is
determined by “inter-institutional dynamics” (p. 169), exert an impact on the making of
voluntary standards in the communication sector.
21
Genschel (1997) argues that
institutional arrangements have evolved to combine centralized bargaining systems and
markets for international telecom standards setting.
22
He further points out that the

21
Hawkins (1996) identifies three stages in the standards setting process, each characterized by the
interaction between technical and non-technical issues (pp. 182-183).
22
By “bargaining systems” Genschel (1997) refers to the bargaining process and outcomes with the
centralized standards committees and “unilateral adoption between these committees” (p. 618).

21

interaction between these two aspects reinforce each other’s strengths and make the
standards-setting process function well. Egyedi (2000) argues that the “institutionalized
ideology” (p. 50) of formal standards-setting organizations sets direction for and
guarantees continuity in the standards-setting process from negotiation through
implementation. West (2000) treats technical standards as “the consequence and
antecedent” (p. 199) of political and economic institutions. After comparing the
deployment of mobile phone technology in North American, Europe and Japan, he finds
that regulatory legacy, political heritage, and path dependency constrain the
dissemination of mobile communications technology in the U.S. market. In their
normative analysis of international standards, Abbott and Snidal (2001) recommend
institutional analysis where different levels of governance, whether national, regional or
international, require a specific form appropriate to that particular level (pp. 362-363).
The most comprehensive study of international telecom standards setting from
an institutional perspective is perhaps that of Schmidt and Werle (1998). Adopting an
actor-centered institutionalism,
23
they focus on corporate and bureaucratic actors, not as
single, unrelated units acting on their own, but rather as “composite actors” (p. 20). It is a
framework that integrates “actor-theoretic individualist components with
institution-theoretic structuralist components” (p. 16). In their framework, actors are

23
This theoretical framework was first developed by Scharpf (1997). It includes institutions, actors,
and actor constellations as its major concepts, and focuses on modes of interaction among actors or
actor constellations within an institutional setting.

22
treated as “having goals, orientations, perceptions, values, interests and preferences, and
as acting in an intentional and purposeful manner”(p. 21), and technological choices stem
from “the interactions of intentional actors (p. 16).
Institutional analysis has described a broad institutional context of technical
standardization, and pinpointed institutional constraints that shape the technical process
(for instance, regulatory frameworks, legal systems and political orientations). For the
purpose of this research, institutional analysis is a useful methodological tool; it sheds
light on the case study, providing an analytical tool to account for how institutional
arrangements of China create constraints on and shape the outcome of its
standards-setting efforts.
4. Telecom Standardization Under International Systems
International regimes have always been involved in the governance of global
network infrastructure for information access (Mansell, 1996). Given the global presence
and scope of telecom standards, scholars have traced the evolution of telecom standards
setting under international systems—either the international telecom regime or the
international trade regime—and examined the impact of the process on the outcome of
domestic standards-setting efforts aimed at the international market.
4.1 Telecom Standards Under the International Telecom Regime
At the international level, compatibility between and among autonomous
national networks was achieved through inter-governmental agreements. Much of this

23

work took place within the framework of the ITU.
24
However, technical standardization
in international telecom has undergone a drastic change in terms of structure and strategy.
This line of inquiry traces the evolution of the standards-setting regime within the
context of international telecom and trade systems. The old international telecom regime,
characterized by national sovereignty, joint service provision, and international
interconnection (Cowhey 1990; Drake 2000; Genschel, 1997; Rutkowski 1995; Trebing
& Estabrooks, 1993) and organized under the ITU, sought to protect the international
monopoly structure comprising national monopolies. Under the old order, the
standards-setting regime was dominated by public policy discourse under the umbrella of
the Consultative Committee on International Telephone and Telegraph (CCITT) of the
ITU, where national governments participated in negotiations to reach agreements on
standardization. Because of extensive government involvement that brought
consensus-seeking and power-based mechanisms with it, the standards-setting process in
international telecom was slow and ineffective (Drake, 1994; Sung, 1997). Because of
the infrastructural nature of telecommunications, monopolies (Shurmer & Lea, 1995, p.
389) and national governments (Schmidt & Werle, 1998, p. 44), as opposed to market

24
In addition to the ITU, there are international standards organizations in related fields with different
foci, such as the ISO (International Organization for Standardization) and the IEEE (Institute of
Electrical and Electronics Engineers). There are also regional standardization organizations and
national standards bodies, such as the ETSI (European Telecommunications Standardization Institute)
and ECMA (European Computer Manufacturers Association) in Europe. At the national level, each
government has its own national standards body, such as the ANSI (American National Standards
Institute) in the United States, and the SAC (Standardization Administration of China) in China. For a
listing of major national, regional and international standards organizations in telecom and related
fields, see MacPherson (1990).

24

players in a pure market process, played a major role in standards setting. In other words,
under the old regime, decisions about international standards setting rested in the hands
of national and international monopolies, and telecom standards setting was very much a
governmental activity.
Rapid technological development in the telecommunications and information
industry has undermined the natural monopoly assumed by the state-sanctioned telecom
operators, and greater user demand has also challenged the traditional monopolistic
arrangements (e.g., Cowhey 1990; Cowhey & Klimenko, 2001; David & Shurmer, 1996;
Genschel, 1997; Genschel & Werle, 1993; Krasner, 1991; McLarty, 1998; Noam, 1989;
Noll & Rosenbluth, 1995; Rutkowski, 1995). Technological advances led to the
regulatory and structural changes in the telecom sector, replacing the old monopolistic
model with a “market access model” (Drahos & Joseph, 1995, p. 620). This model is
characterized by competition between and among firms and countries in international
telecommunications, as well as by increased international activity such as foreign direct
investment, strategic alliances, and cooperative ventures.
25
This regime transformation
also set off a significant change in the standards-setting system in international telecom
(Bense, 1995; Genschel, 1997; Genschel & Werle, 1993; Keil, 2002; Rutkowski, 1995;
Slater, 1999; Shurmer & Lea, 1995; Tassey, 1997). New trends emerged and unforeseen

25
This fundamental change occurs at two levels, the national level, where new entrants have entered
the market, and the international level, where global carriers have started to play an increasingly
important role (David & Shurmer, 1996, p. 798).

25

consequences unfolded in wake of the regime change. The landscape and orientation of
telecom standards setting throughout the globe was transformed. While the ITU-T
(formerly CCITT) continues to focus its efforts on the development and recommendation
of operational and technical standards worldwide, deregulation and liberalization have
put the CCITT on the sidelines. These forces have removed the regulatory obstacles for
industrial players like multinational corporations and international consortia, allowing
them to assume more important roles in setting communications standards.
26

Organizationally, “a maze of institutions” (Akwule, 1992, p. 115) has surfaced to propose
telecom standards, and the standards-setting process in international telecom has come
into “a state of flux” (Shurmer & Lea, 1995, p. 390). The organizational structure of the
formal standards-setting regime has been transformed from a public-centered structure
into a commercial one.
27
For instance, new, ad hoc standards organizations have emerged
to constitute “a new architecture for telecom standards making” (Rutkowski, 1995, pp.
239-240). As the outdated model of standards setting has collapsed, regional initiatives to
set international telecom standards are on the rise (David & Shurmer, 1996; Mattli, 2001;
Sung, 1997). In this new standards regime, corporate actors, especially multinational

26
For discussions on the rise of consortia and their role in communications standards setting, see, for
instance, Hawkins (1999) and Updegrove (1995).
27
Other authors use similar terminology to describe the transformation of standards-setting regime.
For instance, it is a “hybrid regime” where the “industry reigns supreme” (Salter, 1999, p. 112), “a
mixture of cooperation and competition” (Rutkowski, 1995, p. 241), a “fragmented standard-setting
structure” (Genschel, 1997, p. 616) combining centralized and market approaches, or “institutional
isomorphism and peaceful co-existence” (Werle, 2001) between the official and private standards
organizations. This transformation is in line with the transition from the public support model to a
public-private mixture in technology development over the past two decades (Tassey, 1997).

26

telecom corporations, that have the resources and the incentives to access global markets,
are the more important players. Intergovernmental activities in standards setting, on the
other hand, have become less prominent and nation-states less relevant. However, that
does not mean that the public sector is entirely excluded from the standards-setting
process; it is still represented through its participation in international organizations and
its role in the prescription of national standards. In general, on the one hand national
governments in the name of public policy and public interest take part in standards
setting, while on the other hand commercial interests and companies’ competitive
strategies have started to play a more important role to influence the process.
4.2 Telecom Standards Under the International Trade System
Not only have compatibility standards been a fundamental and institutionalized
component of international telecom regimes; they have long been part of international
trade relations (e.g., Aronson, 1990; Cheah, 1993).
28
Telecom standards setting can also
be a crucial component of a national strategy in international trade (e.g., David &
Steinmueller, 1996; Gandal & Shy, 2001; Hjelm, 2001; Lecraw, 1987; Long & Wildner,
1997; National Research Council, 1995; Tanabe, 1997; Warsaw, 1997; Warshaw &
Saunders, 1995; Wilson, 1997). Use of compatibility standards can be an efficient
non-tariff tool to boost or limit international trade. For instance, Sung (1997) points out

28
For instance, within the international trade system there are Standard Codes adopted during the
GATT’s Tokyo and Uruguay rounds, and the Technical Barrier to Trade Agreement adopted by the
WTO.

27

that standards must be viewed within the international economic system, where they may
be used to advance national industrial policy (p. 333). Swann, Temple, and Shurmer
(1996) empirically show that standards facilitate intra-industry trade in the U.K., and that
the U.K.’s advantage in standards setting has a positive impact on its trade balance.
Arguing from a liberal-strategic trade perspective
29
, Lembke (2002) posits that the
coordinated efforts of the European Union and the multinational corporations in mobile
communications standards setting constitute an effective trade strategy, securing market
access to the Asia-Pacific region (pp. 41-42).
In the telecom sector, compatibility standards represent an export market and a
potential for bringing in trade revenues. If a country adopts a standard compatible with
that of other countries, related products manufactured by international firms can access
that market with no barriers, and international trade will be promoted. On the other hand,
if a country imposes a standard incompatible with that of other countries, related
products made by international firms cannot access that country’s market. As a result,
non-tariff trade barriers would be created to keep out foreign competition and protect
domestic firms, thus impeding international trade. Yet the new international trade regime,
the World Trade Organization (WTO) (including its Technical Barrier to Trade
Agreement) monitors national governments’ behavior in standards setting. National

29
Lembke (2002) defines this as a model of critical industry support under which political actors and
industrial players cooperate to shape technology infrastructure, in contrast with the subsidy-based
industry support model characterized by protectionism (pp. 42-48).

28
governments are prohibited from choosing incompatible standards developed by
domestic industry over those developed by overseas competitors, unless the choice can
be justified on the grounds of national security.
This line of inquiry has probed the impact of international systems on standards
setting and provided a context to understand the evolution of national standards under the
international telecom and trade regimes. Nevertheless, it has only focused on the macro
influence of international organizations, and has not addressed the reaction of
multinational corporations to competing standards at the international level. With much
of the standards-setting power transferred to the private sector, giant multinational
corporations can influence global standards setting with their resources, preferences, and
interests. However, there has been little research on this topic. Moreover, the WTO, the
reformed international trade system with institutionalized dispute resolution and
enforcement mechanisms, poses new questions for research on international standards
setting. For example, how are standards-related trade issues resolved under the new trade
regime? The literature to date has not addressed this topic.
5 What Is Missing from the Current Literature
Exhaustive as the literature seems, some important theoretical and
methodological issues have not been attended to by scholars. First, with a focus on the
general political-economic, institutional, and international environments, the three
approaches described above fail to give due attention to technical standards per se. On

29

the empirical side in particular, they have failed to examine the technical process in
perspective, i.e., in a comparative context against similar standards-setting efforts in a
global context. In many cases, parallel campaigns are underway to set standards for
similar technical systems; for instance, the fight between Sony’s Betamax and JVC’s
VHS for the videocassette recorder market, and the U.S., Japanese, and European
competition in analog television standards and later in high-definition television
standards.
30
History is a reminder that standards are set in competition with each other
rather than in a competition-void vacuum. This calls for research into the making of
technical systems per se and analysis of standards setting in a comparative context.
Second, the linkage between national and international standards is yet to be explored.
International telecom standards are national or regional ones prior to their global
adoption. For example, the GSM standard was developed in Europe before spreading
throughout the globe, and the CDMA standard was created in the United States before
worldwide adoption. The literature, however, has focused heavily on telecom standards
in regional or global contexts. Analysis of the political-economic factors behind telecom
standards setting at the national level, and particularly theoretical articulation to link the
domestic and the international, are much needed. Therefore, it is imperative to develop

30
In analog television, three transmission standards co-exist: the NTSC (National Television System
Committee) standard developed by the United States, the PAL (phase alteration by line) by Germany,
and SECAM (Sequence Couleur a Memoire) by France. Multiple transmission standards are
developed for digital television: the MUSE (Multiple Sub-Nyquist Sampling Encoding) standard in
Japan, the MACS (Multiplexed Analog Components) standard in Europe, and the ATSC (Advanced
Television Systems Committee) standard in the United States.

30
an explanatory framework that accounts for the conditions that transform a domestic
standard into a global one. Third, most of the current research has focused on
standards-setting efforts in Europe and North America. Little research has investigated
similar efforts in regions outside these two technological powerhouses. For instance,
research on China’s recent initiatives in setting TD-SCDMA in 3G (third-generation)
mobile communications and WAPI wireless networking is scanty (e.g., Cowhey &
Aronson, 2004; Fan, 2001; Qiu, 2005; Tan, 2001). How the process of standards setting
in China under its unique institutional conditions differs from that in Europe and North
America, and why China has not been successful in its recent efforts, require in-depth
analysis.
This study builds upon the three theoretical/methodological approaches that
have been reviewed here. Building on the existing literature, I will examine the impact of
political-economic elements and international systems on international telecom standards
setting in theoretical and empirical terms. This study will also build upon the two-level
game model (Putnam, 1988), and develop a domestic-global linkage model to analyze the
conditions needed for domestic standards to develop into international ones. With this
new approach to international telecom standardization, I will study the games played
around international telecom standards setting at both national and international levels, as
well as the interaction between the two levels. Seminal and provocative, Putnam’s
theoretical framework has stimulated theoretical elaboration and empirical studies in

31
international relations; however, it has never been applied to the two-level process of
international telecom standards setting. Adapting Putnam’s original framework, I will
conceptualize international telecom standards setting as a two-level game and link the
domestic and the international to account for the determinants behind the technical
process. By expanding the original framework, I will situate technical standards within a
competitive context with rival standards. I will also treat the comparative strength of
technology as a dimension equally as important as the political games and commercial
strategies played around the technical process. In other words, I will conceive technology
itself as part of the game in both domestic and global contexts.
Compared with theoretical/methodological approaches in the literature, the new
domestic-global linkage model will facilitate a more incisive theoretical discussion and a
more guided empirical analysis of international telecom standards-setting arena. For
theory building, I will start with the political, economic, and institutional aspects of
telecom standards setting within the national context. Then I will move on to the
international level of the process, focusing on how similar political and economic forces
at the international level affect the process and outcome of standards setting in the
context of global competition. I will propose that a comprehensive understanding of
standards-setting efforts in the international telecom arena should be based on an
examination of the linkage between the national level and international level. For
empirical analysis, I will examine China’s TD-SCDMA and WAPI in both national and

32
international contexts. I will also weigh the Chinese standards up against their
international competitors, and look into the political-economic factors at the two levels
that have thus far caused the Chinese standards to fail in their international bid.

33

Chapter 3: Domestic-global Linkage in International Telecom
Standards Setting: An Explanatory Framework

The dynamics of international telecom standards setting give rise to economic
and political actions taken at national and international levels, which defines the process
as a typical two-level game. In this chapter, I first provide an overview of the two-level
game metaphor, as well as its relevance to this study. I then examine the two-level nature
of the standards-setting process by surveying the interests and power involved at both
national and international levels. I also expand on the original two-level game model by
discussing the role of technical dimension in the outcome of standardssetting process,
and propose a domestic-global linkage model to account for the transition of national
standards to international standards. Finally, I present scenarios and hypotheses featuring
different conditions regarding technical competitiveness, interests, and power, thus laying
a conceptual foundation for the case study of China’s initiatives.
31

31
The emergence and growth of research on the social shaping of technology over the past 20 years
have defined and refined the study of technological systems in the general social context. This stream
of research argues that technology is not an isolated artifact, nor is technological evolution an isolated
process; social factors help construct the technology (e.g., Bijker, 1995; Bijker & Law, 1992; Hughes,
1987; Hughes, 1991; MacKenzie & Wajcman, 1985). This analytical framework has spurred studies
on the evolution of the railway system (Caron, 1988; Heinze & Kill, 1988; Salsbury, 1988), the
telephone system (Bertho-Lavenir, 1988; Galambos, 1988; Thomas, 1988), and information
technology (e.g., Lievrouw, 1996; Williams, 1997; Williams & Edge, 1996). Those studies focus more
on the broad social, political, organizational, and cultural factors that contribute to the construction of
technology; this study, however, is more specifically focused on how political and economic
considerations at national and international levels shape the outcome of technical standards setting.

34
1. The Two-level Game Model and Its Relevance to This Study
More than a decade ago, in an effort to understand international economic
negotiations among industrialized nations, Robert Putnam (1988) developed a “two-level
game” model as a theoretical approach to the issue of how domestic politics and
international relations interact with each other. His theorization lays bare the
entanglement of political strategies and actions at the national and international levels,
highlights the mutual reinforcement of internal politicking and external pressure, and
argues for an integrated approach to domestic constraints and international pressures.
Putnam (1988) puts forward his central claims as follows:

The politics of many international negotiations can usefully be conceived as
a two-level game. At the national level, domestic groups pursue their
interests by pressuring the government to adopt favorable policies, and
politicians seek power by constructing coalitions among those groups. At
the international level, national governments seek to maximize their own
ability to satisfy domestic pressures, while minimizing the adverse
consequences of foreign development. Neither of the two games can be
ignored by central decision-makers, so long as their countries remain
interdependent, yet sovereign. (p. 434)

According to the original model, in international negotiations each national government
has to deal with players at two different tables, its foreign counterpart at the
“international table,” and the internal political forces at the “domestic table.” This is a
complicated political situation that national governments must manage with great care, in
that on the one hand they have to satisfy foreign demand for international cooperation

35

while on the other hand they have to cope with internal pressures to protect domestic
interests. At the heart of Putnam’s theorization are the games played by domestic actors
and their foreign counterparts in domestic and international spheres, and in particular the
interplay between the international imperatives and domestic constraints defining the
contour and consequences of the games.
32
Or, in Putnam’s (1988) more vivid terms,
“clever players will spot a move on one board that will trigger realignment on other
boards, enabling them to achieve otherwise unattainable objectives” (p. 434). Thus, in
international negotiations, “bargaining is an interactive process, simultaneously shaped
by the pursuit of international gains and the political dynamics of domestic ratification”
(Evans, 1993, p. 397). As a result, games at both levels represent “a double-edged
process” (Evans, 1993, p. 397) where the “role of international and domestic factors in
the determination of outcomes is simultaneous and mutual” (Evans, 1993, p. 397). In
other words, implicit in the model is the “reciprocal influence of the two levels” (Milner,
1997, p. 63); that is, moves at the national level have an impact on the moves at the
international level, and vice versa. Eventually, outcomes of any international cooperation
and negotiation are dependent not only on the preferences of domestic actors but also on
the decisions made at the international level.

32
In his original model, Putnam examines the roles of national governments in playing games at the
dual levels and meeting domestic and international pressures. He also discusses concepts such as the
negotiation phase at the international level, the ratification phase at the national level, win-sets, and
the role of the chief negotiator and central decision-makers. This study adopts the general metaphor of
the two-level game, and focuses on the games played by domestic and international players at the
national and international levels. It does not develop arguments around the games played by national
governments at the two levels; nor does it borrow those concepts for conceptualization and analysis.

36
The two-level game model is relevant to this study and provides an appropriate
tool for theorizing and analyzing the international telecom standards-setting process for a
variety of reasons. First, setting an international telecom standard involves efforts at both
the national and international levels. While the making of a domestic standard is a matter
of national economic and political decisions, the transformation of that standard into an
international one involves international debate and competition. Also, at both the national
and international levels, corporate strategizing and political maneuvering characterize the
technical process among business firms and national bureaucracies. Accordingly,
economic and political actions are taken by and among sets of players. The actions taken
at the two levels imply competitive and cooperative moves, or games, shaped by the
preferences, interests, and goals of all actors participating in the process. In this sense,
the outcomes of international telecom standards setting efforts “depend on both the
international and domestic games (Milner, 1997, p. 63)”. Finally, the emphasis of the
two-level game metaphor on the interaction between domestic and international spheres
allows for a conceptual connection between the games at the national level and those at
the international level. Consequently, it can effectively account for the development of
national standards into international ones. Thus, the two-level game metaphor offers
conceptual and analytical foundations for this study.
2. Interests and Power in the Two-level Game of Telecom Standards Setting
Surrounding the economic and political aspects of the international telecom

37

standards-setting process are corporate actors and bureaucratic actors, each with their
own interests, goals, and power, who view the process from the perspective of their own
priorities, and wield their power to influence the process in their favor. Corporate actors,
mainly standards settersand network operators, aware of their roles in the process,
cooperate and negotiate with each other on the one hand, and pressure bureaucratic actors
for favorable policy on the other. Standards setters are the group of business enterprises
that set and promote technical standards through strategic alliances. Their ultimate goal is
to make profits in the marketplace with their technology and equipment as well as
intellectual property embedded in them.
33
Network operators control the infrastructure on
which the standards can be implemented. On the public side, bureaucrats, in charge of
allocating communications spectrum, awarding licenses and regulating related issues,
have to deal with pressure from corporate actors and politicians. Basically, standards
setters are in the center of the process, with network operators on a parallel level, to
influence the standards-making process. Bureaucratic actors, on the other hand, are in a
position to increase economic efficiency and enhance public welfare from a higher policy
ground by virtue of their regulatory authority. The interests and power of the players
involved in standard setting are summarized in the following table.

33
In most cases, the firms that develop technical standards also make equipment for their standards,
like IBM in computing, Sony in HD DVD and Qualcomm in mobile communications. For analytical
convenience this study adopts a narrow definition of “standards setters,” focusing on business
companies that develop standards and manufacture products or deliver services using their standards,
and excluding standards development organizations and government standards bodies.

38
Table 1: Interests and Power of Actors in Telecom Standards Setting
Standards setter Network operators Bureaucrats
Interests Royalties from the
equipment market
Market share Public welfare and
political power

Power
Expertise in standards
setting and equipment
manufacturing
Network platform
for the standard
Authority to allocate
spectrum and award
license
2.1 Interests and Power at the National Level
At the national level, standards setters, network operators, and regulatory
agencies all have their interests embedded in the process, their goals explicitly or
implicitly revealed, and their power positions leveraged to direct the process toward their
preferences. The strength of standards setters lies in their technical expertise, in their
ability to develop a technologically efficient standard that integrates various network
components into a compatible system, and in their ability to manufacture euiqpment that
is compatible with their standards. Manufacturing capabilities may prove crucial in
making a technical standard a commercial success in the marketplace. With equipment in
place, the standard can be tested and operated; without required equipment, the standard
is only a working standard in theory without a prospect to be rolled out. The development
of color television standards in the United States in the 1950s provides an example of the
strategic importance of the manufacturing capabilities of standards setters. After its
standard was adopted by the FCC in 1950, CBS was unable to move quickly into
commercial production of color TV sets because it had neither manufacturing capability
nor manufacturing allies behind it at that time. This, in part, gave RCA an opening to

39
push for its own technology. This subsequently became the U.S. standard, known as the
NTSC standard. The competition between CBS and RCA illustrates the importance of
equipment manufacturing capabilities in standards battles. Had CBS possessed
manufacturing ability to produce TV sets or cooperated with manufacturers, its own color
TV standard would undoubtly have taken a share in the market. For RCA, itself an
equipment manufacturer, its ability to manufacture TV sets helped its color TV standard
to dominate the U.S. market. Because of all the investment sunk into the research and
development, and the potential gains promised by royalties and licensing fees, they have
strong interests in seeing their own standard adopted and rolled out in the market so that
they can benefit from the equipment market and lcensing the technology to other
manufacturers. However, once the technical phase of standards development is
completed, they face the task of rallying technical and political support to make the
standard an operationally workable, commercially viable, and politically persuasive
standard in the domestic arena. On the one hand, they have to rely on network operators
for network readiness; on the other hand, they have to turn to bureaucratic actors for
communications spectrum support and political patronage. Without technical and
political support from those players, the standard developed will remain a standard on
paper only and can never make into the market. As a result, standards setters interact with
other players who calculate their gains and losses, and strategize their moves in a
complicated payoff matrix in order to maximize their rewards and minimize their losses.

40
At this juncture, their challenge is to convince other players to jump on the bandwagon.
They cannot afford to lose, because losing to competitors portends not only that the
technology development investment costs are wasted, but also that all potential economic
gains will evaporate.
While standards setters will make every effort possible to build an alliance with
other corporate actors and secure favorable policies from bureaucrats, network operators
may select to support or oppose the standard. Lured by the benefits, while also wary of
the risks accompanying the process, they may choose to participate in or back off from
the process depending on their interests.
Network operators, with telecom networks under their control, have the power
to sway the standards-setting process. If they choose to adopt it, the new standard sees its
future in the commercial rollout of a new network. If they choose to abandon it, the new
standard is usually commercially doomed. In this sense, network operators’ preferences
hold the key to the rollout of a standard in the market. The adoption of CDMA
technology in the U.S. and Chinese markets is a case in point. Bell Atlantic and Nynex’s
adoption in 1990 gave CDMA commercial presence in the most important market in the
world, while China Unicom’s adoption gave CDMA another huge boost in one of the
largest mobile communications markets in the world. In the case of competing standards
seeking market entry, network operators have the power to tip the competition game with
their endorsement, placing a standard in an advantageous position over another. Although

41

adventurous operators willing to test the waters may make a bold move to introduce a
new standard into the market, in general corporate inertia may keep them from
implementing a new standard; waiting for the standard market to mature while
maintaining the status quo may be in their best short-term interest. Regulatory agencies,
as public trustees, see their best interest in promoting technology diffusion and increasing
consumer welfare for public interest. On the other hand, entrusted with the power to
allocate communications spectrum, award licenses for network equipment manufacturing,
and formulate standards policy, they have the authority to guide the technical process.
Sometimes, regulatory agencies have the destructive power to misguide the technical
process with bad decisions.
34
Although they are expected to maintain a neutral position
and not meddle in the market, under certain circumstances the temptation to step into the
technical and commercial process and succumb to certain political pressures may
compromise regulatory integrity and independence. This may happen when multiple
standards compete in the market. In that case, industrial players will also compete to
sway regulatory influence for decisions in favor of their own standard.
35
Corporate and bureaucratic actors are intent on leaving their imprint on the

34
Regulators may adopt different strategies in upholding public interest when it comes to technical
standards issues. For instance, in second-generation mobile communications and high-definition
television, the United States has left the standards selection to market competition, while the
European Union has taken a centralized approach, playing an active role by mandating the standards.
For an analysis of the contrast, see, for instance, Mattli and Buthe (2003), Pelkmans (2001) and Tan
(2001).
35
For instance, the FCC’s endorsement of the CBS color television standard largely stemmed from
the political influence of CBS, even though its mechanical system was inferior to the electronic
system under development at RCA.
standards-setting process in one way or another to gain profit or advantage. Even though
they are not as key players as the standards setters, with their interests, preferences, and
power, network operators and bureaucrats have no less influence on the evolution of the
standard than standards setters. Thus, a solution regarding the growth of a standard
usually has to be fought out amid an intricate game matrix, i.e., domestic economic and
political relationships among actors from the private and public sectors. The interaction
of the players involved in the national games is represented as follows.
Figure 1. Interaction of Players at the National Level

Standard setting
firms
Standard under
development
Network
operators
Bureaucratic
actors
2.2 Interests and Power at the International Level
The domestic realm is not the only place where corporate and bureaucratic
actors have to be concerned about how to prioritize their goals and wield their power. A
technical standard aimed at the international market has to succeed not only in the
domestic market but also in the more competitive global market beyond national borders.

42

43
At the international level, as at the national level, economic and political considerations
lurk behind the moves of the corporate and bureaucratic actors. Also, similar to the
situation at the national level, network operators are critical for the commercial success
of the standard because they possess the network platform necessary for the standard to
be tested and embraced by consumers; however, they are not particularly motivated,
either economically or politically, to ally themselves with standards setters in pushing for
the adoption of a standard.
Standards setters, in the international as well as in the national market, have
similar economic interests in the success of their standard. If their standard is adopted in
the global market, they will be able to enjoy a larger installed base and bring in more
royalties than from the domestic market alone. However, at this level they enter into
competition with standards setters from other countries or regions. This situation tests
their technical strength, corporate strategy, and political finesse. When they feel unable to
deal with the competitive pressure from their international counterpart on the technical or
strategic fronts, they turn to bureaucratic actors for support. Bureaucratic actors, on the
other hand, have equally strong political interests in seeing the home standard prevail in
the global market. When the domestic standard vies for a particular national market and
standards setters attempt to rally political support from their bureaucratic hierarchy to
bring about a desirable outcome, trade issues are brought into the equation. At this point,
regulatory agencies and trade ministries find themselves embroiled in the process,

44

arguing over trade barriers and market entry.
Eventually, national governments may step in and confront each other to protect
their own domestic industries. The politically convenient solution for bureaucratic actors
is to ignore relative technical merits and let political considerations control the process.
In the race between national standards, the pressure and urge to interfere in the name of
national interest typically takes precedence over technological and commercial issues. To
bureaucratic actors, standards setting is a technical undertaking, as well as a political
mission to promote the home standard. So, similar interests may unite standards setters
and bureaucratic actors in their concerted efforts to fight for the domestic standard in the
global arena.
With more players involved, the power relationships are more intricate at the
international level than at the national level. Within this larger context, when games are
played on a larger scale, goals have to be re-defined and strategies re-adjusted.
Standards-setting processes of an international magnitude and complexity engage
corporate and bureaucratic actors in different interests-oriented and power-based games
at both the national and international levels. In this sense, international telecom standards
setting is a “two-level game”
36
situation that comprises not only domestic games but also
international games. On the one hand, the standards must succeed at the domestic level
among complementary or competing interests of various players—for instance network

36
For a general conceptualization of the two-level game on which this discussion is based, see Putnam
(1988, pp. 434-435).

45

operators and regulatory bureaucrats. On the other hand, national standards face
international pressures from global competitors.
Eventually, bureaucratic actors representing their domestic standard in the
international arena face double pressures: internal pressure from domestic corporate
actors and external pressure from international counterparts. Internally, bureaucrats have
to deal with domestic corporate actors that put pressure on their governments when
seeking political support for the success of their standard. Externally, when pushing for
acceptance of the domestic standard from their country in the global market, bureaucratic
actors have to cope with pressure from their foreign counterparts. Ideally, bureaucratic
actors manage to protect domestic interests without compromising their positions on the
international stage. Practically, however, they typically have to find an equilibrium and
strike a balance between what they can claim and what they have to give up.
At national and international levels, games are played around the resources,
interests, and power associated with industrial and bureaucratic players.
37
The following
graph represents the interaction of the players involved in the national and international
games. In the graph, bureaucratic actors can influence not only their own domestic
standard and standards setters, but also those of another nation that proposes a competing
standard.

37
As Krasner (1991) points out, in international telecom, what is at stake is the relative power of the
players involved (p. 363). He conceptualizes power as comprised of the following: technological
innovation, market size, membership in international organizations, and control over territorial access
(p. 363).
Figure 2 Interaction of Players at the International Level

International
corporate actors
Domestic
corporate actors

Domestic
bureaucratic actors
Domestic
bureaucratic actors
Domestic
bureaucratic actors
Foreign
bureaucratic actors
3 The Domestic-Global Linkage between National and International Standards
As a heuristic framework for understanding the interaction between international
pressure and domestic politics, the two-level game model has given rise to a wealth of
empirical studies.
38
Yet no research on international telecom standards setting has

46

38
Putnam’s two-level game framework has provoked a plethora of research on international relations,
for instance, in general bilateral relations (Fearon, 1998; Iida, 1993; LeoGrande, 1998; Lohmann,
1997; Mayer, 1992; Mo, 1995; Putnam, 1993), economic negotiations (Avery, 1998; Friman, 1993;
Goldstein, 1996; Grossman & Helpman, 1995; Krauss, 1993; Lehman & McCoy, 1992; Li, 1994;
Mayer, 1991; Mansfield, Milner, & Rosendorff, 2002; Milner, 1993; Milner & Rosendorff, 1997;
Odell, 1993), the European Community (Huelshoff, 1994; Hug & Konig, 2002; Iida, 1996; Laursen,
2005; Pahre, 1997), and security issues (Carment & James, 1996; Knopf, 1993; Moravcsik, 1993;
Schultz, 1998; Shamir & Shikaki, 2005; Snyder, 1993; Trumbore, 1998; Trumbore & Boyer, 2000).
Recently, an interesting reverse trend has emerged in the two-level game research. As Drezner (2003)
has argued, Putnam’s framework puts too much emphasis on how domestic political forces use their
power to influence the outcome of the international bargaining process, while not enough research has
been done on how foreign relations leaders use international organizations to thwart domestic
opposition. His argument is echoed in the research done by Blanchard (2003), Johnston (2003),
Pevehouse (2003), Reinhardt (2003), Schultz (2003), and Snidal and Thompson (2003).

47
conceptualized the technical process as a two-level game, nor have empirical studies
used the two-level game approach to analyze the international telecom standards-setting
process. This study adapts Putnam’s (1988) original framework and examines
international telecom standards setting from the two-level game perspective, focused on
China’s initiatives for empirical analysis. While appropriate and convenient for analyzing
telecom standards setting, the original framework needs conceptual elaboration and
refinement to better account for the technical process of international telecom standards
setting and the politics evolving around it.
First of all, studies originating from the two-level game model are mostly
confined to “the interaction of domestic and international factors” (Putnam, 1988, p. 430),
and unduly ignore the nature of the particular issues under discussion. Consequently,
inadequate attention is paid to how those issues may under certain circumstances operate
as a significant, third dimension of the framework to influence the outcome of the
international process. Second, the original framework does not specifically address the
roles of interests and power in the connection between the national and the international.
Therefore, to explore the two-level game nature of international telecom standards setting
and capture the characteristics associated with the technical process, a modified two-level
game framework that addresses these two under-conceptualized aspects is needed.
This study adapts the original framework in three ways. First, it incorporates
into conceptualization and analysis the nature of the technical artifact. Starting with the

48
technical merits of telecom standards would set up a base for the political and economic
dimensions of the technical process to exert their influence. Second, when dealing with
the political-economic aspect of standards setting, this study brings interests and power
into the scenario, and examines their interaction with the technical base. Moreover, in
adapting the two-level game metaphor, I focus on games played at national and
international levels by corporate actors and bureaucrats, rather than on the games played
by national governments to cope with domestic groups and international pressures. With
this focus on the games themselves rather than on national governments, I expand the
scope of the investigation to games played by different domectic and international
players, thus providing a more inclusive analysis of the political economy around the
technical process.
Clearly, the technical base, as well as its interaction with interests and power,
has to be understood across national and international levels. Domestically, the
development and adoption of a telecom standard, whether as a de facto one or as a
mandatory one, has to be fought out among the different domestic economic and political
factions around the technical process. Yet, a domestic standard does not easily evolve
into an internationally adopted standard, as it faces competition from similar standards
developed by international players vying for the same global market. At this juncture, the
technical superiority of the standard, together with the economic and political basis
behind it, will determine whether it will be adopted and deployed on a global scale. The
need to explore the interplay among the actors at the two levels, and particularly to
understand what accounts for the transitional linkage from the domestic to the global,
requires an appropriate analytical approach. Therefore, this study proposes a
domestic-global linkage approach to connect the national and the international, as well as
to explain why some telecom standards become international standards and others do not.
Based on this framework, technical merits are the foundation for the success of
international telecom standards setting. But the outcome will also be explained by other
factors such as political-economic interests and political-economic power. So, the
explanatory factors of this framework include not only the relative technical base of the
standard, but also the interests and power of corporate and bureaucratic actors. The
following graph represents the domestic-global linkage.
Figure 3 Linkage between Domestic and International Standards

International
standards
Technical base,
interests,
and power
Domestic
standards

In this model, technical base refers to technical superiority of a telecom standard
in comparison with its international competitors. Interests refer to the economic and

49

50

political importance that corporate and bureaucratic actors attach to the standard. Power
refers to the ability of corporate and bureaucratic actors to influence the standards-setting
process, and the economic and political tools they utilize to achieve their goals. In reality,
the three factors do not act separately; they combine to create a host of scenarios with
different intensity of technical base, interests, and power.
With this framework, I argue that the three dimensions have a compound effect
on international telecom standards setting. I also argue that only when the technical and
political-economic conditions are fulfilled can a domestic standard evolve into an
international one.
4 Scenarios of Comparable Technical Base and Hypotheses
In terms of intensity, the three factors underlying a telecom standard fall into
three categories relative to those associated with its competitors, i.e., weak, comparable,
and strong. Along this line, technical base can be classified into three levels in
comparison with that of its competitors, weak, comparable, and strong. When a telecom
standard has a weaker technical base than its competitors, it most likely will fail in the
marketplace. On the other hand, when a telecom standard enjoys a stronger technical
base than its competitors, it most likely will succeed in commercial adoption. In this
sense, these two situations will produce self-evident results, and do not require much
analysis.
39
The real puzzle lies in the situation when a telecom standard has a comparable

39
There might be cases where a standard with a weaker technical base would beat its competitor with

51

technical base with its competitiors. Given similar technical merits, what roles do
interests and power play in affecting the outcome of the technical process in the market?
Therefore, this study will focus on the scenario of comparable technical base, and
investigate how comparale technical base interacts with different levels of
political-economic factors to determine the outcome of standards setting efforts. Under
the scenario of comparable technical base, some games can be conceived in which actors
play with different levels of interests and power. While using the technical base as the
starting conceptual point, my approach does not imply technological determinism. Rather,
I take an integrated approach to the technical and non-technical dynamics of standards
setting, and privilege technical merits only for analytical convenience.
With a technical base that is comparable to its international competitors, the
intensity of interests and strength of power behind it will determine its fate in the global
battle. With weak interests and power behind it, the standard will not achieve global
success, because crucial political-economic factors are not there to support it. With
comparable interests and power behind it, the standard can achieve partial success in the
global market, but may have to co-exist with its competitors. With strong interests and
power behind it, the standard will likely achieve global commercial adoption. So in the
case of comparable technical base, a standard may achieve global commercial adoption if

a stronger technical base, as illustrated by the classic example of Betamax and VHS. However, this
study does not look at variantions of that type. Rather, this study concentrates on general, normal
patterns in standards setting process by analyzing the competition between standards with comparable
technical bases.

52
championed by strong political-economic interests and power, or may fail to achieve
global commercial adoption in the absence of strong interests and power.
Scenario I: When a standard has a technical base comparable to its international
competitors, it may fail in global adoption if it has weak interests and power behind it.
Scenario II: When a standard has a technical base comparable to its international
competitors, it may have to co-exist with its competitors in the global market if it has
comparable interests and power behind it.
Scenario III: When a standard has a technical base comparable to its
international competitors, it may succeed in global adoption if it has strong interests and
power behind it.
The three factors, i.e., technical base, interests, and power, interact with one
another to make the standards-setting process full of intricate games that are played out
among corporate and bureaucratic actors. These scenarios of comparable technical base
are of interest because they are not self-evident or self-explanatory, and also because they
involve complicated combinations of different levels of the interests and power behind
the technical process.
Based on the scenarios of comparable technical base, three hypotheses are
developed for this study. Technical base is the control variable as only the scenarions of
comparable technical base are examined; interests and power are independent variables.
Interests refer to the fundamental goals and preferences of political and corporate actors,

53
and are operationalized as weak, comparable, and strong. Power is defined as political
influence and authority for bureaucrats; for corporate actors it is conceptualized as
manufacturing capabilities and market size they can capitalize upon. Both interests and
power are operationalized as weak, comparable, and strong. The outcome variable is
conceptualized as commercial adoption of a telecom standard, and is operationalized as
no global adoption, partial/domestic adoption, and full global adoption.
Hypothesis 1: A standard with a comparable technical base but weak domestic
interests and power behind it is unlikely to be adopted globally.
Hypothesis 2: A standard with a comparable technical base supported by strong
domestic interests but weak international interests will be adopted domestically and may
be adopted globally. Success will depend as much on complex negotiations as on
technology, politics, and economics.
Hypothesis 3: A standard with a comparable technical base supported by strong
domestic/internal interests and power is likely to be adopted in the absence of competing
standards with equally strong backing.
The underlying assumptions and implications of these hypotheses can be
understood in more concrete terms in the context of China’s initiatives, TD-SCDMA and
WAPI. First, domestic games in the context of conflicting interests and unbalanced
relative power among Chinese actors have caused coordination problems among the
standards setters and network operators in both cases. The coordination problems have

54

weakened the competitiveness of the local standards setters on the technical front despite
their comparable technical merits in comparison with their international competitors.
Also, the interests of Chinese bureaucracies, most noticeably the Ministry of Information
Industry (MII),
40
the National Development and Reform Commission (NDRC),
41
the
State-owned Assets Supervision and Administration Commission (SASAC),
42
and the
Ministry of Science and Technology (MOST),
43
are mixed due to their different
regulatory and administrative domains and foci. Second, international games have been
played that have made the Chinese standards less competitive and more vulnerable to
international pressure. Competing economic interests and strong economic power of
global competitors, backed by strong political interests, have made China’s initiatives
subject to rules of international systems. Rules governing intellectual property rights and
international trade have further weakened China’s bargaining position in global standards
setting. That is why these two standards face an uncertain future, even though they may
prevail in the domestic market. In other words, the domestic-global linkage is not there to
guarantee their transition from a domestic standard to a global one.

40
The MII is the regulator of China’s information and communication sector. For a full list of its
responsibilities, visit http://www.gov.cn/english/2005-10/02/content_74175.htm.
41
The NDRC is in charge of the formulation and implementation of the planning and strategy for
China’s national economy. As described by one interviewee, it is an “economic State Council.” For an
overview of its administrative responsibilities, go to http://en.ndrc.gov.cn/brief/default.htm.
42
SASAC is in charge of the restructuring of State-owned enterprises and the management of
State-owned assets. Go to http://english.peopledaily.com.cn/200305/22/eng20030522_117060.shtml
for an overview of its responsibilities.
43
The MOST is in charge of making China’s science and technology policies, and promoting science
and technology development. Go to http://www.most.gov.cn/eng/organization/Mission/index.htm for
a description of its administrative authority.

55

5 Data and Methods
To answer the research questions and test the hypotheses, this study adopts the
case study approach as its major method. First, as this study attempts to answer the
“how” and “why” questions focused on contemporary issues in a situation where the
investigators have no control over the events under investigation, case study proves to be
an ideal methodology.
44
It allows the investigators to examine in greater detail the
evolution of the standards-setting process and come up with a systematic record and
analysis of China’s standards-setting initiatives. Second, this study also intends to
construct an explanatory framework to account for the complex process involving
different players at different levels in the technical standardization of international
telecom. The theoretical expansion of the two-level game framework developed in the
study might subsequently be used to explain other standards-making activities in the ICT
and telecom sector.
The study draws on both primary and secondary data. Primary data are obtained
from 20 interviews conducted over a period of 18 months from June 2005 to February
2007. Interviewees include those in public service and the industry. Those in public
service include researchers affiliated with government agencies such as the State
Information Center, China Chief Information Officers Association, and the International

44
Yin (2003) recommends that in developing research strategies three conditions should be taken into
consideration: the type of research questions raised, the degree of control over social events, and the
extent of focus on contemporary issues (pp. 5-8).

56
Cooperation Division of the MII, as well as academics following China’s telecom
standards-setting processses. Those in industry include project managers and engineers
from equipment vendors Alcatel, Nokia, and Nortel with first-hand experience in
wireless standards development, as well as technical experts from Guangdong
Telecommunications Planning and Designing Institute, analysts in private practice, and
executives with provincial branches of the network operators China Mobile, China
Netcom, and China Unicom. The researchers and academics interviewed, who are
knowledgeable not only about Chinese standards but also their international competitors,
have spoken and written on 3G standards. On the other hand, the project managers and
engineers interviewed are directly involved in the development and marketing of 3G
standards and related equipment, and executives affiliated with network operators can
assess the Chinese standards from an operational standpoint.
Topics of interest for the interviews, depending on the interviewees’ areas of
specialty, included the role of government in the standards-setting process, the economic
and political rationale behind China’s initiatives, the interaction between industrial
players, and lessons learned from the making of TD-SCDMA and WAPI. The interviews
seek to reveal in-depth insights into the standards-setting issues in general and China’s
initiatives in particular.
Answers to the interview questions serve to unravel the stories behind China’s
initiatives as well as analyze the interaction between technical standards,

57
political-economic interests, and political-economic power, thus testing the hypotheses.
Archival research provides secondary data that cover a broad range of literature,
including reports by trade journals, publicly available documents on telecom standards,
and government announcements and regulations. These secondary data serve to complete
and corroborate the interview data, thus allowing for more solid and comprehensive
conclusions.

58

Chapter 4: TD-SCDMA: Limited Success in Anticipated Debut

1. Introduction
The first multinational mobile communications system in the world was
designed and constructed by public telephone operators in Denmark, Finland, Norway,
and Sweden in late 1960s through early 1980s (Lehenkari & Miettinen, 2002). In the
wake of that, global mobile communications technology has evolved from the
first-generation (1G) analog technology introduced in the 1980s and the
second-generation (2G) digital technology launched in the 1990s to the present third
generation (3G).
45
Not surprisingly, all three phases witnessed co-existence and
competition among different technical standards throughout different parts of the
world.
46

While there is no fundamental difference between 2G and 3G, the newer
technology does enable higher-speed Internet access and such multimedia services as
music and video downloading. The migration from a 2G to a 3G platform in mobile
communications has been under debate for years, covering issues ranging from selection
of standards and licensing scheme to communications spectrum allocation approaches in
major mobile markets (e.g., Bohlin, 2001; Srivastava, 2001; Webster, 2001). As in the 2G

45
For a brief historical review of the evolution of mobile communications systems through successive
generations and the role of standards, see, for instance, Funk (1998) and Kano (2000).
46
For instance, the second-generation mobile communications standards are mainly divided
worldwide between the European-developed GSM, and the Qualcomm-developed CDMA. Both
standards are used in many countries, for instance, GSM and CDMA in the United States and China.

59

standards wars, competition between two major standards has become more and more
intense. CDMA2000, a natural outgrowth of the 2G CDMA technology and favored by
the United States, has seen commercial rollouts in Japan and South Korea, while
WCDMA, supported by the European Union and European equipment giants like Nokia
and Ericsson, has been deployed in some European countries.
47
The landscape of 3G
standards was made more complicated—at least for the Chinese market—with the
approval of the Chinese-developed TD-SCDMA as a 3G standard by the ITU, and the
ambition of Chinese firms and the Chinese government to make it one of the working
standards for next-generation mobile communications applications. The first telecom
standard proposed by China to gain international recognition, TD-SCDMA, marks a
milestone for China’s telecom industry. In spite of the developer’s fervor and Chinese
government’s support for it, TD-SCDMA has not emerged as a true international standard
when measured by commercialization or adoption, nor does it constitute a serious
challenge to its more established opponents of WCDMA and CDMA2000. What has
happened to TD-SCDMA and how historical, technical, and political-economic elements
have shaped TD-SCDMA into what it is today deserve a closer look.
2. The Standard: Key Players and Alliances
Those in the telecom industry and policy circles have long entertained the

47
For instance, WCDMA network has been deployed in Japan by NTT DoCoMo and J-Phone, and by
Hutchison in some European countries, while the CDMA2000 network has been rolled out in Japan
by KDDI and in South Korea by SK Telecom. The first 3G commercial network was deployed in
South Korean by SK Telecom in October 2000 using CDMA2000 technology.

60
speculation that the Chinese government would divide the Chinese 3G market among
WCDMA, CDMA2000, and TD-SCDMA, giving a share to its home-grown standard
(Liu, 2000). Siemens, co-developer of the TD-SCDMA standard, was optimistic about
the take-off of the standard, predicting in early August of 2001 that there would be
hundreds of thousands of TD-SCDMA handsets by the end of 2002, and that by the end
of 2005 there would be 40 million users in China (Clendenin, 2001). None of Siemens’
predictions have become a reality. Even though it is said to embed cutting-edge
technologies with advantages over its competitors in smart antenna and adaptability to
populous metropolitan areas, TD-SCDMA’s is only able to entertain the prospect of
domestic adoption.
Datang Telecom Technology and Industry Group (Datang Telecom) has put
research and development efforts into TD-SCDMA with the central government as a
steadfast champion of the standard; however, reactions from the telecom industry have
not been encouraging. While Zhongxing Telecommunications Equipment Co., Ltd. (ZTE)
is an active participant and advocate for the standard, interest from Huawei Technologies
(Huawei), another domestic equipment giant, has been lukewarm. On another front,
major domestic operators like China Telecom and China Unicom have strong
reservations about it. International standards setters/equipment manufacturers such as
Nokia and Ericsson have been taking a wait-and-see attitude toward it. They have
focused on their own WCDMA while keeping an eye on the development of the Chinese

61
standard.
The uncooperative stance of domestic carriers and the competition of global
giants have made it difficult for TD-SCDMA to prevail in the market. The difficult
situation of TD-SCDMA raises questions about its current struggle and future fate.
Specifically, what dilemmas does the standard face in the domestic arena, and what
challenges does it have to cope with in the international arena? What technical, political,
and economic factors hinder it from domestic and international deployment? What
domestic games are played round TD-SCDMA? What international games are played
around the Chinese standard?
In this chapter I first trace the evolution of TD-SCDMA as a compatibility
standard. Then I outline and analyze the technical, economic, and political issues that the
standard has faced in a historical context. With these efforts, I attempt an answer to the
questions raised above. Finally, I explain why TD-SCDMA has not become a true
international standard from the domestic-global linkage perspective.
2.1 TD-SCDMA and Its Key Players
As a 3G standard, TD-SCDMA has features similar to those of other 3G
standards. For instance, it also promises a smooth migration to 3G from the current GSM
TD-SCDMA, features flexible up and downlink data rates up to 2-Mbit/s, and offers
coverage up to 40-kilometers (Clarke, 2003b). Additional advanced features include code
division multiple access, smart antennae, and mutual synchronization between mobile

62
and base stations (Clarke, 2003a). Moreover, it boasts advantages over its competitors in
spectrum efficiency, and its antenna can reduce the power radiation at base stations,
while minimizing radio interference for greater antenna gain (Yoshida, 2003).Supporters
of the standard say it is more suited to be deployed in densely populated cities in China
than the other two standards (Clendenin, 2001). Backers also say it is at least 20 percent
cheaper to implement because of the software-defined radio that reduces system size,
weight, and cost, and has higher data transfer rates for Internet access (Clendenin,
2001).
48
In mid 2005, ZTE conducted a successful test on TD-SCDMA equipment,
determining that it is able to deliver diversified multimedia services, including streaming
media and data download (Walko, 2005b). The following table summarizes the technical
merits of TD-SCDMA in comparison with WCDMA and CDMA2000.
Table 2: Technical Merits of TD-SCDMA in Comparison with WCDMA and
CDMA2000
Categories Technical Advantages
Spectrum Efficiency More efficient due to its asymmetrical transmission
Smart Antenna Reducing power radiation at base stations and minimizing
radio interference for greater antenna gain
Deployment Area More suited for densely populated metropolitan areas due to
lower radio interference
Cost Effectiveness More cost-effective to implement and upgrade due to the
software-defined radio that reduces system size
Source: Clendenin (2001) and Yoshida (2003)
Siemens, Nortel, and Alcatel proposed TD-SCDMA in the mid-1990s as a 2G
standard for adoption in Europe (Clarke, 2003a), but Datang Telecom and ZTE have been

48
Also see Xu & Pitt (2002, pp. 133-134).

63
key players since the late 1990s in refining it and developing equipment in China,
forming industrial alliances, and pushing for its adoption. Datang Telecom, a public
company formed after its separation from the China Academy of Telecommunications
Technology, has been aggressive in developing and promoting the standard. Since it
began research and development on a 3G standard based on its synchronous CDMA
access technology in 1998, Datang Telecom has partnered with Siemens and some
domestic vendors and research institutes to develop base stations, switches, and handsets.
In July 2003, it set up a lab with Beijing Post and Telecommunications University for
technical testing and signed an agreement for technology cooperation with China’s major
telecom equipment vendors, China Putian Corporation (Putian) and ZTE, to introduce
commercially mature TD-SCDMA equipment.
Datang Telecom enjoyed initial success when in March 2004 it manufactured the
world’s first TD-SCDMA-based cell phone. ZTE, specializing in telecom equipment, has
been a steady supporter of the TD-SCDMA standard along the way. In 2001, it started
pre-research on TD-SCDMA with a focus on smart antennae and testing. Since early
2003, ZTE has been in full swing into the research and development of system
equipment. ZTE has also been active in the testing of TD-SCDMA-related equipment. In
January 2005 it took part in a lab test in Beijing, and in March 2005 it participated in an
outdoor test in Shanghai. A host of international firms, including Motorola, LG Telecom,
Nokia, Philips Semiconductors, Samsung Electronics, STMicroelectronics, and Texas

64
Instruments, have either committed resources to the standard or formed joint ventures
with Chinese firms to develop chipsets and equipment for TD-SCDMA.
2.2 Industrial Alliances as Cooperation Platform for TD-SCDMA
Datang Telecom and ZTE, as standards setters that have placed a stake in the
technology, have been making consistent and strategic moves to further their interests.
They not only initiate national industrial forums and secure membership in international
industrial organizations, but also build alliances with domestic and international network
equipment vendors and chip manufacturers. Participation in national organizations unites
industrial players and broadens the base for strategic cooperation, while membership
with international organizations can extend the influence of TD-SCDMA beyond national
borders and gain international recognition. Forming industrial alliances, on the other
hand, helps with cooperative efforts in developing network equipment and terminals, and
in completing a supply chain for the standard.
The development of TD-SCDMA is marked by the formation of several
industrial organizations aimed to ensure the recognition and support for the standard in
China and around the world. The Chinese government submitted TD-SCDMA to the ITU
as a 3G standard in June 1998, and the ITU accepted it in May 2000 as an international
3G standard, along with the Europe-supported WCDMA and U.S.-backed CDMA 2000.
To create a cooperation platform for industrial players interested in TD-SCDMA, the
TD-SCDMA Forum was inaugurated in December 2000, with domestic and international

65
vendors, chip manufacturers, research institutes, universities, and venture capitalists as its
members, including Huawei, China Mobile, China Unicom, Motorola, Nortel, and
Siemens. In March 2001, TD-SCDMA was accepted by the 3rd Generation Partnership
Project (3GPP). In October 2002, the TD-SCDMA Industry Alliance was established for
TD-SCDMA technical development and improvement, with Datang Telecom, Huawei,
Putian, ZTE, and additional well-known Chinese companies as its founding members. In
November 2004, a group of Chinese companies and government agencies formed the
Mobile Multimedia Technology Alliance to develop and promote 3G applications for the
Chinese standard. Participants include the MII, semiconductor maker Vimicro
Corporation, equipment manufacturers Huawei and ZTE, and China’s four wireline and
wireless operators (Clendenin, 2004b).
On another front, research and development work had been ongoing to deliver
network equipment, chipsets, terminals and solutions for TD-SCDMA. In January 2002,
Nokia, Texas Instruments, LG, Putian, DBTel and Datang Telecom established Commit
Incorporated (Commit), a company solely focused on solutions to 3G mobile terminals,
including chipsets and handset reference designs (Clendenin, 2002). In January 2003,
STMicroelectronics signed a license agreement with Datang Telecom’s mobile
communications equipment subsidiary for know-how and intellectual property rights
related to TD-SCDMA in order to develop mobile, multimedia, multimode
TD-SCDMA/GPRS System-on-Chip products (Clarke, 2003a). In January 2003, Datang

66
Telecom formed a joint venture with Philips, Samsung, and Beijing T3G Technology Co.
(T3G), the latter specializing in designing and licensing core chipsets and reference
designs for TD-SCDMA terminals (Walko & Clendenin, 2003). In April 2003, Texas
Instruments integrated its digital signal processor into a TD-SCDMA base station
manufactured by Siemens (Clarke, 2003b). In August 2003, Siemens formed a joint
venture with Huawei to promote TD-SCDMA worldwide (). In March 2004, startup
Commit produced its first TD-SCDMA chipset (Clendenin, 2004a). In November 2004,
U.S. chipmaker Analog Devices Inc. (ADI) was rolling out a chipset for China’s nascent
3G mobile communications standard (Clendenin, 2004c). Also in November 2004, Texas
Instruments developed an 850-MHz digital signal processor for TD-SCDMA base
stations. The processor would improve network coverage and signal clarity while
enabling video delivery and real-time video conferencing (Mannion, 2004b). In April
2005, ADI teamed with Datang Mobile to work on a reference design for developers of
TD-SCDMA handsets (Walko, 2005a). In May 2005, ZTE and Ericsson formed a
strategic partnership aimed to deliver TD-SCDMA solutions (Chin, 2005). Around the
same time, core networks and servers, together with terminals and network-planning
systems, were manufactured at ZTE (Walko, 2005b). In October 2005, Nokia and Putian
agreed to set up a joint venture to focus on research and development, manufacturing,
and sales of 3G network solutions for TD-SCDMA (Clarke, 2005). In October 2005,
Beijing-based T3G Technology developed TD-SCDMA chipsets with HSDPA (High

67
Speed Downlink Packet Access) capability. Also in late 2005, Commit released its
second-generation TD-SCDMA chipsets that support multimedia and Web-based
applications. Around the same time, LG also released a handset based on Commit’s
first-generation chipsets, while local manufacturers like Bird and Lenovo were finalizing
prototype testing of their own TD-SCDMA handsets based on Commit’s technology
(Clendenin, 2005b). In March 2006, Philips and Samsung unveiled a TD-SCDMA
videophone based on TD-SCDMA processors developed by Philips (Chin, 2006b).
In the regulatory areana, Chinese bureaucracies have provided timely and much
needed support in the form of communications spectrum allocation for TD-SCDMA. In
November 2002, the MII allocated two blocks of spectrum, totaling 55-MHz of
bandwidth, to TD-SCDMA technology, and reserved 100-MHz for future use. In the
same allocation scheme, the two dominant global standards, WCDMA and CDMA2000
1x were each granted a 60-MHz block, with a 30-MHz block each reserved for future use
(Clendenin, 2002). In January 2006, the MII approved TD-SCDMA as China’s national
3G standard (Clarke, 2006).
3. Games at the National and International Levels
The timeline outlined above has traced the formation of industrial alliances and
the growth of research and development in the supply chain for TD-SCDMA, as well as
revealed the regulatory decisions geared toward the success of the standard. This has

68
created an evolutionary context within which to comprehend the strategic moves of the
players and rationalize their objectives.
A wide array of actors, including standards setters, network operators and
bureaucrats, take actions in their privileged territories to protect or further their interests.
Those actions can be conceptualized as games, or “competition and cooperation
structured by a set of rules and assumptions about how to act in order to achieve a
particular set of objectives” (Dutton, 1991, p. 282). In TD-SCDMA’s bid to be a national
and international standard, multiple games interact with each other at national and
international levels within technical, commercial, regulatory, and political configurations.
In other words, actors situated in different industrial segments or endowed with
regulatory authority play their specialized games. Furthermore, those interdependent
games converge at given intersections to constitute a network of games, and reveal how
pluralistic interests embedded in the games and inequalities in the power relationship
among the players affect the outcome of the standards-setting process. A comprehensive
understanding of why TD-SCDMA has failed to make its commercial debut on the
national and international stages demands an examination of the multiple games and their
interaction. In particular, it requires an analysis of the multiple games staged by domestic
and international players within China’s commercial, regulatory, and political
environments, as well as the interplay of the national and international games. As pointed

69

out by an interviewee, the adoption of TD-SCDMA and awarding of 3G licenses is a
game between competing and collaborative interest factions in China and beyond.
49
3.1 Domestic Games
The timeline brings a plethora of domestic and international players to the
forefront, exposing the alliances they have formed and the activities they have engaged in.
A review of the player list indicates, however, the absence, or disengagement, of
powerful domestic network operators. Certain critical questions surface. Where do the
interests and power of domestic actors reside? What objectives do Datang Telecom and
ZTE expect to achieve with the supply chain they created for TD-SCDMA? What are the
interests of network operators in TD-SCDMA? Why are they not present in the alliances?
How does the approach they pursue affect TD-SCDMA? Contemplation of these
questions first points to the need to scrutinize the games played at the national level
around TD-SCDMA.
3.1.1 The Standard Setting Group: Strong Interests and Limited Manufacturing
Capabilities
As the firm that initially set TD-SCDMA in China and the driving force in
promoting the standard, Datang Telecom has a strong economic interest in the success of
the standard. ZTE, a major domestic equipment vendor, joined Datang Telecom earlier
on and has been pursuing a serious, aggressive strategy in favor of TD-SCDMA. It is the

49
Interview No. 3, conducted in Beijing, China on July 13, 2005.

70

only firm that “specializes in TD-SCDMA equipment and terminals,”
50
and “as a key
member of the standard setting group, ZTE has been helping Datang Telecom promote
and commercialize the technology,”
51
according to a senior ZTE executive. Adoption of
the standard means a stable source of revenue for Datang Telecom and ZTE as a united
standard setting group, because licensing the technology would generate revenues from
the equipment market and royalties from other manufacturers. Their shared economic
interests have led Datang Telecom and ZTE to seek and form joint ventures and
partnerships with chipmakers and equipment manufacturers in hopes of forming a supply
chain. On another front, this interest has led Datang Telecom to build the case for
TD-SCDMA by lobbying the bureaucratic establishment of the Chinese government.
According to an industry insider, its top management has been selling TD-SCDMA to
the MII and the NDRC for funding support, even though not very successfully.
52
The
interests of Datang Telecom and ZTE are reinforced by the huge size of China’s mobile
communication market they can take advantage of. With the number of cell phone users
at 450 million and growing in China, there is a large-scale market and scale economy for
them to capitalize upon. Then the huge market size represents a power game that the
standards group can play in their advantage. If able to deploy their standard, Datang
Telecom and ZTE would gain from their equipment sold in the market, and the royalties

50
Interview No. 11, telephone interview, July 31, 2005.
51
Interview No. 5, conducted in Beijing, China on July 14, 2005.
52
Interview No. 13, telephone interview, October 7, 2006.

71

from licensing their standard. The huge market size would also become a bargaining chip
for Datang Telecom and ZTE in their negotiations with international players for
collaboration on TD-SCDMA.
However, the standard setting group’s shared interests are constrained by their
weakness another dimension of their power game, i.e., their inability to develop core
network equipment and terminals by itself.
53
Unlike telecom powerhouses entrenched in
international competition, such as Qualcomm, Nokia, and Ericsson, that possess the
expertise and resources to set standards, make chips, manufacture network equipment,
and develop terminals, Datang Telecom and ZTE are not well positioned to serve the
whole product line necessary for its standard to succeed. The very fact that Datang
Telecom and ZTE have entered into partnership with domestic and global equipment
vendors exposes its weakness to independently deliver a full line of TD-SCDMA-based
products to the market. Aside from its weak manufacturing capabilities, Datang Telecom
has been suffering from brain drain, losing many engineering talents over the past few
years to local and global telecom firms, according to a research engineer with Nokia.
54

The consequence of the brain drain is predictable for the ambition of Datang Telecom
and ZTE; the diminishing pool of resources in research and development would cripple
the standards group’s interests in TD-SCDMA. Moreover, the standard setting group’s

53
Capabilities to manufacture network and end-user equipment are important to standards setters,
beucase network equipment would link the standard to the network infrastructure, and terminals
would connect the standard with service subscribers.
54
Interview No. 6, conducted in Beijing, China on July 16, 2005.

72

enthusiasm for TD-SCDMA has not been widely echoed from other domestic equipment
manufacturers. Huawei, the equipment vendor with global outreach and international
recognition, has been more interested in WCDMA than in TD-SCDMA.
55
Some less
influential domestic equipment vendors, while interested in TD-SCDMA, distribute the
risk of lock-in by developing equipment for other 3G standards in parallel. For instance,
Alcatel Shanghai Bell Co., Ltd., while working on TD-SCDMA technology, also works
with Fujitsu on WCDMA equipment and with Samsung on CDMA2000 equipment
targeting the Chinese 3G market.
56
By investing in multiple standards rather than
dedicating themselves to the local standard, these domestic equipment manufacturers
prepare themselves for a Chinese 3G market where multiple standards may co-exist.
With this strategy, no matter what 3G standard is licensed for operation in China,
equipment vendors can ensure themselves of a share in the huge equipment market.
Clearly, Datang and ZTE lag behind their international competitors in product
development. Other domestic equipment vendors do not embrace TD-SCDMA in concert,
and their interests are diverse across competing 3G standards. However, some joint
ventures between domestic and international firms have been working to deliver
equipment for TD-SCDMA, and have developed chipsets and consumer terminals. From
the equipment side, it can be argued that Datang and ZTE have achieved initial success in
the domestic market.

55
Interview No. 5, conducted in Beijing, China on July 14, 2005.
56
Interview No. 7, conducted in Beijing, China on July 19, 2005.

73

3.1.2 Bureaucrats: Strong Interests and High Expectations
The development and promotion of TD-SCDMA in China is not a simple
technical issue; it is overshadowed by the nationalistic ambition of the Chinese
government and the close relationship of standards setters with bureaucrats and
politicians. Datang Telecom, before its incorporation, was part of a state-controlled
research institute that received funding from the Central Government. With respect to
TD-SCDMA, Chinese bureaucrats have strong political and economic interests in the
success of the standard. Guided by the overarching goal of supporting domestic industry,
the Chinese government “will not give up on TD-SCDMA.”
57
As noted by a ZTE
executive, TD-SCDMA is “a government project funded by the Central Government.”
58

Some interviewees rationalize the involvement of the Chinese government from
the perspective of national interests, alluding to China’s national interests in the success
of TD-SCDMA due to the economic stake in the intellectual property rights of the
TD-SCDMA standard. Chinese firms have been paying a huge amount of royalties for
2G standards, and cannot suffer to lose out again in the upcoming 3G network
deployment. So the Chinese government wants to reverse the trend in the 3G competition;
it wants to nurture a Chinese 3G standard so that Chinese firms will be able to collect
royalties for TD-SCDMA. In this regard, the economic interests of the Chinese
government are in line with Datang Telecom’s, but are formulated from a higher

57
Interview No. 4, conducted in Beijing, China on July 13, 2005.
58
Interview No. 5, conducted in Beijing, China on July 14, 2005.

74

industrial policy ground. Under the banner of national interests, Chinese bureaucracy
takes a political approach to the Chinese standard, and is directly involved in many
industrial activities related to the support for TD-SCDMA. For instance, the Chinese
government is behind the formation and operation of the TD-SCDMA Industrial
Alliance
59
and the TD-SCDMA Forum, two industrial organizations that aim to further
improve the Chinese standard.
60
The Chinese government’s championship for
TD-SCDMA also stems from its strategy to boost national economic growth. As an
executive with China Unicom in Guangxi Province noted, huge investment in the 3G
communications infrastructure in the form of fixed assets will be a “catalyst for the
growth of national economy.”
61

Following this type of economic logic, it can be argued that the Chinese
government’s investment in TD-SCDMA will not only create jobs for the telecom and
related industries, but also save TD-SCDMA. The NDRC, viewing TD-SCDMA from
the angle of national economic policy, “places the Chinese-developed standard within the
context of national economic development,”
62
and as a think tank for the State Council
advised the State Council to follow up on 3G standard and support the Chinese
standard.
63
The MII, seeing the market potential in TD-SCDMA, allowed political

59
Interview No. 5, conducted in Beijing, China on July 14, 2005.
60
Interview No. 4, conducted in Beijing, China on July 13, 2005.
61
Interview No. 14, telephone interview, June 24, 2006.
62
Interview No. 3, conducted in Beijing, China on July 13, 2005.
63
Interview No. 4, conducted in Beijing, China on July 13, 2005.

75
considerations to step into its communications spectrum allocation decision. In spectrum
allocation, half of China’s 3G spectrum resources has gone to TD-SCDMA, and
WCDMA and CDMA2000 share the other half. In addition to regulatory support,
bureaucrats have poured billions into the project. Based on publicly available data, the
MII, the NDRC, and the MOST allocated about USD 125 million for TD-SCDMA
between 2003 and 2004 (Liu, 2005).
This policy and regulatory support points to the interests that the Chinese
government has in TD-SCDMA. The bureaucrats are playing an economic game through
a political approach to make TD-SCDMA succeed in the standards competition for 3G
communications networking. To bureaucrats, the success or failure of TD-SCDMA has
not only economic but also political implications. TD-SCDMA is the first Chinese
telecom standard that has won international recognition, and it involves “face” issue. If
TD-SCDMA is adopted in the domestic or even the international market, the bureaucrats
will be accredited with its success; but if TD-SCDMA is not adopted, the bureaucrats
will suffer a political loss. In this sense, bureaucrats have political incentives to promote
TD-SCDMA. So, in the presence of WCDMA and CDMA2000, which have been
deployed in other parts of the globe, Chinese bureaucrats still push for the development
of TD-SCDMA. In this respect, political considerations outweigh economic efficiency,
and under political rationale, technical and economic viability is secondary to the

76

political interests of Chinese bureaucrats. To Datang Telecom and ZTE, bureaucratic
support means that they have achieved success in the regulatory and political arenas.
3.1.3 Network Operators: Interested in 3G but not in TD-SCDMA
In general, network operators have the power and resources to influence the
trend of the standards market. If they adopt a network technology, that particular
technology would be deployed through their networks nationwide. If they refuse to
endorse a standard, that standard has no way of seeing commercial deployment.
Therefore, the extent to which the Chinese government can mandate industrial policy
formulation and implementation with respect to TD-SCDMA is constrained by market
forces. In this regard, domestic telecom network operators constitute a major force in the
marketplace to determine the commercial adoption of TD-SCDMA. While Datang
Telecom and ZTE are eager to see TD-SCDMA rolled out in new networks so as to
collect royalties, domestic network operators have different interests. Among China’s
four operators,
64
the wireless operators China Mobile and China Unicom, as interested
parties in the 2G technology, have less incentive to deploy new network technologies
than the standards setter. As wireless operators, China Mobile and China Unicom control
all the wireless network assets in China’s telecom sector, and their preferences determine
the development of the wireless standards market. At present, they are interested in

64
The Chinese telecom service market is divided along geographical and service lines among the four
operators, China Mobile with a GSM network, China Unicom with a GSM and a CDMA network,
China Telecom providing wireline service in southern China, and China Netcom providing wireline
service in northern China.

77

maintaining current revenue streams from their 2G networks, and are wary of 3G
services that may be risky and unpredictable. According to an executive of China
Netcom in Hebei Province, China Mobile and China Unicom have been making huge
profits from their 2G networks, and are not so enthusiastic about 3G, even though they
had been planning for 3G by training their engineers and managers.
65
In other words,
domestic operators would rather maintain their current revenue flow than invest in new
technologies, because it is not in their best interests to replace their existing networks
with new, risky technologies. Even if they want to deploy 3G networks, from a technical
perspective WCDMA and CDMA2000 are natural options for wireless operators,
because their existing GSM and CDMA networks can be easily upgraded to WCDMA
and CDMA2000 networks. So, from a practical point of view TD-SCDMA is out of
favor with wireless operators. According to an executive of China Mobile in Shandong
Province, wireless operators have reservations about TD-SCDMA because lots of
operational adaptation and transition will have to be done from scratch to deploy a
TD-SCDMA network, which means high operational cost to operators.
66
Particularly,
when they perceive no profitability potential in investing in an untested technology like
TD-SCDMA, they would be hesitant about adopting it. That would leave no chance for
the Chinese standard to be adopted in China. The two wireline operators, China Telecom
and China Netcom, are interested in wireless licenses to expand their revenue sources

65
Interview No. 12, telephone interview, August 2, 2005.
66
Interview No. 11, telephone interview, July 31, 2005.

78

and compete with wireless carriers because they suffer from stagnation in their fixed-line
services.
67
With 3G services, wireline operators would be able to secure investment from
the Central Government, add a selling point to the already stagnant fixed-line market.
Yet, they are more interested in receiving a CDMA2000 or WCDMA licensing than
testing out the Chinese standard, because they look for guaranteed superior technology
and stable network performance.
68
So based on their commercial calculations, domestic
network operators are unlikely to opemly endorse TD-SCDMA at the moment.
Domestic operators are able to defend their interests, not only because they have
the market power, but also because they have political muscles. All the network
operators are under the SASAC of the State Council. The top executives of the network
operators have “high political positions,” according to an executive with China Unicom’s
Guangxi Branch.
69
The high political profile of network operators’ top executives
empowers the network operators to assert their interests and influence. Even though the
MII oversees network operation and is an endorser of TD-SCDMA, network operators
can bypass the MII to connect with other key ministries and reach top Chinese leadership
for favorable decisions. As a result, network operators do not have to defer to the MII
when it promotes TD-SCDMA. With SASAC, which also promotes TD-SCDMA,
network operators can then deal with it as an internal affair and work out a solution with

67
Interview No. 12, telephone interview, August 2, 2005.
68
Interview No. 4, conducted in Beijing, China on July 13, 2005.
69
Interview No. 14, telephone interview, June 24, 2006.

79

their supervising entity. So through their market power and political channels, wireless
network operators persist with their preferences for their existing networks, and protect
their interests in 2G networks out of economic considerations. Therefore, lack of support
from this group of key players has made it difficult for TD-SCDMA to be taken seriously
in the market from the perspective of network operation.
In the foray over TD-SCDMA, the standards setting group, network operators,
equipment manufacturers, and bureaucrats all play games of a varying political and
economic nature in their own interests. The standard setting group’s political game to
convince bureaucrats has been successful in that it has commanded their regulatory and
political support in the name of national interests, and its technological game has
achieved initial success with equipment for trail.
70
For telecom operators, their
self-interested preferences for WCDMA and CDMA2000 as well as their economic
non-cooperation game with the standards setting group come across as disapproval of a
possible commercial implementation of TD-SCDMA.
At the same time, bureaucrats play a political game, defined by their functions
within the Chinese bureaucratic establishment. They harbor strong interests in the
domestic standard and support it through funding and regulatory leanings. Their political
game to uphold national interests has made TD-SCDMA a national project, and has
created a favorable policy environment for TD_SCDMA. . In the final word, the

70
According to an industry insider, TD-SCDMA equipment was in the trial period, and would be
ready for commercial use soon (Interview No. 16, telephone interview, October 18, 2006.)

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availability of chipsets and handsets, and bureucrats’ intervention on a techno-national
platform have changed the economic course of TD-SCDMA, and as a result Datang
Telecom and ZTE have been able to entertain a prospect for commercial deployment of
their standard in the domestic market.
3.2 International Games around TD-SCDMA
A number of global players have engaged in developing network equipment and
chipsets for the Chinese standard. Those global players include less influential firms such
as ADI and Texas Instruments as well as traditionally more influential players like Nokia,
Ericsson, and Motorola. Given the involvement of international players in TD-SCDMA,
some issues deserve to be explored in greater depth. Where do the interests and power of
powerful international actors reside? What approaches do they pursue? What goals do
they want to achieve with their particular approach? Pursuit of these questions then leads
to scrutiny of the games played by the heavyweight international equipment vendors as
well as political games around the Chinese standard.
The primary interests of international players like Nokia, Ericsson, and
Qualcomm are in other international 3G standards, not necessarily in TD-SCDMA.
Nokia and Ericsson have interests in their own WCDMA, and Qualcomm has interests in
its own CDMA2000. If they aggressively developed and manufacture TD-SCDMA
equipment, that would improve TD-SCDMA’s chance of adoption. That means Nokia,

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Ericsson, and Qualcomm would have to pay royalties to the Chinese standards setters,
and in the long run weaken their own dominance in the standards and equipment market.
International players are also engaged in the TD-SCDMA development process,
although passively. According to a project manager of China Mobile, international
equipment vendors don’t openly oppose TD-SCDMA for fear of offending the Chinese
government and losing the Chinese telecom and 3G equipment markets.
71
Ericsson,
Motorola, and Nokia all have formed joint ventures with Chinese firms. The participation
of international players testifies to the effectiveness of the power game that the Chinese
standard setting group has played with the potential huge size of the TD-SCDMA
equipment market. Even though they are not enthusiastic about TD-SCDMA,
international equipment vendors cannot suffer to lose the potential Chinese 3G market.
Collaboration with Chinese firms on TD-SCDMA through alliances and joint ventures
would help them establish commercial presence and gain political vantage point in the
TD-SCDMA scene. Even though international equipment giants like Nokia and Ericsson
have made no substantial progress in developing network equipment for TD-SCDMA,
some international players are active participants in the TD-SCDMA process. For
example, Nortel participated in the trial of TD-SCDMA network equipment in December
2004, and LG and Samsung have developed TD-SCDMA handsets. Major international

71
Interview No. 11, telephone interview, July 31, 2005.

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vendors are strategic investors in TD-SCDMA development.
72
And according to a Nokia
research engineer, Nokia has been doing follow-up work on TD-SCDMA.
73
The power game that Datang and ZTE play with international equipment
vendors based on China’s market potential does not develop without any problem;
economic and political pressures have mounted on the Chinese standard setting group.
Qualcomm, making patent claims to all CDMA mobile technology, has repeatedly made
it public that it would seek to collect royalties from the TD-SCDMA technology
(Calendenin, 2005c). This claim, if implemented, would have deep economic
implications for Datang Telecom and ZTE.
74
Instead of the anticipated collection of
royalties from equipment vendors, Datang Telecom and ZTE may find themselves
paying royalties to Qualcomm. Payment of royalties to Qualcomm would drive up cost
and reduce profits for the Chinese standards setters, and as a result would undermine
Datang Telecom and ZTE’s competitiveness in the domestic and global markets. The
European Union (EU) has openly called for China not to proceed with the deployment of
a TD-SCDMA network, citing increased costs and international roaming incompatibility
as its concerns (Clarke, 2002). Moreover, the EU has argued for an integrated global
standard of WCDMA set by European firms. The starting point of its political
disapproval is the interests embedded in its WCDMA, and the baseline for it is to expand

72
Interview No. 5, conducted in Beijing, China on July 14, 2005.
73
Interview No. 6, conducted in Beijing, China on July 16, 2005.
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Datang Telecom and ZTE may end up paying royalties to Qualcomm if TD-SCDMA is deployed. In
2006, Nokia paid six USD to Qualcomm for every cell phone it sold using CDMA technology.

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the worldwide deployment of WCDMA networks, thus maximizing benefits for the
European standards setters and equipment vendors. So the EU’s argument is not only a
political declaration against TD-SCDMA, but also an indication of an economic solution
detrimental to the survival of the Chinese standard. It has win-win implications within
the EU, economically and politically. On the one hand, the EU-backed WCDMA would
win the standards battle against TD-SCDMA, and on the other hand, the EU would win
the political battle against Chinese bureaucrats. To the Chinese standard setting group
and Chinese bureaucrats, however, it would create a loss-loss situation. The position of
the EU not only sends an affirmative message to European equipment vendors in their
passive cooperation on TD-SCDMA, but also puts political pressure on Chinese
bureaucrats that disregards an integrated global 3G standard. In consequence, the
economic game of passive cooperation and the political game of open opposition played
by international players cause the Chinese standard to lose at the international level.
4. Domestic and International Games: Determinants for TD-SCDMA
To be fair, TD-SCDMA is a comparably competitive technology, and is more
efficient than the other two 3G standards in spectrum utilization due to its asymmetrical
frequency design (Xu & Pitt, 2002). With its competitive technical base, TD-SCDMA is
on the track to be deployed in the domestic market, despite that it lags behind its
international competitors in commercial development. This is partial success for Datang
Telecom and ZTE in their international telecom standards setting venture, considering

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that TD-SCDMA is a latecomer to the 3G standard battle ground, and was developed by
a standard setting group from a developing country with no proven track record in this
field. The explanations for TD-SCDMA’s partial success can be found in the economic
and political games played around it at domestic and international levels.
At the domestic level, because of its deep economic interests the standard setting
group has played efficient economic and political games to solicit and maintain support
for its standard. Datang Telecom and ZTE have been able to rally industrial support from
domestic equipment manufacturers because of the power game they play. The hug size of
China’s wireless communications market, coupled with the status of TD-SCDMA as
designated national standard, makes TD-SCDMA a commercially marketable and
politically persuasive technology that equipment vendors cannot ignore. The standard
setting group has also played an effective political game characterized by political
interests and bureaucratic power. Chinese bureaucrats, most notably the MII and the
SASAC, are united with the standard setting group because of their political interests in
the “national project” of TD-SCDMA. The interests and power of the standard setting
group, combined with those of the bureaucrats, have created a comfortable political
environment for TD-SCDMA, and motivated equipment vendors to continue working on
product development. Technologically and economically, however, the standard setting
group and bureaucrats have not been able to make the case to network operators for
TD-SCDMA’s adoption. The power of Chinese bureaucrats can be wielded efficiently in

85

allocating funds and spectrum, but is limited in mandating the network operation sector.
In this case, strong political interests fail to resonate with domestic operators cautious
about a national standard based on comparable technical base. As one interviewee notes,
“the Chinese government can determine the fate of TD-SCDMA for now,” but
“eventually the market will determine the fate of TD-SCDMA on the basis of the quality
of the network and services.”
75
In this light, the access of TD-SCDMA to the domestic
telecom network will depend on the outcome of negotiations between the standard setting
group-bureaucrats alliance and network operators.
At the international level, in spite of the political pressure from the EU to drop
TD-SCDMA the standard setting group, backed by strong bureaucratic interests and
power, has been successful in soliciting and maintaining the participation of international
equipment vendors in the TD-SCDMA development process. In this regard, the standard
setting group has played effective power games to keep the industrial momentum for its
standard. To international equipment vendors like Nokia, Ericsson, and Motorola, the
huge Chinese market size offers a profit-making opportunity, and the strong support of
bureaucrats guarantees a TD-SCDMA operating license in the Chinese market. Therefore,
international equipment vendors are in the game for potential profits from TD-SCDMA
equipment. As an interviewee pointed out, global equipment giants have joint ventures

75
Interview No. 9, conducted in Beijing, China on July 26, 2005.

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with local firms because they are lured by the Chinese market. If there is a TD-SCDMA
operating license, they will enter the market.
76

Arguably, Datang Telecom and ZTE have achieved partial success in their goal
of TD-SCDMA’s commercial adoption. The standard setting group has marshalled
political support around its standard under the banner of technological indigenization,
and locked equipment manufacturers in the development process with the lure of the size
of the Chinese market. With political and commercial champions on the bandwagon, the
commercial deployment of TD-SCDMA can be anticipated. On the other hand, as a
technical standard with comparable merits to its international competitors, TD-SCDMA
is backed by relatively strong domestic interests but weak international interests. In other
words, TD-SCDMA has not made a full connection between the domestic and the global
to achieve full success. With the size of the Chinese telecom market and the scale
economy that the Chinese standard setting group can take advantage of, TD-SCDMA
may be adopted globally in the long run. That prospect, however, is contingent upon
negotiations on politics and economics at the international level. When international
political and commercial interests can be harnessed in its favor, the chance of
TD-SCDMA’s global adoption will increase.

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Interview No. 11, telephone interview, July 31, 2005.

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Chapter 5: WAPI: An Unsuccessful Bid for National and International Status

1. Introduction
WLAN (Wireless Local Area Network) technology for networking has made
mobile Internet access possible for people on the move, and its penetration has been
growing constantly. Wi-Fi (wireless fidelity) technology, a wireless networking
technology that keeps computers and other communications devices wirelessly connected,
has been in wide use in home settings, business environments, educational institutions,
and public spaces, and more recently, hotspots for wireless Internet access have sprouted
up in airports, hotels, office buildings and cafes around the world. In the United States,
cities such as Boston, Philadelphia, San Francisco, New York, and Los Angeles have
proposed or implemented Internet access through Wi-Fi technology as part of their
municipal information infrastructure. Many consumer electronics companies have started
to adopt Wi-Fi technology in their devices. The Nintendo Wii and Sony PlayStation 3
both feature Wi-Fi connectivity. Digital camera manufacturers like Kodak and Canon
have installed Wi-Fi chips in their products, and cell phone companies have also
embedded Wi-Fi chipsets in their handsets.
Wi-Fi’s popularity is reported to have exceeded iPods and home telephones
(Friedman, 2006). The increasing adoption of Wi-Fi technology for wireless Internet
access has driven up the demand for Wi-Fi chipsets, causing an increase of 25% in sales

88
in 2006 (Gaudin, 2006). This percentage increase translates into about 200 million Wi-Fi
chipsets shipped by chip manufacturers. More than 500 million chipsets have been rolled
into worldwide markets up to now, and 1 billion chipsets are expected to be shipped into
the market in 2012 alone (Clendenin, 2007).
The Chinese market for Wi-Fi has been growing rapidly in recent years.
Currently, telecom operators have deployed about 10,000 Wi-Fi hotspots for public
access around the country, and have also started to provide home Wi-Fi service.
According to Wi-Fi Alliance, the Chinese corporate Wi-Fi market is expected to reach
150 million USD in 2008, and grow fourfold by 2009.
Wireless networking standardization is another area where Chinese companies
and government agencies see the potential for economic gain and wish to take a market
share. The technology they have relied on to reap a share in the WLAN market is the
Wireless Authentication and Privacy Infrastructure (WAPI). It was an unknown
technology in a national lab before it was introduced to the industry and the public
through media coverage. Its emergence from the national lab was surprising. First, the
Chinese government made it a mandatory standard for nationwide implementation
against the opposition of international chip makers, and then the standard setter and
Chinese bureaucrats pursued a more ambitious goal of making it an international
standard.
Things did not work out on either front as expected by the standard setter and

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the bureaucrats. The Chinese government indefinitely postponed WAPI’s mandatory
implementation following trade talks with the United States in April 2004. Later, the ISO
rejected WAPI’s bid to become an international standard at a meeting in March 2006.
ISO’s rejection officially put an end to WAPI’s international attempt. As a result, WAPI
has also disappeared form the national stage, and no serious efforts have been made by
Chinese companies or bureaucrats to revive it.
2. The Standard, Key Players, and the Supply Chain
From the Chinese government’s announcement of the nationwide mandatory
implementation plan to ISO’s rejection, WAPI enjoyed the national and international
limelight for more than 2 years. During this period, it experienced an abrupt rise from
obscurity to national and international prominence, and then a downfall to oblivion.
While disputes over its nationwide implementation plan and attempt for international
status have subsided, questions linger about WAPI’s evolution and the causes for its
demise. How did WAPI rise to national prominence and international controversy? Why
did the collaboration between Chinese bureaucracy and industrial players fail to produce
the desired results? More importantly for this study, what games played at national and
international levels caused its failure? In the following sections, I first trace WAPI’s
evolution and the key players around it. Then, I outline and analyze the technical,
economic, and political issues the standard has encountered. Finally, I explain from both

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national and international perspectives why WAPI has failed to become an international
standard.
2.1 The Short-lived Standard and Its Key Players
The prototype of the WAPI standard originated in the National Key Laboratory
of Integrated Service Networks (ISN Lab) at Xidian University, located in the inland city
of Xi’an. Xidian University is devoted to teaching and research on information and
electronics science and technology, while the ISN Lab, a government-funded research
institute, leads WLAN technology research and development in China. At the center
stage of the development and promotion of WAPI is China IWNCOMM Co., Ltd.
(IWNCOMM), a joint venture established in September 2000 between Xidian University
and a venture capitalist. As a start-up company, IWNCOMM was unheard of before the
Chinese government’s mandate for WAPI’s nationwide implementation caught national
and international attention. Behind IWNCOMM is Cao Jun, an ambitious venture
capitalist who bet on WAPI and the Chinese WLAN market. According to an industry
insider familiar with the case, Cao Jun is a shrewd investor who made his fortune in the
late 1990s in steel and lumber businesses, and decided to invest in the new technology
when he came across the Chinese WLAN standard developed by the ISN Lab in 2000.
He invested about one million USD from his own pocket into IWNCOMM, taking a
controlling share of 75% in the new venture.
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On the bureaucratic side, key players are

77
Interview No. 17, telephone interview, October 29, 2006.

91

MII’s Department of Science and Technology (DST), the Standardization Administration
of China (SAC), and the Certification and Accreditation Administration of China
(CNCA).
78
The cooperation between Cao Jun and Xidian University, and the formation of
IWNCOMM, paved the way for WAPI to come to the national and international spotlight.
Charging that Wi-Fi’s security holes make it vulnerable to hacking, IWNCOMM
asserted that its algorithm would guarantee better security mechanisms. So in August
2001, under the auspices of MII, IWNCOMM inaugurated the Broadband Wireless IP
Standard Working Group (BWIPS Group), an alliance of industrial players and academia,
and began drafting standards documents. Some bureaucracies, buying into the validity of
the claims of better security, jumped in to aggressively promote WAPI as a domestic
alternative to the internationally adopted Wi-Fi standard.
In May 2003, MII submitted WAPI to SAC for approval. The
industry-bureaucrats collaboration culminated in a call for a nationwide implementation
of WAPI. On November 26, 2003, SAC issued a directive, the Announcement Regarding
the Implementation of National Mandatory WLAN Standard, requiring that starting June
1, 2004, all WLAN equipment imported and sold in China must be in compliance with
China’s WAPI standard. Later that month, CNCA issued its own decree, requiring that
all wireless networking equipment to be sold in or imported into China comply with

78
The DST makes technology policy, formulates development plans, oversees the setting of technical
standards for communications, and promotes technology innovation and commercialization.

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China’s compulsory certification system for WLAN. These decrees accorded WAPI the
status of a national mandatory standard; however, they also caught international WLAN
equipment vendors and government leaders off guard.
These decrees turned out to be disastrous to WAPI, and the seemingly domestic
victory for WAPI was short-lived. After the announcement of the mandatory
implementation plan, the fate of WAPI took a downturn. In January 2004, the Wi-Fi
Alliance made public its opposition to the mandatory implementation plan, saying that if
the Chinese government went along with the WAPI implementation mandate it would
stop shipping Wi-Fi chips to China. In March 2004, the then U.S. Secretary of
Commerce Donald Evans, Secretary of State Colin Powell, and Trade Representative
Robert Zoellick sent a joint letter to Chinese Vice Premiers Wu Yi and Zeng Peiyan. In
the letter, they expressed their concerns about the mandate and indicated that such a
mandatory implementation was inconsistent with China’s WTO commitments (Mannion,
2004a). On April 24, 2004, after talks with U.S. trade officials at the meeting of the
U.S.-China Joint Commission on Commerce and Trade (JCCT), China agreed to
indefinitely suspend the nationwide implementation of the WAPI standard. However, the
indefinite postponement did not announce the demise of the WAPI standard, and it soon
opened an international front in the quest to be an international standard. Technical and
commercial efforts of the standards setter were united with the political interventionism
of Chinese bureaucrats when the two groups submitted WAPI to the ISO to make WAPI

93
an international standard. Through the efforts of China’s national standards body, SAC,
the BWIPS Group succeeded in putting the Chinese standard up for approval at an ISO
meeting in Orlando, Florida, in December 2004, to which IEEE’s 802.11i was also
submitted (Clendenin, 2006a).
Yet the road to the international stage also proved bumpy. In late February 2005,
the ISO removed the WAPI standard from the fast-track approval process and placed it
on a slower track, causing the Chinese delegation to walk out of the meeting in Germany
in protest of ISO’s favoring of the IEEE’s 802.11i over its WAPI standard (Clendenin,
2005a). Then a later meeting between the BWIPS Group and the IEEE in August 2005,
convened in hopes of uniting the two standards, came to no fruition. Finally, in October
2005 ,WAPI came into a direct contest with 802.11i in ISO voting that decided which
standard would be adopted as an international standard for better security.
In March 2006, voting results showed that the ISO members rejected WAPI as
an international standard, and instead selected IEEE’s 802.11i as the base for an
international wireless protocol (Clendenin, 2006a). Up to this point, WAPI underwent
dramatic national and international ups and downs, from national obscurity to
international controversy, and finally went back to obscurity.
2.2 The Competition Strategy and Supply Chain of WAPI
Data security during the course of wireless communication is IWNCOMM’s
major argument against the Wi-Fi standard. Pointing to security loopholes in the IEEE’s

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802.11b WLAN protocol, IWNCOMM publicized WAPI as a more secure protocol. This
strategy proved effective with Chinese bureaucrats. The MII also positioned security
issues as vital to China’s national security. The three patents that IWNCOMM filed with
China’s State Intellectual Property Office (SIPO) all involved security enhancements in
wireless Internet access. In December 2001 IWNCOMM filed the “Secured Access
Method for Mobile Terminals of Broadband Wireless IP Systems;” in August 2002 it
filed the “Secured Access Method for WLAN Mobile Terminals,” and in November
2002 it filed the “Secured Access Method for WLAN Mobile Terminals and Encrypted
Data Communications Method over Secured-Access Wireless Links.” The following
table summarizes the technical merits of WAPI in comparison with the IEEE 802.11.
Table 3: Technical Merits of WAPI in Comparison with the IEEE 802.11
1. More reliable security system at the link layer and bi-directional authentication to
ensure verification at the mobile terminals and access point
2. Authentication management with centralized or distributed centralized approach
3. Dual authentication by certificate and encryption key, and flexible certificate
management and distributing system
4. Enhanced encryption algorithm as well as scalable built-in authentication and
algorithm modules
5. Supported by SNMP (Simple Network Management Protocol) to ensure roaming
across different coverage regions with one certificate
Source: CNet News (http://www.cnetnews.com.cn/2007/0528/404468.shtml)
On the technical front, IWNCOMM made a strong case for WAPI and
convinced Chinese bureaucrats to support its standard, as data security is a top concern to
users and regulators. On the commercial front, however, IWNCOMM failed to build a
supply chain for its WAPI standard. This failure can be traced to IWNCOMM’s

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development strategy. The 24 Chinese vendors who were granted access to the
intellectual properties of WAPI were unable to deliver chipsets by themselves. This
strategy closed off international players’ access to the intellectual properties in WAPI,
and international players, who had the expertise and resources to help WAPI, would have
had to collaborate with the 24 Chinese grantees to develop WAPI products.
As a small company with about 100 employees and without the technical
capacity to manufacture network cards essential to wireless networking, IWNCOMM
had to turn to OEM companies in China and Taiwan for finished products.
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Domestically, for product development IWNCOMM collaborated with several small
companies that did not have much credibility in developing wireless equipment. For
instance, LHWT Microelectronics Inc. (LHWT Microelectronics), IWNCOMM’s close
partner that designed chipsets for the WAPI standard, was a small company of about 80
employees without much experience in the design of core chipsets.
80
Some
Taiwan-based chip and system companies, including Acer, BenQ, Cybertan Technology,
Inprocomm, and Silicon Integrated Systems, worked with the standard setter in an
attempt to make products available by the deadline prescribed in WAPI’s nationwide
implementation plan (Clendenin & Mannion, 2004a). However, none of them were able
to deliver the chips needed for the WAPI standard to work on any wireless devices.

79
Interview No. 17, telephone interview, October 29, 2006.
80
Interview No. 19, telephone interview, February 10, 2007.

96
On the international front, external chip designers and makers took a strong
stance against cooperation on WAPI. In early April of 2004, international players like
Intel, Texas Instruments, and Broadcom said they would not support WAPI (Clendenin
& Mannion, 2004b), and even smaller WLAN players like Conexant Systems and
Atheros Communications were not interested in developing WAPI-complaint products
(Clendenin, 2006b).
As a market incumbent, Wi-Fi enjoyed a leading position and increasing
adoption. Operators selected it for their wireless networks, and manufacturers provided
Wi-Fi-compliant products on a consistent basis. In May 2006, British Telecom installed
Wi-Fi hotspots in Cardiff (Haskin, 2006). In December 2005, Qualcomm joined the
Wi-Fi Alliance, working to ensure that its 3G cellular chipsets are compatible with Wi-Fi
(“Qualcomm finaly,” 2005). In January 2006, the San Diego-based Kyocera Wireless
entered into a strategic alliance with Marvell to develop a Wi-Fi/CDMA handset
platform, in hopes of capturing the growing market for WLAN-enabled cellular handsets
(Chin, 2006a). A month later, Atheros Communications and Qualcomm started
collaboration on the development of cellular devices that would support Wi-Fi
technology (Nobel, 2006). All these developments strengthened Wi-Fi’s position in the
marketplace. As a result, WAPI would have more to do to catch up if IWNCOMM still
wanted to pursue its national and international ambitions for WAPI.

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3. Political-Economic Games at the National and International Levels
In retrospect, it is hard to tell whether IWNCOMM made WAPI a popular media
term or WAPI made IWNCOMM better known in the industry, but obviously both
benefited from the publicity that boosted them from obscurity. Without WAPI,
IWNCONN would have remained little known in the Chinese ICT industry; and without
IWNCOMM to push it to the forefront, WAPI may still reside only in a national
laboratory. For a while, IWNCOMM was able to enjoy the success of its promotional
efforts when WAPI was the center of controversy. However, IWNCOMM’s strong boost
of WAPI into national and international arenas did not go unresisted; the effort was
checked in the form of decisions made by other players in those arenas for or against the
Chinese standard. At the national level, even though it commanded the support of
bureaucracies like SAC, CNCA, and MII’s DST, it failed to solicit support from key
government bureaucracies like the NDRC and the SASAC, as well as the support of
industrial players. At the international level, it faced resistance from global equipment
vendors and the U.S. government.
3.1 Domestic Games around WAPI
Interests in WAPI and potential financial gains from the marketplace motivated
IWNCOMM to take commercial and political moves in an attempt to make WAPI a
success. While IWNCOMM played its political and commercial games to make WAPI a
working standard in the market, other players engaged in different games out of their

98
own interests. Some games were in favor of WAPI, but most were against it. Eventually,
the interests and power of IWNCOMM were outweighed by those of its opponents, and
WAPI lost the battle against Wi-Fi.
3.1.1 The Moves Favorable to WAPI
The major thrust of WAPI is its claimed better security mechanism over that of
Wi-Fi. With a belief in the superiority of its technology, IWNCOMM engaged in a series
of collaborative projects with other industrial players to strengthen the technical merits of
its standard. The formation of the BWIPS Group as an industrial collaborative body was
a starting point, and provided an organizational platform to make technical improvements
to WAPI. As a start-up company, IWNCOMM did not have much research and
development capability, but with commercial firms, universities, and research institutes
united under the BWIPS Group, it had the opportunity to enhance its research and
development efforts on WAPI. For instance, BWIPS Group drafted standards documents
for WAPI to be approved by Chinese bureaucracies as a national standard. However,
IWNCOMM not only played technical games but also political games to influence the
process and outcome of its standard setting efforts. In this regard, the BWIPS Group
provided IWNCOMM with an organizational platform to engage in political operations
to make WAPI a national standard.
IWNCOMM achieved its goal through the DST of MII, and its lobbying strategy
proved successful. The DST submitted its proposal to SAC and CNCA, administrators of

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national standards, which soon enacted decrees granting WAPI the status of a national
standard and calling for its implementation on a national scale. In spite of IWNCOMM’s
technical efforts to make WAPI a workable standard by working with domestic and
Taiwan-based manufacturers, WAPI’s rise to national attention was, to a large extent,
executed via a political path, and through appealing to government bureaucracies for
political support. In other words, IWNCOMM did not focus on the technical aspect of its
standard to compete with its rival on the technical and economic fronts, but rather
focused on its political advantage over its rival. As an interviewee pointed out, without
the political intervention from the SAC and the CNCA, there was no way that WAPI
could come to the point of a nationwide implementation plan.
81
So, IWNCOMM played
aggressive games at both industrial and political fronts to pursue its agenda for WAPI. Its
partnership with industrial players on the organizational platform of BWIPS helped it
launch its political venture and influence the decision-making of government agencies in
its favor.
Two bureaucracies provided timely, important political support to IWNCOMM.
When issuing directives for the nationwide implementation of WAPI, the SAC and the
CNCA became allies of the standard setter. Even though they did not have strong
economic interests in the standard, they had political interests in promoting WAPI as a
national standard, and their decision for nationwide implementation signaled a political

81
Interview No. 16, telephone interview, October 18, 2006.

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intrusion into a technical process. To these bureaucracies, the planned nationwide
implementation for WAPI was a political project, and “a benchmark of their
administrative performance and political achievements.”
82
They approached the technical
issue in a top-down fashion out of their political motivations, and used WAPI as a tool to
enhance their political stature. As administrators of national standards, they looked upon
WAPI as a “face project,” and around it they played political games. On the one hand,
they asserted their administrative power through their decrees in the name of supporting
domestic industry, and on the other hand they took advantage of the emerging
technology of WAPI to make themselves look good. In other words, the more national
standards they approved, the more capable and efficient they would appear to the
Chinese bureaucratic culture. Yet, these two champions comprised only a minor part and
a low end of the Chinese bureaucratic hierarchy at the central level. As a result, their
administrative and political power could be challenged at a higher level of the
bureaucratic system, and the effectiveness of their decrees could be questioned in a larger
context. Without the decision-making power of ministry-level agencies, their approval of
WAPI as a national standard could not further push WAPI to a higher level of
endorsement within the bureaucratic structure, and had to end at the symbolic support of
administrative mandates.

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Interview No. 19, telephone interview, February 10, 2007.

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IWNCOMM did find a willing collaborator in the industry, but only in the form
of a minor manufacturer. LHWT Microelectronics, a small chip designer, was interested
in cooperating with IWNCOMM to develop WAPI technology, because “it has nothing
to lose but something to gain from the cooperation with IWNCOMM.”
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IWNCOMM
and WAPI were the media focus nationwide, so for LHWT Microelectronics, the
collaboration presented an opportunity to gain limelight on the national stage. No matter
whether it succeeded in developing chipsets for WAPI or not, LHWT Microelectronics
would win the publicity campaign to make itself known in the industry. Therefore, it saw
no harm in helping IWNCOMM out. Yet, the weak position of LHWT Microelectronics
in research and development—its inability to develop chipsets for WAPI—has cost
IWNCOMM much-needed product line to strengthen WAPI’s position.
3.1.2 The Moves Unfavorable to WAPI
The meager endorsement from the SAC and the CNCA seems to be the only
political support the standard setter could obtain from Chinese bureaucracies. Without
support from key government agencies, WAPI lost the momentum to consolidate its
position as a national standard. At a higher level of China’s bureaucratic hierarchy,
WAPI’s future was overshadowed by the divided interests within MII, as well as by lack
of interests and support from the NDRC and the SASAC under the State Council. Within
MII, there was no uniform support for the standard. According to an interviewee, within

83
Interview No. 17, telephone interview, October 29, 2006.

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MII those in charge of equipment manufacturing like the DST supported the standard
because they wanted to capitalize on China’s vast equipment market if WAPI was
introduced into the market. Those in charge of network operations showed no interests in
the standard because they saw no promise in the home-grown technology.
84

The division within MII as an industry regulator made the future of WAPI
uncertain. Support from overseers of equipment manufacturing meant that WAPI would
get the go-ahead for the manufacturing of WAPI equipment. However, that support was
not sufficient. To be a full operational network technology, WAPI also needed access to
communication networks. However, because of the disapproval from overseers of
network operations, WAPI failed to get guaranteed access to existing networks. So the
different opinions of the two segment overseers within the MII cost WAPI sufficient
regulatory support, and thus weakened its position as a national standard.
Additionally, the NDRC and the SASAC, responsible for supervising
development planning and national economic projects, did not allocate any funding to
support WAPI’s development. Simply put, WAPI was “not on the agenda of the NDRC
and the SASAC” because “they understand that WAPI won’t work in the market.”
85
So
in spite of the hasty decision by SAC and CNCA for its nationwide implementation,
WAPI never became a standard of economic importance and an issue of national interest

84
Interview No. 19, telephone interview, February 10, 2007. MII was created after the merging of the
old Ministry of the Electronics Industry in charge of equipment manufacturing and the old Ministry of
Posts and Telecommunications in charge of network operation.
85
Interview No. 16, telephone interview, October 18, 2006.

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in the eyes of the NDRC and the SASAC. The non-engagement approach of the NDRC
and the SASAC served as a non-confidence vote for WAPI, and cut off government
funding for WAPI’s further improvement.
On a deeper level, the NDRC and the SASAC’s non-engagement strategy also
created a political impact. Because it was not on the agenda of the two agencies, WAPI
not only lost endorsement from these heavyweight decision-makers, but also lost
channels to a higher level of the Chinese leadership. If the NDRC and the SASAC had
approved the standard, WAPI could have secured government funding for further
development. In this event, the NDRC and the SASAC’s recognition of the importance
of WAPI in the form of granting government funding would have helped WAPI and the
standard setter to secure greater political endorsement. However, the NDRC and the
SASAC’s decision implied that further development of WAPI has to go without serious
political or financial government support. As a result, their non-engagement approach
rendered the support from SAC and CNCA insufficient for IWNCOMM to continue
pursuing WAPI at the national level, and cut off economic and political remedies that
could be available to WAPI. The NDRC and the SASAC, standing on a higher policy
ground than the SAC and the CNCA, did not prioritize WAPI, which dealt a fatal blow to
WAPI’s development. Lack of support from key bureaucrats like the NDRC and the
SASAC led to serious consequences for WAPI. In the China-U.S. trade talks in April
2004, Chinese government agreed to indefinitely postpone WAPI’s nationwide

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implementation plan. In return, the U.S. government agreed to ease its restrictions on the
export of hi-tech products to China (Liu, 2004). Because Chinese government’s
nationwide implementation requirement would restrict U.S. exports to China’s Wi-Fi
market, WAPI became part of the China-U.S. trade dispute. However, because it did not
have strong political interests behind it, WAPI eventually became a bargaining chip in
bilateral trade relations.
Not only did WAPI gain little regulatory and political support from Chinese
bureaucrats, it gained no serious support from industry players, especially major
manufacturers and network operators. Lack of support from industrial players subjected
WAPI’s status as a national standard to question, and raised doubt on the practicality of
the nationwide implementation plan. On the part of manufacturers, no heavyweight
players invested any research and development efforts into the standard. Big domestic
manufacturers like Huawei and ZTE did not take WAPI seriously “because they realize
Wi-Fi is a mature technology in the market and favored by consumers” and also “because
they realize it is not worthwhile to engage in a risky venture like WAPI.”
86
For
equipment manufacturers, their interests were in supplying equipment to the market and
making profits from their market positions. In this regard, WAPI failed to make an
attractive investment opportunity to major domestic manufacturers. On the operational
side, no network operators or independent operators endorsed the standard. According to

86
Interview No. 17, telephone interview, October 29, 2006.

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an interviewee, operators “do not care about WAPI at all because both China Mobile and
China Unicom have their own wireless solutions based on Wi-Fi.”
87
Without operators’
involvement, IWNCOMM lost important another ally and lost operational platforms to
run its technology.
Industry players are in the market to make profits, and their interests are in
financial returns. When they see no future or financial returns in WAPI technology, they
withhold their investment. Similar to the NDRC and the SASAC, industrial players take
a non-engagement approach to WAPI, which springs from their rational economic
judgment. To IWNCOMM, industry players’ decision not to get involved has cut off
industrial resources and expertise that it needs for the development of WAPI. Moreover,
their non-engagement decision also shows that in an economic environment that is
increasingly market-oriented, industrial players in China have gained more autonomy to
make their own economic judgments, and can stray from administrative and political
pressures from SAC and CNCA.
3.2 International Games Unfavorable to WAPI
Internationally, WAPI was in an even worse position than at the national level. It
encountered overwhelming opposition from international players, regardless of its
nationwide implementation plan or its bid to be an international standard. As a political
solution to a technical issue, the nationwide implementation plan resulted in a

87
Interview No. 17, telephone interview, October 29, 2006.

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technological impass between the WAPI standard setter and global industrial players as
well as a political confrontation between the Chinese and U.S. governments. In
confronting WAPI from technical and political perspectives, global IT giants,
international organizations, and the U.S government built a unified front which, to a
small start-up like IWNCOMM and a fledgling standard like WAPI, created economic
and political barriers that could not be easily surmounted.
Depending on where they came from and what goals they wanted to achieve,
players on the international stage adopted different strategies in dealing with different
aspects of WAPI’s national and international ambitions. International manufacturers were
not only opposed to the WAPI technology but also fought its nationwide implementation
plan for their own interests. Major equipment manufacturers like Intel, Texas Instruments,
and Broadcom refused to develop WAPI-compliant products and opposed the mandate.
As global leaders in the wireless networking equipment, their technological know-how
would be essential to the development of critical equipment for WAPI. However, as
suppliers of Wi-Fi products, they had commercial stakes in protecting their shares in the
Wi-Fi market.
88
Aware of their power and their stakes in Wi-Fi, they chose not to develop
products for WAPI, or not to abide by Chinese bureaucratic mandates for WAPI’s
nationwide implementation.
The uncooperative approach of the major international equipment manufacturers

88
For instance, Intel spent more than 300 million USD worldwide promoting Centrino, its chip set for
wireless Internet access. See Liu (2004).

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proved to be effective in boycotting WAPI and protecting their own interests in Wi-Fi. If
they were to develop WAPI-complaint products, they would have had to cooperate with
Chinese companies in order to get access to WAPI technology, and share their proprietary
information with their Chinese partners (Liu, 2004). Doing so would not only relegate
them to a secondary position in the development efforts, but also threaten their privileged
positions in Wi-Fi related intellectual property rights. Furthermore, if they developed
WAPI-complaint products, the rise of WAPI, backed by the administrative mandate,
would undercut their dominance in the wireless market.
With respect to the nationwide implementation plan for WAPI, they took an
even stronger stance, because the mandate would block all Wi-Fi products from the
Chinese market, and those international firms would suffer huge financial loss. Therefore,
Broadcom threatened to stop shipping Wi-Fi chips to the Chinese market if the mandate
went into effect. It was a strong gesture, because if Broadcom stopped shipment to China,
the whole Chinese Wi-Fi market would be disrupted.
Clearly, the controversy around WAPI went beyond China’s national borders,
and became a contentious issue between the Chinese and U.S. governments. If WAPI
won the domestic game, Wi-Fi products from the United States would be barred from
entry into the Chinese market, and if WAPI lost the domestic game, Wi-Fi would
continue its dominance in the Chinese market. Stakes in the wireless networking market
not only caused a technical confrontation between WAPI and Wi-Fi, but also

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transformed a technical issue into an economic and political showdown between the U.S.
and Chinese governments. From the standpoint of the U.S. government, it was critical to
protect the interests of its Wi-Fi industry and challenge the nationwide implementation
mandate of Chinese bureaucrats in the name of its wireless industry. To that end, U.S.
government officials took the approach of aggressive engagement by placing economic
and political pressures on the Chinese bureaucrats. In March 2004, in their letter to
Chinese Vice Premiers, U.S. government officials pointed out that mandatory nationwide
implementation of WAPI was inconsistent with China’s WTO commitments.
This escalation proved to be an effective strategy for the U.S. government. On
the one hand, the economic and political showdown as part of the bilateral trade relations
revealed that the U.S. government was concerned about the competitiveness and fair
treatment of its wireless industry on the international stage. This was a strong political
signal to Chinese government. On the other hand, invocation of China’s WTO
commitments tied Chinese bureaucratic favoritism for WAPI to the international trade
obligations of the Chinese government as a whole, and exposed China’s domestic
standard-setting initiative to the conflicting rules of the international trade system.
Within this global trade system, Chinese bureaucrats could not have it both ways; they
could not enjoy global free trade and protect their domestic industry from international
competition at the same time.

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If Chinese government had stood firm behind SAC and CNCA in endorsing
WAPI, the WAPI controversy would have escalated to more serious trade disputes
between China and the U.S. that would have hurt foreign-trade-dependent China in the
long run. As a result, the Chinese government backed down from the mandatory
implementation plan to avoid further trade disputes with the United States. Thus, from
the perspective of bilateral trade relations, the strong stand against WAPI by the U.S.
wireless industry and the U.S. government created double pressures on WAPI’s
bureaucratic champions, forcing the Chinese government to back off. As an interviewee
indicated, the “good cooperation” between the U.S. public and private sectors played an
important role in the suspension of WAPI’s nationwide implementation plan.
89
Also, in
the context of the international trade system, WAPI’s bureaucratic champions had to
surrender to the rules of the WTO and relinquish their protective stance toward WAPI.
On the global stage, the administrative power of Chinese bureaucrats was constrained by
the power and interests of international players, as well as by international trade rules.
In the international forum of ISO, IWNCOMM and Chinese bureaucratic
ambitions to make WAPI an international standard were also thwarted when IEEE
lobbied against this effort. In 2005, during the balloting period after China’s SAC
submitted its proposal to the ISO, the IEEE 802.11 Working Group released detailed
arguments against WAPI (Clendenin, 2006a). Although China’s SAC made efforts to

89
Interview No. 20, telephone interview, March 6, 2007.

110
defend WAPI and kept its international bid alive, the Chinese delegation’s lobbying was
much weaker. In fact, the Chinese delegation only argued before Ireland’s national ISO
body that 802.11i had security defects (Clendenin, 2006b), and this small gesture
occurred after the Chinese government had indefinitely suspended the nationwide
implementation of WAPI. At this point, domestic economic and political interests in
WAPI had been on the decline, and bureaucratic champions of WAPI like the SAC and
the CNCA had failed to make a strong case for WAPI on the international scene.
In the end, because they were unable to secure commercial and political support
from a higher level of Chinese leadership, IWNCOMM and its bureaucratic supporters
lost in the bid to make WAPI an international standard in the face of commercial and
political pressures from international players.
4. Technical Base, Interests, and Power around WAPI
From a technological point of view, WAPI had the capability of fixing the
security loopholes of Wi-Fi. However, WAPI still failed to develop into a replacement
for Wi-Fi in the Chinese market. One reason is that IWNCOMM, as the standard setter,
did not have the resources to develop a product line for its standard. Another reason is
that WAPI failed to generate sufficient commercial interests from domestic industrial
players. Wi-Fi was entrenched in the Chinese market when WAPI attempted to enter into
the competition, and thus enjoyed first-mover advantage over WAPI. Major domestic
industrial players, for fear of losing their grip on the Wi-Fi market and risking their

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investment in WAPI, did not participate in any serious development efforts for WAPI.
Moreover, IWNCOMM’s resort to political games failed to generate enough political
interests from high-level Chinese bureaucrats.
IWNCOMM shared interests with the SAC and the CNCA in the success of
WAPI, for respective commercial reasons and for political reasons. Their shared interests
led SAC and CNCA to dictate the standards market by their administrative decrees
calling for WAPI’s nationwide implementation. For a while IWNCOMM succeeded in
its political games that boosted WAPI to a national status, yet in WAPI’s path to be a
credible national standard the endorsement for it stopped at the lower levels of China’s
economic and political hierarchy, including only the support of a minor local firm as well
as the SAC and the CNCA. Because of lack of interests from industrial players and a
higher level of Chinese bureaucracies, the development of WAPI in the domestic arena
was unsustainable.
In a larger sense, the failure of WAPI at the national level points to the
complicated relationship between commercial interests and state power. Unlike in the old
era of planned economy, when politics determined the trajectory of technology and
market development, political interests and power of the state are now constrained by
industry players, and the top-down decision-making process does not work any more in
the more market-oriented Chinese economy. Political influence has to be examined in the
context of the increasing influence of market players, while the role of political forces

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has diminished. When industrial players refuse to give a technology or a product a
chance in the market, political support turns out to be nominal support that fails to
produce substantial results, as in the case of WAPI.
IWNCOMM has taken a wrong bet, and their resort to political interests and
power failed to produce the expected impact in the marketplace. The return to a market
mechanism has blocked the political shortcut of those who want to launch technical
competition from a political platform. In this light, the failure of WAPI at the
international level debunks the relationship between China’s national interests and the
international mechanisms. For China as well as other countries, national interests
represent a composite of constituting components from different sectors, and it is natural
that different players want to defend their own interests. As an interviewee indicates,
under the umbrella of national interests “there are many interests that a national
government should take into consideration in its decision-making. In the case of WAPI,
international compatibility also involves China’s national interests.”
90

Thus for bureaucrats, policy-making in the name of national interests is a
priority problem. When they want to protect national interests, they have to decide which
specific part of the national interests they want to protect. With respect to WAPI, when
the SAC and the CNCA protected IWNCOMM’s commercial interests, they ignored and
compromised the interests of other industry players such as equipment manufacturers and

90
Interview No. 13, telephone interview, August 18, 2005.

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network operators that rely on international compatibility. Even worse, their decision in
favor of WAPI endangered the national interests of China in terms of international trade.
In an increasingly globalized world economy, a decision within national
boundaries has international impact, and no telecom standards policy can be made
unilaterally without creating transnational consequences. That is why WAPI and its
implementation plan escalated into a bilateral trade issue challenged by international
players. Internationally, the interests of IWNCOMM and its bureaucratic champions were
in conflict with the interests of the U.S. wireless industry and the U.S. government which
responded by putting pressures on WAPI and its political and commercial champions.
Because of those pressures, Chinese bureaucratic decisions, driven as they were by
narrowly defined industrial policy and political interests, resulted in market failure.
Without more powerful government agencies behind it, WAPI lost crucial
political support on the international stage to hold its ground and stand up against its
competitor. WAPI’s rise to the national and international spotlight was due to the political
intervention of its bureaucratic champions, but its national and international ambitions
were also defeated by political intervention, in this case from the more powerful,
combined opposition forces of the U.S. wireless industry and the U.S. government. In the
international industrial arena, due in large part to the lobbying efforts and the influence of
IEEE, WAPI was not accepted by the ISO as an international standard. IEEE’s strong
stand against WAPI, coupled with its behind-the-curtain activities, made WAPI an

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unpopular choice among national bodies at ISO. In the end, due to the weak
political-economic interests in it, WAPI failed to capture a spot in the international arena
of communication standards in spite of its technical merit of possessing a better security
mechanism.

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Chapter 6: A Comparative Analysis of TD-SCDMA and WAPI

Technology is at the core of market competition, and the merits of technical
standards are critical to the survival and competitiveness of a technology. However,
political-economic interests and power around competing standards also influence the
outcome of the technical process. The two cases of TD-SCDMA and WAPI in China’s
ICT sector show that certain comparative technical advantages do not guarantee
complete success in the standards market; rather, due to less than optimal levels of
interests and power behind them, both Chinese standards fall short of becoming
international standards. However, it is still important to compare how and why the two
standards achieve different levels of success, and in particular how the two standards
stand in contrast to the complete success the GSM standard. In this chapter, I first present
a comparative analysis of the development path of TD-SCDMA and WAPI. I then
analyze the success of the GSM standard based on the interests and power involved in
the process.
1. Comparing TD-SCDMA and WAPI
The two Chinese-developed communications standards experienced different
fates. Even though TD-SCDMA has not seen any domestic or global deployment, thus
falling short of a true international standard in the marketplace, TD-SCDMA is an
accepted international standard, and has commanded the support of domestic

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political-economic interests as well as the cooperation of international industry players.
WAPI was rejected as an international standard and ignored by commercial and political
interests on both the domestic and the global stage. From a comparative perspective,
what are the similarities shared by the two standards in their development? How did
different development strategies lead them on their divergent paths? To answer these
questions, we need to compare their development processes, as well as the
political-economic interests and power rallied behind them.
1.1 Shared Technological and Political Backgrounds
First of all, these two standards possess a similar technical niche. TD-SCDMA
features code-division multiple access, smart antennae, and mutual synchronization
between mobile and base stations. These features enable a more efficient use of
communications spectrum and a longer battery life, as claimed by the TD-SCDMA
standard setting group. WAPI, on the other hand, develops a mechanism that ensures
identification and encryption between WLAN terminals and access points, thus
improving the security of wireless networking.
While these advanced technical features garner them extensive media coverage
and make them attractive to bureaucrats and policy makers, neither has a clear, overall
advantage over their international competitors. In this arena, both Chinese standards
faced a similarly competitive environment.
91
To become a global standard, TD-SCDMA

91
An interviewee pointed out that the two standards actually face different competitive environments.

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had to compete with WCDMA and CDMA2000, while WAPI had to compete with
Wi-Fi. The competitors of both standards have entrenched themselves in the marketplace
and locked in consumers worldwide. For latecomers like TD-SCDMA and WAPI, it is a
challenge to compete on unequal footings without a clear technological breakthrough or
strong political-economic interests.
In the 3G and wireless networking standards market, the Chinese government
was “trying to pick winners”
92
and dictate the market. Traced to the origin of their
development, both Chinese standards have their roots in similar political-economic
rationales. They came into being in the wake of Chinese governmen’st callfor innovation
to boost the competitiveness of Chinese companies. In the words of one interviewee,
these standards emerged “as result of a call for indigenous innovation from top Chinese
leadership.”
93
In both cases, the standards were developed in response to the visions of
Chinese political leaders for national technological innovation, and thus exhibit
entrenched bureaucratic support in their bids for national and international attention. In
the case of TD-SCDMA, the SASAC and the NDRC acted as key political champions,
and in the case of WAPI, the SAC and the CNCA provided crucial political support. On
the other hand, setters of both standards wanted to capitalize on China’s market size, as
adoption of their standards in the large China market would ensure steady cash flow and

TD-SCDMA can take advantage of the confrontation between CDMA2000 and WCDMA, while
WAPI has to stage a battle against Wi-Fi all by itself, and thus could not leverage any third party.
92
Interview No. 18, telephone interview, February 3, 2007.
93
Interview No. 18, telephone interview, February 3, 2007.

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a springboard to the international stage. The economic interests of the standard setters
were in concert with the political-economic interests of Chinese central leadership in
general, and with part of the Chinese bureaucratic system in particular. In other words,
the standards were developed as a result of the combined economic incentives of the
standards setters and the political-economic motivations of Chinese bureaucrats.
On a deeper level, the development and international ambition of the two
standards were guided by the notion of technonationalism. Under this umbrella, when
technology policy was tilted towards technological indigenization, market competition
for standards was ignored, and domestic industrial development was protected through
political intervention. This top-down fashion in standards policy-making, with emphasis
on administrative procedures and political solution in the name of national interests,
exposed some particular aspects of China’s technological indigenization. For one thing,
key bureaucrats’ continuous commitment to TD-SCDMA, as well as unsustainable
lower-ranked agency support for WAPI, reveal that the nationalist ideology still runs
deep in China’s technology agenda. In a way, bureaucratic moves demonstrate “the
state’s political relationship to the marketplace” (Feignbaum, 2003, p. 203). In another,
the limited success of TD-SCDMA and the failure of WAPI on the international stage
demonstrate that China is still underdeveloped in technological innovation. This is one
legacy from China’s past of planned economy, under which the institutional structure ran
counter to competition and innovation.

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1.2 Different Development Processes and Outcomes
Even though both standards had bureaucratic champions behind them, there was
a slight difference in the support they obtained. With the SAC and the CNCA behind it,
WAPI was prescribed as the sole prospective wireless networking technology for the
Chinese market. Yet the support for WAPI was only symbolic on a political platform; it
did not gain any substantial financial support from economic decision-making bodies like
the SASAC and the NDRC. Also, WAPI experienced ups and downs in terms of the
bureaucratic support behind it. At the domestic level, the nationwide implementation plan
from a political vantage point represented the height of a political victory for WAPI and
IWNCOMM. However, from an international perspective, administrative decisions
created unwanted international pressure, making WAPI a victim of political compromise
when the Chinese government called off the implementation mandate.
On the contrary, fewer political stunts centered around TD-SCDMA. In its
development, TD-SCDMA received more substantial support from the SASAC and the
NDRC than WAPI. With less political bickering around it, TD-SCDMA enjoyed the
support of domestic equipment manufacturers, and secured the cooperation of some
international vendors.
The two standards took different paths in their development. TD-SCDMA
followed a relatively open process, while WAPI subjected itself to a closed process. This
contrast is clear in their collaborative scope and strategies. TD-SCDMA’s development

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was open to both domestic and international firms. As a result, international players like
Nokia and Ericsson have been participants in the development process of the technology,
and have set up joint ventures with Chinese companies to provide equipment for the
standard. This type of outgoing strategy makes a connection between an indigenous
Chinese standard and the international system, and enables the Chinese standard setters
to refine their technology. On the other hand, IWNCOMM adopted a closed-process
strategy in order to have total control over its standard. The company only collaborated
with domestic firms, and the intellectual properties of the technology were only licensed
to 24 Chinese vendors. Moreover, IWNCOMM was not willing to disclose the
encryption algorithms to be used at the time the nationwide implementation plan was
announced by Chinese authorities. These approaches to developing WAPI made it
impossible for international firms to assess the technology and participate in the
development process.
The transparent approach of TD-SCDMA vis-à-vis the non-transparent approach
of WAPI in the domestic arena produced different consequences in terms of international
challenges. While Datang Telecom enjoyed international cooperation to a certain level on
TD-SCDMA, IWNCOMM met with opposition to WAPI from international players like
Intel and Broadcom. In sum, the open process of TD-SCDMA leaves it with the prospect
of domestic and international adoption, while the closed process of WAPI deprived it of
any chance to be considered an international standard.

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2. Understanding the Success of GSM
The GSM standard is of interest, and offers a good case for a comparative analysis
against TD-SCDMA and WAPI. First, all three standards are similar to one another in that
they all belong in the ICT sector much dependent upon technical standardization for
interoperation and interconnection. Second, they are widely different from one another in
terms of the outcome of their respective process. While TD-SCDMA has arguably
achieved partial success and WAPI has suffered failure, GSM has accomplished dramatic
commercial success throughout the globe. An analysis of the interests and power issues
behind the prevalent GSM standard would provide intriguing contrast to TD-SCDMA and
WAPI in terms of non-technical issues.
2.1 GSM Standard: Rationale and Background
The making of the GSM standard started in the late 1970s.
94
The initial goal was
to introduce a single technical standard to the wireless systems in Europe, and the
momentum for it comes from both commercial and political sources. At the national level,
French and German firms, which failed to develop a 1G standard, wanted to develop a 2G
standard in order to take the lead in the digital communications market. The French and the
German governments, in response to the efforts of those firms, subsidized the development
of a digital communications system. In 1985, France, Italy, U.K., and the then West

94
The brief historical overview provided in this section is based on the account of Bekkers et al. (2002),
Cowhey, Aronson, & Richards (2004), Fomin & Keil (2000), and Funk & Methe (2001). Also see
www.gsmworld.com for a timeline of GSM’s development and expansion.

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Germany signed an agreement to jointly develop the GSM standard.
At the EU level, the CEPT and European Commission played key roles, because
they had concerted interests in harmonizing the technical specifications for the European
wireless communications networks. The EU had wanted to create an economically
integrated Europe, and a single GSM standard across Europe would help it do that. At the
EU level, European PTTs wanted to implement a pan-European telecom system that would
put an end to the fragmentation in the European wireless communications market.
95
The
Conference European Posts and Telecommunication (CEPT) initiated the technical process
in 1982, and the European Commission endorsed the GSM project in 1984. In 1986, the
EU decided to allocate 900MHz spectrum for GSM. The CEPT and EU’s persistence led to
the formal acceptance of the GSM system by EU members in June 1987. In September
1987, the GSM Memorandum of Understanding was signed where 15 network operators
from 13 EU countries agreed to start GSM services in 1991. As a result, equipment
manufacturers saw the potential market size of this standard, and joined force to supply
equipment. In 1991, the first GSM call was made in Finland. By 1993, thre had been 32
networks in 18 countries or regions. At present, GSM is serving about 2.5 billion customers
worldwide.
2.2 Interests and Power behind GSM
The GSM did not meet any serious competition in its early stage of development

95
Before GSM was deployed, Europe had five analog standards.

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and deployment, and its development process was characterized by a constellation of
commercial and political interests.
Commercially, French and German firms, in the hope of playing a more
prominent role in the 2G market, took the commercial initiative, and their commercial
interests won the political endorsement of their respective governments. When Italy and
U.K. joined the venture in 1985, there was a powerful commercial alliance to develop the
standard. The commercial interests in GSM reached the peak in 1987 when carriers from
13 EU countries agreed to start GSM services. Participation by network operator of this
line-up portended a huge market for GSM, and fueled the interests of equipment vendors.
This chain reaction in the industrial circle helped ensure a market foothold for GSM.
The commercial interests in the GSM standard found a partnership in the political
interests of the EU that was aggressively engaged in the GSM process in pursuit of its
political agenda. Politically, a unified 2G standard across all EU countries would serve
the symbolic purpose of European unification. As Cowhey and Aronson (2004) argue, to
accelerate deployment the EU made a “political bargain” (p. 31) in making GSM a
required standard for EU members, and achieved a “huge political victory” (p. 29) in doing
that. For the EU, the adoption of the GSM system throughout its member countries
symbolizes a great success in industrial policy, because it was able to coordinate the
interests of various national players to produce the optimal commercial outcome for
European equipment manufacturers. And behind GSM’s commercial success was an

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optimal political outcome for the EU in telecom policy.
Therefore, the development of the GSM in the 1990s was driven as much by the
commercial interests of industrial players as by the political interests of the EU. A
commercial-political synergy made GSM standard a success in the European marketplace.
Once it established an installed base in the European market, it achieved economies of
scale to reduce procurement cost. Then GSM became an attractive technology worldwide,
and was exported to other countries for implementation. In thise case of the interplay
between technical base, interests, and power, the GSM standard was able to make a
connection between the national/regional and the international, with strong
political-economic interests and the power of market size behind it. In this way, GSM
developed from a nationa/regional standard into a truly international wireless standard.

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Chapter 7: Findings and Conclusions

In this concluding chapter, I first summarize findings from the case study, as
well as the comparative analysis between the two Chinese standards and the GSM
standard. At the same time, I draw some general conclusions about the interplay of
technical base, interests, and power in the two-level games of international telecom
standards setting. I conclude the chapter with lessons learned from the Chinese initiatives,
contributions and limitations of the study, and directions for future research.
1. Two-level Game in International Telecom Standards Setting
The cases of TD-SCDMA and WAPI illustrate the interaction of technology,
interests, and power in international telecom standards setting at national and
international levels.
Political-economic interests and power interact with technical base to influence
the outcome of international telecom standards-setting initiatives. At the national level,
interests and power of domestic factions do not always act in favor of the technical base
of a standard. The economic interests of industrial players and the political interests of
bureaucrats may disagree, so their economic and political power may be used for
different purposes to defend or hurt a domestic standard. With transition to a
market-oriented economy, the Chinese central government has lost its grip on industry
players, and there is no unified, defining set of “national interests.” Rather, national

126
interests are a combination of various industrial and political interests, and when they are
not homogeneous, it is a challenge to coordinate those interests. Bureaucrats can no
longer easily mandate the implementation of industrial policy, and the outcome of any
policy-making process is dependent upon the interests of industry players.
In the case of TD-SCDMA, the Chinese telecom industry has not embraced
TD-SCDMA as a whole. Network operators have more interests in WCDMA and
CDMA2000 than in TD-SCDMA. The standard setting group has harbored interests in
the home-grown standard because of the potential huge market size available for it to
exploit, and its commercial interests are in line with the political interests of the
bureaucrats. As a result, the standard setting group has secured the support of bureaucrats
in its endeavor. The potential market size of TD-SCDMA has lured domestic equipment
manufacturers into the game, and the standard setting group is able to keep the
TD-SCDMA momentum alive.
For WAPI, the commercial interests of the standard setter were in line with the
political interests of bureaucrats. When bureaucrats granted preferential treatment to
WAPI, the standard setter failed to play the game of potential market size in its favor to
lock in the support of major manufacturers and network operators. In this situation of
bipolar games, the interests of the standard setter-bureaucrats alliance were outweighed
by conflicting commercial interests with more stakes in Wi-Fi. As a result, WAPI did not
get a chance at domestic adoption.

127
At the international level, technical and non-technical factors associated with
international players interact with those associated with domestic players, and determine
the outcome of standards-setting efforts at the national level. Strong economic and
political interests in a domestic standard do not guarantee international success, and have
to be viewed in the comparative context of international competition. In other words,
international telecom standards setting is a competition between different national or
regional standards. Which standard will win out is contingent on the way international
games affect national games.
TD-SCDMA and WAPI have comparative advantages over their international
competitors. However, the two standards experienced different fates due to differing
international games played around them. TD-SCDMA has enjoyed limited domestic
success as an international standard. Its acceptance in the international telecom
community by the ITU and 3GPP has a positive impact on its domestic status, providing
it with international legitimacy. Also, participation of international equipment vendors in
the development process has given Chinese companies an opportunity to improve
TD-SCDMA. Politically, TD-SCDMA has not encountered any major international
setbacks, which emboldens Chinese bureaucrats to continue their financial and political
support. All these technical, economic and political factors have created a favorable
environment for the continued commercialization efforts of TD-SCDMA.
On the other hand, WAPI’s international ambitions can be described as a debacle

128
due to the unfavorable play of international games around it. International equipment
vendors did not accept it or its planned nationwide implementation, and the powerful
IEEE, with deep-seated interests in Wi-Fi technology, opposed its international ambition
at the ISO. Politically, the U.S. government’s challenge of WAPI’s implementation plan
generated pressure on its bureaucratic champions. These international economic and
political games created an environment hostile to W API’s development. When these
international impacts came home to roost at the domestic level, bureaucratic support for
WAPI receded, and WAPI became a bargaining chip in the U.S.-China trade talks.
In more general terms, an argument can be made about the connection between a
domestic standard and an international one. On the path from the national to the
international success, a telecom standard targeting international adoption has to make the
domestic-global linkage. In that linkage, technical factors interact with non-technical
factors in making the transition from a national standard to an international standard. A
telecom standard that fails to make the domestic-global connection cannot see global
adoption, as in the case of WAPI. A telecom standard that makes only partial connection
in that linkage may succeed in the domestic market, as in the case of TD-SCDMA. A
telecom standard that makes a full domestic-global connection will see global adoption in
the absence of competing standards, as in the case of GSM.
What dintinshuishes TD-SCDMA from WAPI is, in principle, the interests
behind them and the power play staged for them at the domestic and international level.

129
In an unfavorable policy and commercial environment, WAPI had key domestic and
international elements against it, and had weak commercial and political support behind
it. As a result, it was unable to fulfill the domestic-global linkage, and lost in its
international bid. Therefore, the WAPI case supports Hypothesis 1 (A standard with a
comparable technical base but weak domestic interests and power behind it is unlikely to
be adopted globally.). TD-SCDMA, in a favorable policy and commercial environment,
has many non-technical factors on its side, and therefore is able to achieve partial success
with a prospect for global adoption. Therefore, the TD-SCDMA case supports
Hypothesis 2 (A standard with a comparable technical base supported by strong domestic
interests but weak international interests will be adopted domestically and may be
adopted globally.). Eventual success for TD-SCDMA will depend as much on complex
negotiations as on technology, politics, and economics. GSM, on the other hand, attracted
the common interests of manufacturers and carriers form the industrial circle, as well as
strong political interests from the EU. Eventually, with strong political-economic backing
and the market size in the power game, GSM was not only deployed in the EU countries,
but also exported to other parts of the world. Therefore, the GSM case supports
Hypothesis 3 (A standard with a comparable technical base supported by strong
domestic/internal interests and power is likely to be adopted in the absence of competing
standards with equally strong backing.).

130
2. Lessons from the TD-SCDMA and WAPI Process
From TD-SCDMA and WAPI, what lessons can Chinese government agencies
and standards setters learn? In this section, I summarize some of the issues that Chinese
bureaucrats and standards setters can ponder in order to achieve success in the future in
the international telecom standards-setting arena.
First, Chinese bureaucrats must learn how to make sound standards policy in a
new international standards regime. With the deregulation of the telecom industry, the
rules of game in standards setting have changed from domination by the public sector to
domination by the private sector. Under these circumstances, de facto standards hold
control in the market while de jure standards, backed by political will, have diminished
influence.
Chinese bureaucrats, instead of adapting to the new world and new rules, still
play the standards-setting game according to old rules and by managing innovation in a
top-down fashion. To be more effective and efficient, they need to interfere less with
market forces and focus on more on creating a favorable policy environment for fair
trade competition.
Chinese bureaucrats did the right thing in the case of TD-SCDMA by
supporting the inauguration of the TD-SCDMA Industry Alliance and TD-SCDMA
Forum to encourage industrial collaboration, but in the case of WAPI they made wrong
decisions when dictating the market with their nationwide implementation mandate.

131
Second, for Chinese firms with an eye on the international standards market, it
is important to understand that their primary task is to come up with advanced
technology to compete with their international rivals. After all, the open market is the
place where a standard is ultimately tested. Competing through political-economic
channels is important and necessary, but should come only after competition on a
technical platform. TD-SCDMA and WAPI have certain technical advantages over their
international rivals, but are not substitutes for them. If both Chinese-initiated standards
had achieved overall superiority over their international opponents, they would have had
a greater chance of global adoption, given the bureaucratic support they enjoyed.
Third, for the competitiveness of a telecom standard, it is important to
commercialize the standard in an efficient way. One reason that TD-SCDMA and WAPI
have remained communications standards on paper and not in reality is that they could
not develop critical components required for their implementation. Without these critical
components, standards setters cannot implement their standards in the market, and
meanwhile their competitors continue to improve their own technologies and maintain
their market lead.
On a related note, in order to implement a telecom standard in the market, it is
critical for standards setters to improve their manufacturing capabilities and win the
support of network operators. TD-SCDMA did not have the full support of domestic
network operators, which cost the standard setting group precious time and made it

132
difficult to have TD-SCDMA tested. WAPI failed to win the hearts of chipmakers and
network operators, which relegated it to a standard on paper without imminent hopes of
industrial development. In order for TD-SCDMA and WAPI to be adopted, the standards
setters needed to win the support of domestic and international equipment manufacturers
and network operators, which they failed to do for the most part.
Finally, while both TD-SCDMA and WAPI struggled to become international
standards in the marketplace, it may be more realistic for the standards setting groups to
target domestic niche and regional markets before seeking to launch their standards as
international competitors on a global scale. Chinese firms should probably refrain from
international ambitions, and focus on what they can achieve in the domestic arena first.
TD-SCDMA could target urban areas with its smart antennae technology, while WAPI
could cater to the needs of China’s public security sector and government bureaucracies
for wireless networking. If successful with those enterprises, they may subsequently be
exported to a regional market to establish themselves as regional standards, and then seek
to become international standards after regional success.
As an example, GSM was a regional standard in Europe before being adopted
worldwide, and CDMA became entrenched in the U.S. domestic market before being
exported to other countries. This is a pattern that TD-SCDMA and WAPI could possibly
emulate and replicate in China and East Asia.

133
3. Contributions of This Study
This study has made theoretical contributions to the literature of international
telecom standards setting. First, it adapts the two-level game framework to the study of
international telecom standards setting. The two-level game framework has been used in
the analysis of various issues in international relations, but has never been used to
analyze international telecom standards setting. Second, it includes political-economic
interests and power in the analysis of international telecom standards-setting initiatives.
The inclusion of political-economic dimensions corrects a technologically deterministic
viewpoint in standards setting, and captures the complexity of the factors that affect the
outcome of standards-setting efforts.
Few studies have been done on the telecom standars setting efforts in China, and
those few studies are descriptive at best. This study has filled that gap by not only
addressing the relative importance of the technical base, but also providing a systematic
analysis of the interests and power behindthe technical process.
This study also has practical implications. Policy makers can learn that a
top-down approach to standards setting, as exhibited in the WAPI case, no longer works
in a world where a communications standard is increasingly selected by the market. What
policy makers can do best is to create a level playing field for business firms to compete
with each other, allowing market mechanisms to choose the most efficient standards. On
another front, firms need not only the political support of bureaucrats, but also the

134
cooperation of other industrial players. And while support from domestic industry
players is important, the participation of international players even is more critical in
building an international connection.
4. Study Limitations and Directions for Future Research
This case study is limited to China’s standards initiation efforts for TD-SCDMA
and WAPI. Future research could explore more Chinese initiatives in related electronics
industries, including the settings surrounding the EVD (enhanced video disk) standard
and IGRS (intelligent grouping and resource sharing) standard.
Future research should also explore the standards-setting initiatives of other
countries. With more cases, especially those from other countries, we can draw a more
generalizable conclusion about the interaction of technology, interests, and power in
international telecom standards setting.
Second, this study adapts the two-level game framework and builds a
domestic-global linkage model, but does not quantify the variables for a rigorous
hypothesis testing. Future research should focus on ways to measure and quantify the
dependent and independent variables, introducing more rigorous methods for hypothesis
testing, and giving more empirical support to the domestic-global linkage model in
relation to international telecom standards setting.

135
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Appendix A: Members of the TD-SCDMA Industry Alliance

Domestic Firms
ACE Achieve Group
Beijing StarPoint Telecommunication Software Co., Ltd.
Beijing Zhongchuang Telecom Test Co., Ltd.
Bright Oceans Inter-Telecom Corporation
Changfang Corporation
China Electronics Corporation
China Electronics Technology Group Corporation
Chongqing Chongyou Information Technology Co., Ltd.
Comba Telecom System Holdings Ltd.
COMLENT Technology Inc.
Datang Mobile Communications Equipment Co., Ltd.
EI Communication Equipment Co., Ltd.
FiberHome Technologies Group
Guangzhou New PostCom Equipment Co., Ltd.
Haier Telecom Co., Ltd.
HiSense Company Limited
Holley Group
Huawei Technologies
Hubei Zhongyou Technology Industry & Commerce Co., Ltd.
Koretide Corporation
Legend (Beijing) Group
Mobile Antenna Technologies (Shenzhen) Co., Ltd.
Ningbo BIRD Co., Ltd.
POTEVIO Corporation
RDA Microelectronics
TCL Mobile Communication Co., Ltd.
Tongyu Communication Equipment Co., Ltd.
Xi’an Haitian Antenna Technologies Co., Ltd.
Zhongxing Telecommunications Corporation

Foreign Firms/Joint Ventures
Alcatel Shanghai Bell
Andrew Corporation
COMMIT Incorporated
DBTEL Industry Co., Ltd.
Inventec Appliances (Shanghai) Co., Ltd.
Spreadtrum Communications (Shanghai) Co., Ltd.

158
T3G Technology Co., Ltd.
TD Tech Ltd.
UTStarcom Inc.

159
Appendix B: Members of the TD-SCDMA Forum

Domestic Firms
China Mobile
China Network Communications (CNC)
China Railway Telecommunications Corporation
China SatCom
China Telecom
China Unicom
Chongqing Chongyou Information Technology Co., Ltd.
Comba Telecom System Holdings Ltd.
Datang Mobile Communications Equipment Co., Ltd.
FiberHome Technologies Group
Huawei Technologies
Koretide Corporation
Longcheer Holdings Limited
Rising Technology
Sea High Communications
TCL Mobile Communication Co., Ltd.

Foreign Firms/Joint Ventures
Agilent Technologies
Alcatel Shanghai Bell
Analog Devices
ASUSTEK Computer
DBTEL Industry Co., Ltd.
French Telecom
Fujitsu
Infineon Technologies AG
Intel
InterDigital Communications Corporation
LG Electronics
Lucent Technologies
MCCI
Motorola
NEC
Nortel
NXP Semiconductors
Qualcomm
Rohde & Schwarz

160
Samsung Electronics
Siemens
Spreadtrum Communications (Shanghai) Co., Ltd.
T3G Technology Co., Ltd.
Tektronix
Texas Instruments
UTStarcom Inc.
Xilinx

161
Appendix C: Members of the China Broadband Wireless IP Standard Group

Council Members
China Electronics Standardization Institute
China IWNCOMM Co., Ltd.
Beijing Institute of Post and Telecommunications
Guilin University of Electronic Technology
Hanwang Technologies, Inc.
Huawei Technologies
National Radio Monitoring Center
Research Center for Commercial Key of China
Xi’an Institute of Post and Telecommunications
Xi’an Jiaotong University
Xidian University

Members
Beijing Chiplight IC Design Co., Ltd.
Beijing Digipro Information Technology Co., Ltd.
Beijing Founder-LinkAir Communications
Beijing LHWT Microelectronics Inc.
Beijing P&T Telephone Equipment Factory
Beijing University of Technology
CEC Huada Electronic Design Co., Ltd.
Chengdu Westone Information Industry Inc.
China Telecommunications Technology Labs
Fujian Star-Net Communication Co., Ltd.
GCI Science and Technology Co., Ltd.
Hainan Infosee Data System Co., Ltd.
HiSense Digital Product Co., Ltd.
Legend (Beijing) Group
Nanshan Bridge Co., Ltd.
Netac Technology Co., Ltd.
Peking University Founder Group
Shanghai AboveCable, Inc.
Shanghai Angkai Co., Ltd.
Shanghai Hamm Information Technology Co., Ltd.
Shenzhen Mingwah Aohan High Technology Corporation
Shanghai Sibo Telecom Co., Ltd.
Shenzhen Surho Technology Co., Ltd.
TCL Communication Equipment (Huizhou) Co., Ltd.

162
Tsinghua Tongfang Co., Ltd.
Tsinghua Unisplendor Corporation
Tsinghua University
Zhongxing Telecommunications Corporation

163
Appendix D: List of Interviewees

Interview 1
Conducted in June 2005 with Senior Project Manager at the Switch Department
of Guangdong Planning and Designing Institute of Telecommunications in China. She
was based in the metropolitan of Guangzhou in Southern China, and was known as a 3G
expert in China. She managed switch-related network planning and implementation for
projects across China.

Interview 2
Conducted in June 2005 with Deputy Director at the Switch Department of
Guangdong Planning and Designing Institute of Telecommunications in China. He
supervised switch-related network design and planning for the Institute.

Interview 3
Conducted in July 2005 with Deputy Secretary General, China Chief
Information Officers Association under the State Information Center in China. He was
well connected with government officials overseeing China’s information and
communication industry.

Interview 4
Conducted in July 2005 with Senior Economist and Deputy Division Chief at
the Department of Strategy and Development of the State Information Center in China.
His responsibilities included providing strategy and development advice to government
officials in connection with information technology services.

Interview 5
Conducted in July 2005 with TD-SCDMA Marketing Director of the ZTE
Corporation Research and Development Center in China. He supervised ZTE’s
marketing activities for TD-SCDMA

Interview 6
Conducted in July 2005 with Research Engineer with Nokia Research Center in
Beijing, China. He conducted research in network performance and 3G standards, and
also represented Nokia at national and international standards meetings.

Interview 7
Conducted in July 2005 with Business Development Manager of the 3G Group
of Alcatel Shanghai Bell Co., Ltd. He was based in Beijing, China, and supervised
market development for the company’s 3G products.

164
Interview 8
Conducted in July 2005 with Senior Economist and Deputy Division Chief at
the Department of Strategy and Development of the State Information Center in China.
His responsibilities included providing strategy and development advice to government
officials in connection with information technology services.

Interview 9
Conducted in July 2005 with Liaison Officer with the International Cooperation
Division of the Ministry of Information Industry of China. His responsibilities included
coordinating international cooperation related issues of the Ministry of Information
Industry.

Interview 10
Conducted in July 2005 with Standards Manager at the Wireless Marketing
Department of Nortel Networks (China) Limited. His responsibilities included managing
promotional activities for Nortel’s 3G products and representing Nortel at national
standards meetings.

Interview 11
Conducted in July 2005 with Project Manager of China Mobile, Shandong
Branch. He managed projects related to China Mobile’s GSM network operation in
Shandong Province.

Interview 12
Conducted in August 2005 with General Manager of China Netcom, Heibei
Branch. He supervised the operation of China Netcom’s landline network in Hebei
Province.

Interview 13
Conducted in August 2005 Professor Kan at the Beijing University of Posts and
Telecommunications. He had done and published research on China’s telecom industry,
and was sought by the Chinese media for comments on China’s telecom sector.

Interview 14
Conducted in June 2006 with Project Manager of China Unicom, Guangxi
Branch. He managed projects related to China Unicom’s network operation in Guangxi
Province.

Interview 15
Conducted in October 2006 with an American entrepreneur in China. Formerly,

165
she was Managing Director of the U.S. Information Technology Office in Beijing.

Interview 16
Conducted in October 2006 with Deputy General Manager of China Unicom,
Yunnan Branch. He supervised the day-to-day operation of China Unicom in Yunnan
Province.

Interview 17
Conducted in October 2006 with Managing Director of ChinaLabs. He
supervised research on China’s recent standards setting efforts.

Interview 18
Conducted in February 2007 with Managing Director of BDA China, the leading
independent telecom advisory firm in China. He had advised the senior management of
China Mobile, China Telecom, China Netcom and China Unicom, as well as the private
sector.

Interview 19
Conducted in February 2007 with President and Editor-in-Chief of
Communication World in Beijing, China. He had written and supervised the coverage of
China’s telecom sector for over 20 years, and was well connected with China’s telecom
industry.

Interview 20
Conducted in March 2007 with Professor of Political Science at the University
of Oregon. He has published on China’s recent standards initiatives.

Abstract (if available)

Abstract Current literature on international telecom standards setting ignores the two-level game nature of the technical process, and also fails to address current telecom standards-setting initiatives in China. This study addressed these two gaps from a theoretical and empirical perspective. In the study, I propose, using Robert Putnam's two-level game metaphor, a domestic-global linkage model to theorize the development of national telecom standards into international ones, arguing that international telecom standards setting is a two-level game involving standards setters, network operators, and bureaucrats at national and international levels. I also argue that three key factors -- technical base, interests, and power -- interact with each other in transitioning national standards into international standards.

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Asset Metadata

Creator Zhou, Liuning (author)

Core Title Technical base, interests, and power in the two-level game of international telecom standards setting: the political economy of China's initiatives

School Annenberg School for Communication

Degree Doctor of Philosophy

Degree Program Communication

Publication Date 10/31/2009

Defense Date 10/17/2007

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag interests,international telecom standards setting,OAI-PMH Harvest,power,TD-SCDMA,technical base,two-level game,WAPI

Place Name China (countries)

Language English

Advisor Aronson, Jonathan (committee chair), Bar, François (committee member), Tang, Shui Yan (committee member)

Creator Email liuningz@usc.edu

Permanent Link (DOI) https://doi.org/10.25549/usctheses-m901

Unique identifier UC1228986

Identifier etd-Zhou-20071031 (filename),usctheses-m40 (legacy collection record id),usctheses-c127-588580 (legacy record id),usctheses-m901 (legacy record id)

Legacy Identifier etd-Zhou-20071031.pdf

Dmrecord 588580

Document Type Dissertation

Rights Zhou, Liuning

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Repository Name Libraries, University of Southern California

Repository Location Los Angeles, California

Repository Email cisadmin@lib.usc.edu