In This Issue... China Digital Set-Top Box Market (Millions of Units) China Netcom to Switch from H.264 to AVS for IPTV

MONTHLY ChinaNEWSLETTER TELECOM

Vol. 13 No. 12 December 2006

In This Issue... China digital set-top box market (millions of units) China Netcom to switch from H.264 to AVS for IPTV.... 2 12 12 Ericsson secures optical 10 backbone network contract with Central China Power Grid ...... 3 8 ZTE wins WDM deal ...... 5 6 Beijing Quan Tong Chang to 4 launch ‘Intragroup Call’ .. 6

3 3TNet launches new 2 broadband information network...... 7 0 2005 2010 ZTE’s new generation ‘green’ base stations reduce Source: In-Stat power consumption ...... 8

TOP NEWS Intelsat renews China Central Television contract Number of fixed-line users in China reaches 370 million for global programming China’s Ministry of Information Industry stated that the distribution ...... 9 number of landline users in China had reached 370 million. The nation’s mobile-phone base reached 440 million, taking

China Telecom Newsletter is published monthly by Information Gatekeepers Inc. 320 Washington, Brighton, Massachusetts 02135, USA. Fax: (617) 782-5735. Editorial telephone: (617) 782-5033. Circulation telephone: (617) 782-5033. (800) 323-1088 (Outside MA) Publisher: Dr. Paul Polishuk Editor: Dr. Hui Pan Managing Editor: Bev Wilson Circulation Mgr: Jaime Perez Subscription rates: $695 per year, U.S. and Canada; $745 per year elsewhere. Discounts available for multiple subscriptions. © Information Gatekeepers Inc. 2006. All rights reserved. (ISSN 1078-2214) No part of this publication may be reproduced, stored in a data base or transmitted without prior written permission of the publisher. For photocopying authorization, contact Copyright Clearance Center, 222 Rosewood Dr., Danvers, MA 01923, Tel: (978) 750-8400. China Telecom Newsletter December 2006

the overall telephone volume to over 800 million. which include Levono, ZTE, Datang, LG, The MII also said that the Chinese telecom Samsung, and Motorola. These three industry grew from July to September. companies are intending to give orders for an Revenues from the postal and telecom business additional 10,000 TD-SCDMA mobile phones reached $67 billion in the period, an increase of next month. 11 percent compared to the same period a year ago. Total subscribers reached 280 million in China Unicom adds 1.29 million new September and are likely to go past 300 million subscribers in October 2006 by this year’s end. China Unicom added 1.29 million new subscribers in October, compared to 1.23 million China Netcom to switch from H.264 to AVS new subscribers in September. 924,000 for IPTV subscribers were added to the GSM, network, China is conducting trials for IPTV in five compared to 894,000 new GSM additions in cities, of which one trial uses AVS, whereas the September. others use H.264. Netcom said that it would The GSM subscriber base thereby change over to AVS from H.264 after the codec increased to 104.04 million. The CDMA trials finish. This month, the Chinese subscriber base increased over the month by government will begin another round of tests 361,000 subscribers, from 35.40 million to 35.76 for AVS, which should finish in January 2007. million. The operator had 139.8 million Netcom said that it would favor equipment subscribers at the end of October. suppliers who agree to upgrade its system with AVS free of cost in return for potential long-term SUBMARINE CABLES contracts. In addition, Netcom plans to use AVS- based IPTV in 20 cities in 2007, and expects 6 China Telecom, China Netcom and China million IPTV users in five to seven years, or 40 Unicom join Asia-Pacific consortium to build percent of its present broadband users. $500 million next-generation optical cable The technical performances of H.264 and directly linking US and China AVS are believed to be almost the same. China Telecom, China Netcom and China However, some chipmakers are skeptical. Unicom signed a construction and maintenance Unlike MPEG-4/H.254, AVS might not charge agreement with a consortium that includes participation fees for using codec in subscription- Korea Telecom, Chunghwa Telecom and based services, title-by-title duplication of Verizon Business to build the first next- content, or free over-the-air broadcasts. generation undersea optical cable system directly linking the US mainland and China. China Mobile, China Netcom, and China The new system, to be named Trans- Telecom sign deals to purchase TD-SCDMA Pacific Express (TPE), will use the latest optical handsets technology to provide greater capacity and China Mobile, China Telecom, and China higher speeds to meet the dramatic increase in Netcom have reportedly signed deals with 15 demand for IP, data, and voice communications mobile-phone manufacturers to purchase with the Asia-Pacific region. around 9,000 TD-SCDMA mobile phones. It The new fiber-optic cable can support the forms a part of a trial for the homegrown 3G equivalent of 62 million simultaneous phone technology. The sale price for the mobile phones calls, more than 60 times the overall capacity is $315 per handset. Twelve of the 15 of the existing cable directly linking the United manufacturers happen to be domestic firms, States and China.

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While TPE will initially provide capacity Chongming. TPE will also have landings in of up to 1.28 terabits per second (Tbps), the Tanshui, Taiwan, and Keoje, South Korea. system will have design capacity of up to 5.12Tbps to support future Internet growth and FIBER OPTICS advanced applications such as video and e- commerce. In another first, individual customers Ericsson secures optical backbone network can access the cable system at wavelengths of contract with Central China Power Grid up to 10 Gigabits per second (Gbps), the Ericsson has been selected by Central equivalent of nearly 121,000 simultaneous China Power Grid Co. Ltd. (CCPG) as the sole phone calls. supplier for its East-West Corridor Optical Verizon Business is the only US-based Transmission Project. Ericsson will be providing member among the initial parties of the 10G and 2.5G SDH equipment and related consortium. The TPE cable also provides more services. diversity from other undersea routes and more Under the contract, Ericsson will supply efficient connections to a number of countries its most advanced Optical MultiService transport in Asia where Verizon Business has large and switching platforms to build an optical business customers. transmission backbone network for CCPG. “This state-of-the-art cable will support Upon completion of the network, the high-speed traffic to the world’s fastest-growing transmission capacity of Central and South region — the Asia-Pacific,” said Fred Briggs, Western provinces in China will be greatly Verizon Business executive vice president of enhanced, local electric resources utilized, and operations and technology. “Our leadership in local telecommunications improved. Most this project builds on our important existing significantly, it will help improve the supply of relationships in China, further recognizes the power to economically booming areas of Central emergence of China as a diverse and South Western China. communications hub for Asia, and reflects our The East-West Corridor Optical company’s commitment to help U.S. and other Transmission Project is the most important one global companies compete worldwide.” of CCPG’s 11th Five-Year Plan. The optical Construction of the new cable system, transmission network to be constructed will pass which will extend more than 18,000 kilometers, through Hubei and Sichuan provinces and will begin in the first quarter of 2007. Completion Chongqing Municipality, covering 55 stations is scheduled in the third quarter of 2008. The and 1,500 kilometers. The entire project is due project represents an investment by consortium to be completed and put into operation by 2009. members of more than US$500 million. Mats H Olsson, president, Ericsson “In addition to a diverse route directly to Greater China, said, “The contract has further China, this cable will add capacity and the strengthened our long-term solid relationship higher-speed service customers are with China’s power industry. With our world demanding,” Briggs said. “We also will improve leading optical solutions and experiences, we provisioning intervals and reduce latency for will be able to support CCPG in providing safe, traffic between the United States and many secure and high-performance power services countries in the region.” to over 380 million users across Central and The cable will have a landing point South Western China.” provided by Verizon Business at Nedonna Ericsson has so far supplied the SDH Beach, Oregon, on the US West Coast and will OMS3200 series, OMS1600 series, OMS1200 land on the China mainland at Qingdao and series, SMA series3/4, and PCM to China’s

3 China Telecom Newsletter December 2006 major power companies, including China “As hosts to the world’s most important Southern Power Grid Corporation, State Grid sporting event, we can’t afford to take risks with Corporation of China, and its subsidiaries our communications infrastructure,” said Mr. Liu covering North and East China, as well as to Run Sheng, director of Beijing Power’s numerous provincial and local power Dispatching Center. “Of all the companies we companies. evaluated, ECI offered the most robust and The contract highlights the benefits of the reliable solution. Moreover, ECI is well- Marconi acquisition to Ericsson’s customers, established in China and came to us with who value having a strategic partner and a excellent references.” provider of full-service broadband solutions “We’re proud that our optical solution was including cutting-edge microwave and optical once again chosen by a major utility company transport networks, broadband access, and in China for this high profile event,” said Aviel IMS. Tenenbaum, president of ECI Telecom’s Asia Pacific Regional Business Unit. “This flexible Beijing Power selects ECI Telecom to solution gives Beijing Power the ability to support upgrade its communications system for the huge bandwidth requirements for the 2008 2008 Olympics Olympics, ensuring that their critical ECI Telecom announced that Beijing communications run reliably.” Power has chosen ECI to upgrade its optical communications network in preparation for the ZTE GPON system on show at ITU Telecom 2008 Olympics. ECI’s proven track record of World 2006 supplying highly reliable solutions for power ZTE exhibited the ZXA10 GPON (Gigabit companies, both in China and around the world, passive optical network) system at ITU Telecom helped ECI win this competitive bid. This follows World 2006, along with its newest wireless, another 2008 Olympics-related contract that access, core, and terminal products. was awarded to ECI earlier this year by Beijing The ZTE ZXA10 C220 optical line Subways to upgrade its communications terminator (OLT) GPON system and F series system. terminals provide stable, high-quality optical In preparation for the Olympics, Beijing access for new services such as IPTV and Power is building new power stations, Home Gateway. connecting multiple Olympics sites and The ZTE GPON system conforms to ITU- upgrading its current communications T G.984 standards, with the ability to handle infrastructure. ECI’s XDM optical solution will high-density, high-bandwidth, and high-volume be used to expand this network, providing traffic, supporting high-quality multicast and DBA Beijing Power with additional bandwidth and providing high-bandwidth data and Internet capacity to handle peak demand during the access, VoIP, IPTV, and CATV services. Olympic Games. ZTE produces a series of OLTs and ONTs This highly reliable and scalable network (optical network terminators) meeting the will be used for internal communications and requirements of FTTH, FTTB, FTTO, FTTCab, for data communications in order to monitor the and other applications. The ZXA10 GPON power stations and generators. system can also support EPON (Ethernet The network will be managed by ECI’s passive optical network) and GPON mixed- LightSoft network management system, inserts in one frame. enabling Beijing Power to easily provision and ZTE’s EPON system was exhibited. It control new services. conforms completely to IEEE 802.3ah, providing

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a high-quality optical solution. First implemented system installations ranked in the top three in at the end of 2004, ZTE’s EPON products are the world, and ZTE was the fastest-growing now widely used in the Guangdong, Shanghai, mainstream optical network vendor between Guangxi, Hubei, and Shanxi branches of China 2004 and 2006. Telecom; the Sichuan and Guangdong branches of China Netcom; and with ITESS in The PMC-Sierra introduces first end-to-end Netherlands. The ZTE EPON system covers EPON silicon solution with key China applications of FTTH, FTTO, FTTB +LAN, Telecom features FTTCab, and mixed-inserts in MSAN/MSAG. PMC-Sierra Inc. announced the availability of the industry’s first EPON optical ZTE wins WDM deal network unit (ONU) and optical line terminal ZTE has exclusively won a contract to (OLT) silicon devices that support China build five national WDM trunk lines for China Telecom-defined algorithms and features for the Netcom as part of the operator’s 2006 long-haul Chinese telecom market. The new PAS6301 transmission network improvements. This ONU for customer premises equipment and the agreement follows the successful construction PAS5201 OLT for central office equipment of five national trunk lines for China Netcom in together provide an end-to-end EPON solution. 2005. The two system-on-chip (SoC) devices are the The five new national trunk lines will first to be designed to meet new China Telecom cover 10 Chinese provinces. With deployment standards that define data encryption and of the network, China Netcom will achieve decryption algorithms, quality of service greatly increased network capacity on the procedures, and classification protocols, making backbone layer and improved operational them ideal for emerging high-volume capability, enabling it to compete more strongly deployments in China. These devices extend in the highly competitive Chinese market. PMC-Sierra’s product leadership in high-volume ZTE will supply its Unitrans series ZXWM EPON devices by providing the first enhanced M900 DWDM equipment to build the network. Forward Error Correction (FEC) in both ONU With the adoption of multiple industry-leading and OLT devices, enabling higher split ratio and technologies such as ERZ, large-power EDFA, longer physical links in the access network. In enhanced FEC, dynamic power equalization, addition, the PAS6301 includes voice-over-IP distributed dispersion management, automatic service support to lower the cost of providing compensation of line attenuation, and Laman voice over fiber. Both devices support large amplifiers, the equipment solves problems such packet buffers for higher-quality IPTV broadcast as long-term wavelength stability in large- capabilities, which is a significant improvement capacity and long-haul transmission, low signal- over previously available devices. to-noise ratio, and diversified spares. This “We are pleased that a market leader enables single-span transmission over 300km such as PMC-Sierra has introduced EPON and super-long-haul non-REG transmission devices that support the features that we have over 5000km, delivering high reliability and deemed important for our marketplace,” said security over the entire network. Director Wang Zuo Qiang of the Network ZTE optical networking products have Technology Department of China Telecom. “We been deployed by 130 operators in over 70 have worked with the industry to define a countries. According to the latest statistics from complete set of features and algorithms so that telecoms industry analyst firm Ovum-RHK, at equipment deployed in China will be compatible the end of June 2006 ZTE’s long-haul DWDM with our requirements.”

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“These new EPON SoCs demonstrate Mr. Sophie also serves as audit chair for each PMC-Sierra’s commitment to all Asian markets,” of these companies. said Victor Vaisleib, general manager of the Mr. Sophie recently served as EVP and FTTH Business Unit at PMC-Sierra. “They COO, and previously as SVP and CFO, of provide key feature integration for supporting UTStarcom Inc. of Alameda, California, where China Telecom FTTH deployments as well as he had financial and operational management providing extended feature sets that result in a responsibility for the company with annual lower BOM cost for the system vendors.” revenues in excess of $2 billion. At UTStarcom, “PMC-Sierra is first to market with end- a manufacturer of telecom equipment for use in to-end EPON product enhancements that worldwide markets, with specific focus in comply with important market-oriented mainland China, Mr. Sophie had direct specifications,” said Jeff Heynen, directing managerial responsibility for accounting, analyst for broadband and IPTV with Infonetics finance, information technology, investor and Research. public relations, legal, human resources, “According to our research, PMC-Sierra marketing and sales, and supply chain. He also is the volume leader in FTTH devices with coordinated UTStarcom’s highly successful millions of devices deployed in Japan. These $216 million initial public offering in 2000 and new devices will position them to support future effectively positioned the company to investors deployments in China as well.” during the company’s rapid growth. Samples of the EPON PAS6301 ONU Previously he held high-ranking financial and PAS5201 OLT devices are available now. positions with P-Com Inc. and the Loral, The PAS6301 ONU is available in a PGBA 456 Fairchild Imaging Sensors Division. package, and the PAS5201 is available in a BGA “We are pleased to welcome Mike to the 376 package. For more information, contact a Board and are confident that his leadership PMC-Sierra sales representative at http:// experience will prove invaluable to the www.pmc-sierra.com/contactSales. A company’s growth and our strategic planning, comprehensive support package, including especially with regards to various finance, datasheets and application notes, is available accounting and control posture objectives,” said at www.pmc-sierra.com/ftth-pon. Tim Jenks, chairman and CEO of NeoPhotonics. “NeoPhotonics has enjoyed impressive NeoPhotonics appoints Michael Sophie to growth over the last two years and has made a board of directors and chair of audit number of acquisitions that position the committee company well for sustained growth in various NeoPhotonics, a supplier of optical sectors of the telecommunications industry,” networking components for long-haul, metro, said Sophie. “I look forward to assisting the and access (such as FTTX) networks, Board as the company enters the next stages announced the appointment of Michael J. of its development.” Sophie to the company’s board of directors and chair of the audit committee. INTERNET Mr. Sophie currently sits on the boards of directors for McData Corporation, a provider Beijing Quan Tong Chang to launch of storage networking solutions; BCD ‘Intragroup Call’ Semiconductor, an analog and mixed signal IC Beijing Quan Tong Chang Information products company; and Postini Inc., a provider Services (Beijing QTC) will soon be introducing of on-demand message management services. a broadband phone service called the

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“Intragroup Call” in the Beijing Tianzhu Airport adequately service our subscriber base. Industrial Zone. The company expects to make Therefore, we are adding two new servers to a profit of $1.5 million every year. Tianzhu Zone our current infrastructure, creating additional and Beijing QTC will work in partnership to capacity for 500,000 new users. This brings our launch this “Intragroup Call” promotion. The total infrastructure to 27 servers. All of our new company intends to install the broadband phone servers will be installed in China Tie Tong’s platform using the Internet, replacing regular equipment room, who provide us with the phone networks for transmitting calls. The first necessary access to bandwidth, network installation will be done at the management infrastructure and E1 interface. Expansion office building in Tianzhu Zone, Blue Sky programs such as this will be virtually ongoing.” Mansion. Eventually it will be applied to big and midsized enterprises. 3TNet launches new broadband information Beijing QTC is also planning to build network broadband phone networks with the largest 3TNet, a broadband information network covering area in a period of eight months. The which integrates radio, TV, telecom, and company expects to increase its annual sales Internet, has been launched in various parts of by about $1.5 million. China. 3TNet can also provide video-on- demand services. This will allow Chinese China VoIP expands Internet users to access interactive broadband Citing growing demand for its voice over services at speeds of around 41Mbps. The Internet services, Jinan Yinquan Technology Co. majority of Chinese families accessing Ltd., a wholly owned subsidiary of China VoIP broadband services are provided speeds of less & Digital Telecom Inc., announced that it has than 10Mbps, according to the Ministry of launched a major, system-wide expansion Science and Technology. Via video-on-demand, program. The company said it plans to users can order films along with many interactive significantly increase server capacity, add digital services like tele-medical and tele- equipment in cities and provinces that are education services. More than 30 Chinese targeted for expansion, increase the number of companies, scientific research institutes, and available phone numbers, replace certain universities like China Telecom, the Institute of equipment to increase speed and efficiency, and Acoustics of the China Academy of Sciences, add additional staff at current and future and Shanghai Media Group participated to locations. develop the network. It will help to reduce Jinan Yinquan, a technology company information technology costs. offering VoIP services in the People’s Republic of China, has been developing WIRELESS telecommunication solutions for China’s burgeoning Internet industry for more than half Nokia signs contract with Chinese a decade. Guangdong MCC on GPRS packet core “Our mission is to become the premier network expansion provider of VoIP services in the People’s Nokia has announced the signing of a Republic of China,” said Li Kunwu, president GPRS packet core network expansion contract and CEO of China VoIP & Digital Telecom Inc. with Guangdong MCC Ltd., which will make “To accomplish that goal we need to always be Nokia the leading GPRS provider for the several steps ahead of our growth so that we company. As per the terms of the contract, Nokia will never be in a position that we cannot will provide its intelligent GPRS packet core

7 China Telecom Newsletter December 2006 solution for the eighth GPRS expansion of for a happy balance between capacity demands Guangdong MCC. The core solution consists and the environment, integrating with one of SGSN, Nokia Flexi Intelligent Service Node, another to ensure minimal product waste.” and Nokia Charging Gateway. The solution also The new base stations support all supports the high-tech content charging frequencies of GSM — 850/900/1800/1900/ functionality and provides an easy migration EGSM — fully satisfying operator requirements, path to Nokia Combi SGSN, as the 3G access aided by a dynamic resources pool structure support capability can be obtained with simple which enables fast construction and cost memory and interface upgrades. savings. The multivendor, multitechnology Nokia The adoption of Netspeed technology will NetAct network and service management largely increase coverage and data qualities, as system, including Nokia NetAct Traffica, will well as increasing network construction speed support the network; Nokia will also provide and transmission abilities. network planning, implementation, and The ZTE ZXG10 8000 outdoor base integration services. The network will be serving station family is suitable for harsh environments more than 11 million data subscribers in the where operators have difficulty providing Eastern Guangdong province ranging from equipment rooms. Shenzhen to include DongGuan and Huizhou The flexible networking modes help by December 2006. Nokia and Guangdong operators to build economic networks, and by Provincial Government signed a MoU in October using ZTE base station products, operators will 2006 in Finland, which names Nokia as an easily achieve seamless coverage from cities important player in the information industry to suburbs, from towns to rural areas, and from development of Guangdong province. roads to grasslands. ZTE also demonstrated solutions such ZTE’s new generation ‘green’ base stations as its BSC-plus solution and its FMC solution, reduce power consumption which directly increase network value and help ZTE launched its ZXG10 8000 base operators achieve a competitive edge. stations family at ITU Telecom World 2006. ZTE’s “green” multi-carrier 8000 base stations Beijing Mobile uses AsiaInfo family integrates all the technical advantages AsiaInfo Holdings Inc., a provider of of third-generation base stations. telecom software solutions and IT security Because it adopts a multiple-density products and services, announced that it has frequencies module, the power consumption is signed a contract to develop Phase III of Beijing lower and the dimension is smaller. An optimal Mobile’s Business Intelligence (BI) system. The balance between capacity and coverage is Phase III BI project will enhance Beijing Mobile’s achieved, supporting the smooth evolution to competitive capabilities by improving data 3G base stations and future networks. quality, broadening subject domain applications “The key issue in today’s rapidly to enable Beijing Mobile to offer more developing market is that of proprietary personalized services. solutions,” said Mr. He Zhaogang, ZTE’s GSM “AsiaInfo’s leading business intelligence product manager. “If any technology, product or systems help telecom operators analyze their solution is to truly take off, it must integrate with user data and develop services tailored to legacy systems and systems yet to come. It customer needs,” said Steve Zhang, president goes without saying that these solutions will and chief executive officer of AsiaInfo. “We have increasingly feed into the ‘green’ trend and aim been investing in business intelligence R&D for

8 China Telecom Newsletter December 2006 several years now and our BI systems and MERGERS AND ACQUISITIONS service guarantees are world class. Currently our BI systems support more than 150 million Huawei accepts 3Com offer to purchase users and over 15 terabytes of data.” Huawei’s entire stake in H3C Mr. Zhang also noted that AsiaInfo’s BI Huawei, a provider of next-generation system has been successfully deployed for 13 telecommunications network solutions for of China Mobile’s provincial subsidiaries. operators around the world, announced that it As a leading telecom operator in China, has accepted a bid offer from 3Com to purchase Beijing Mobile’s business and user volume has Huawei’s entire stake in their joint venture, increased significantly in recent years, and the Huawei-3Com (“H3C”). operator is expected to reach 14 million users In accordance with H3C’s shareholders’ by the end of 2007. agreement, the bid process was initiated by A sophisticated BI system that provides 3Com on November 15, 2006, and a bid offer in-depth analysis of market and user data is was accepted by Huawei on November 28, 2006 integral to servicing such a large user base. Prior (Beijing time). H3C will become wholly owned to this agreement, AsiaInfo successfully by 3Com after the completion of the transaction. constructed Phases I and II of Beijing Mobile’s Mr. Guo Ping, senior vice president of BI system, establishing a unified data platform Huawei Technologies, said, “The divestment will and nine major analytical functions. further enable Huawei to focus its efforts on its core business, strengthen our leadership Intelsat renews China Central Television position in the ALL IP-based FMC (Fixed and contract for global programming distribution Mobile Convergence) solutions market, and Intelsat announced that China Central create long-term value and potential growth for Television (CCTV), the national broadcaster of our clients. the People’s Republic of China, renewed a Over the past three years, 3Com and multiyear contract for the global distribution of Huawei have contributed a great deal to the its programming. development of H3C. H3C has become one of CCTV is also utilizing Intelsat for its the leading global suppliers of IP networking international backhaul transmission of the Asian products and solutions and we wish them every Games from Doha, Qatar, back to Beijing. success in the future.” A long-standing customer since the Huawei will continue to comply with its launch of PAS-2 in 1994, CCTV became the commitments under the existing joint venture world’s first global Mandarin Chinese television agreements. service when it expanded its services internationally via the PAS-3 satellite in 1995. Hutchison courts suitors Intelsat currently provides full-time Hutchison Telecommunications program distribution services for CCTV via its International Limited states that it has been PAS-1R Atlantic Ocean Region satellite, PAS-9 approached by various potentially interested Atlantic Ocean Region satellite, and PAS-10 parties regarding a possible sale of its equity Indian Ocean Region satellite. interests in Hutchison Essar Limited, the Intelsat also provides CCTV with capacity company’s mobile operations in India. on its Galaxy 3C satellite for direct-to-home No agreement with respect to such (DTH) services in the United States. This possible sale has been entered into to date. The renewal contract also expands CCTV’s C- and company reiterates that there is no assurance Ku-band capacity agreement. that a sale may result from these approaches.

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BUSINESS In August, Telstra acquired a 51 percent stake in Beijing-based real estate portal Motorola Inc. to open another new research Soufun.com for US$254 million through its center in China directory and advertising subsidiary Sensis, thus Motorola Inc plans to open a research entering the nation’s booming Internet market. center in China to target next-generation Industry sources said the firm is also wireless technologies. considering establishing an alliance with China It would focus on important technologies Telecom, the nation’s largest fixed-line operator, used in wireless broadband equipment and aid which operates in much the same fields and has the firm in developing worldwide standards. similar plans to boost its broadband, wireless, The executive vice president of Motorola, and Internet businesses. Gregory Brown, said that Motorola is looking to Telstra’s ambition in both basic and strengthen its alliance with Chinese parents, as value-added telecom services in China, as China is emerging to actively develop standards shown from its interest in China Telecom and in future mobile communications technologies. Soufun, is a typical example of foreign The center will also improve Motorola’s companies’ interest in the world’s most populous cooperation with local firms and universities. telecom market since the nation joined the World Motorola has 18 R&D centers in China, with Trade Organization (WTO) five years ago. around 3,000 engineers, and is the biggest R&D “Joining forces with Chinese operators base by a multinational firm in China. and bringing value is good, but one should not take control,” said Igal Brightman, global Hong Kong’s telecoms regulator OFTA managing director of technology, media, and grants EFTNS license to Tricom Asia telecommunications with the consulting giant Hong Kong-based telecom regulator Deloitte. OFTA has granted an External Fixed According to China’s commitment to the Telecommunications Network Services WTO, the maximum stake that foreign investors (EFTNS) license to Tricom Asia, enabling it to can hold in telecom joint ventures has been lifted operate telecom services through VN-HK, its from 35 to 49 percent, while they are no longer 1,050km undersea fiber-optic network, which restricted to 17 large cities. links Hong Kong and Vietnam. When China was negotiating its WTO Since China Telecom won a license in entry, its telecom industry remained in its 2005, this is the lone EFTNS license in Hong infancy; mobile phones were regarded as a Kong. Tricom Asia is planning to invest in luxury product by most people, and they needed telecom solutions in the emerging markets in to wait for almost one month to have a fixed- Asia-Pacific. It had formed its Hong Kong-based line phone installed. division in May 2003. As a result, with their financial and technological strength, foreign operators Telecom sector rings in changes thought China’s WTO membership would give If the number of times a CEO visits any them access to a hugely lucrative market. given market is an indication of its importance, Since China’s WTO accession in then China must be very significant for Australian December 2001, Chinese operators have made telecom giant Telstra. dramatic progress and spent hundreds of billions Since Sol Trujillo took over the helm of of dollars, partly prompted by the activities of Telstra in July 2005, he has visited China four international equipment vendors such as times, and his visits have paid off. Ericsson and Motorola.

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China has therefore become a place international expertise, as Chinese operators where global telecom equipment vendors test are trying to expand to overseas markets and their best products. increase the share of value-added services for In addition, China’s fixed-line subscribers higher profits. rose twofold to 370 million, and mobile That is why Vodafone, Telefonica, and subscribers grew three times to 450 million. SK Telecom have become strategic investors. Now, they have found out it is not wise to Vodafone and Telefonica both have strong build their own networks, with equity investment international businesses in Europe, Asia, and becoming the dominant form of tapping the Latin America, while SK Telecom has rich benefits of the world’s largest market in terms experience in developing value-added services. of subscribers. Brightman said new opportunities may China Mobile, the world’s largest mobile arise with technological breakthroughs such as operator, teamed up with Vodafone; China the third-generation (3G) mobile communication Unicom, a smaller competitor of China Mobile, system, which has a higher efficiency and a formed a joint venture with SK Telecom from faster Internet connection speed. South Korea; China Unicom, the second-largest China is expected to issue 3G licenses fixed-line operator, brought Spanish counterpart very soon. What services operators bring to Telefonica on board as its largest strategic consumers will be the key to their success in investor. this business. Areas like cost-efficiency and The only firm left for foreign investment content on a 3G network may be something that among the top four operators is China Telecom, foreign operators and investors should use to which has many large international operators attract Chinese operators and consumers. pursuing it, such as Telstra, Japan’s NTT, and Source: China Daily France Telecom. “China is a very unique market: just like TCL joins HomePlug Powerline Alliance its economy, no other country has gone from board of directors having the most primitive communication tools Driving the worldwide acceptance of to the most advanced telecom system in the high-speed networking over powerlines, the world in such a short period of time,” said HomePlug Powerline Alliance announced that Charles Yen, managing partner of China TCL has joined the HomePlug Implementers’ northern region with Deloitte. Forum board of directors. TCL is the world’s Yi Mingyu, a senior analyst with CCID largest manufacturer of television sets and a Consulting Co. Ltd. under the Ministry of global supplier of consumer electronics Information Industry, agreed with Yen and said products. With the addition of TCL, the foreign investors and operators must have a HomePlug Powerline Alliance continues to align realistic attitude when operating in the Chinese the world’s leading electronics manufacturers market. Brightman from Deloitte said that when around the global HomePlug family of foreign investors come, they must find areas standards. The HomePlug Powerline Alliance where they can add value, but Chinese now features the top three global television operators are now already very strong and suppliers — LG, Samsung, and TCL — on its technologically sophisticated, so the board of directors. opportunities for foreign participants to have a dominant say are minimal. Cisco places China bet One area in which they can offer value Cisco announced that it has made a and attract Chinese counterparts is their strategic investment of US$50 million in China

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Communications Services Corporation Limited More than 300 senior executives and (CCS). Cisco is the largest foreign strategic experts from China Telecom and 70 other major investor in CCS. telecommunication operators from around the CCS is the specialized world attended the event. The main topics of telecommunications support businesses arm of the summit were the role of NGN technology in a major telecommunications group in China. network transformation, China Telecom’s CCS has been reorganized and spun off to form network transformation opinion and experience, a separate independent entity, with China experiences of partnership between telecoms Telecom Group, China Mobile, and China operators and equipment providers, and Unicom also as shareholders. CCS is now operation innovation and development in the publicly traded on the main board of the Hong telecoms industry. Kong Stock Exchange. During the summit, China Telecom and Under the terms of the agreement, Cisco ZTE celebrated one year of stable operation of and CCS will jointly provide managed the China Telecom’s long-distance NGN project. telecommunications services, such as network Delegates from FT, TMI (Telecom Malaysia operation and administration, to enterprise International), and other top operators also customers in China. Additionally, the two shared their network construction and companies will provide customers with new maintenance experiences. network solutions, including IP infrastructures, China Telecom is the one of the largest digital video, and 3G platforms and applications. fixed-line network operators in the world and has “We are pleased to be working with Cisco extensive operational experience in fixed-line, to bring advanced telecommunications services wireless PHS, and broadband data networks. to enterprise customers in China,” said Li Ping, Ms. Zhao Huiling, vice president of China chief executive officer of CCS. “This is an Telecom’s Beijing Research Institute, shared exciting time for CCS as we plan to capitalize China Telecom’s views of, and strategy for, on the growing demand of high value-added network transformation. voice and data supporting services across the Ms. Zhao said that China Telecom’s country. We expect Cisco will play an important network transformation is highlighted by its role in helping us realize our plan.” launch of the NGN-based long-distance “China is an extremely important market backbone project, which was awarded to ZTE for Cisco, and in cooperation with CCS, we as sole equipment supplier. The project was intend to help make China one of the most started in May 2005 and now covers 31 connected countries in the world,” said Owen provinces and autonomous regions throughout Chan, senior vice president of Cisco’s Asia China. It is, so far, the largest fixed NGN network Pacific business. “By working with CCS, we in the world in terms of number of nodes and its hope to help Chinese businesses adopt and 300 million subscribers. The launch of the NGN deploy new productivity-enhancing backbone further improves China Telecom’s communications services.” quality of service in those provinces, secures revenue from long-distance voice traffic, and Global fixed-line operators share NGN provides much more efficient, and more varied, construction experiences services. The Network Evolution Summit, jointly Reviewing the latest approaches to sponsored by ZTE and China Telecom, was held network transformation, Ms. Jane Chen, vice in Hong Kong’s Disneyland hotel, December 6, president of ZTE, analyzed current telecoms 2006. network structures and future network

12 China Telecom Newsletter December 2006 development trends, and pointed out that dependable partner that would help the operator operators should pay more attention to end- face the challenging issues confronting the users’ multi-play service requirements. operator. As an example, she discussed ZTE’s F3G (Fast Triple Gain) solution, which is Uganda to receive a grant of $120 million designed to address multi-play services. As an from Huawei end-to-end networking solution, F3G fully Uganda will receive from China a grant addresses the requirements of service of around $120 million for developing the construction, deployment, and management national information communication technology during network transformation. (ICT) backbone infrastructure. On Chinese During the summit’s Q&A session, Prime Minister Jiabao’s visit to Uganda, an e- chaired by Mr. Wang Xuejun, vice president of Government project MoU (Memorandum of Yankee Group Asia-Pacific, delegates from Understanding) was signed with Huawei operators including FT, and TelkomSA Ltd. Technologies, the biggest telecom equipment shared their opinions on how to construct a manufacturer in China. State Minister for ICT highly efficient and profitable telecom network. Mr. Allintuma Nsambu said that this grant would “This summit was jointly sponsored with help in providing fast telecom services at less China Telecom to give us an opportunity to share costly rates. The government intends to create with the world’s leading operators the lessons a new ICT backbone to trigger new economic that have been learnt in developing the world’s growth, improve trade, and offer better largest NGN fixed line network,” said Jane Chen. communication choices to the Ugandans. “Our aim was to share the knowledge acquired Huawei will do the job of installing, supplying, in this process and to give operators the chance and putting the technologies in place to set up to share their experiences from other major an e-government system and extend the markets, with the aim of enhancing global communications network. knowledge of, and interest in, NGN networks.” Huawei picks Xelerated COMPANY NEWS Xelerated, a provider of network processing, announced that its Xelerator X11 Huawei signs deal worth $38.4 million with network processor has been selected by Huawei German operator Technologies for the next-generation packet- China’s biggest telecom equipment- based multiservice products for metro networks. maker, Huawei Technologies, signed a deal with “Huawei selected the Xelerated X11 German operator Versatel Holding Deutschland network processor (NPU) because the GmbH worth $38.4 million. According to the Xelerated NPU is an integration of high- Memorandum of Understanding signed in performance, programmability and low cost, Beijing, Huawei will build a fiber-optic best suited for packet-based multi-service communications network based on Internet products,” said Chen Junhua, president of the Protocol (IP) for the third-biggest fixed-line data-communication product line, Huawei. operator in Germany. For the first time, Huawei The X11 NPU will be deployed in the will provide the technology for a complete next-generation packet-based product family to network for a German operator. Versatel has meet the key requirements from multiple global around 700,000 subscribers, and its revenues operators. “We are very pleased to have been are likely to reach $883 million. Versatel CEO chosen by Huawei on this vital, high-volume Peer Knauer stressed the need for a platform, and believe that our X11 NPU and

13 China Telecom Newsletter December 2006 future-generation products will provide Huawei transport and MSAN domain for the 21CN with the flexibility to meet the changing demands program; and a CWDM/DWDM project for Dutch of operators around the world,” said Bill operator KPN, in which Huawei is the exclusive Franciscovich, Xelerated’s VP of sales. vendor.. The X11’s unique, highly focused data- “We are excited to be part of Telecom flow architecture provides guaranteed line-rate Italia’s rollout plan for WDM optical metropolitan performance with programmable feature networks,” said Mr. Qiao Xiaoping, managing flexibility to track changing standards and the director of Huawei Italy. “Although Huawei and different requirements of multiple geographies. Telecom Italia are working together in the optical transport domain for the first time, Huawei’s UTStarcom sings deal with Maxim Telecom leading technology in optical network, rich of Pakistan experience in commercial development of Telecommunication equipment equipment and rapid response will allow us to manufacturer UTStarcom Inc. has signed a provide high-value, customer-focused distribution deal with Pakistan-based Maxim solutions.” Telecom. No financial details were provided by Huawei’s Metro WDM products provide the company. The deal will include offering the abundant interfaces, which can support services whole range of UTStarcom’s handsets and also access and aggregation with multiple data Internet protocol (IP)-based broadband transfer rates and different protocols. The unique technology. The vice president of the Europe, GE ADM technology guarantees the flexible Middle East, and Africa region at UTStarcom, grooming of GE service on a WDM network, and Youssef Kassissia, said that since foreign saves wavelength and fiber resources. Based investments in Pakistan account for 29 percent on the company’s leading-edge technologies of all investments, this deal would help the and experience in commercial application of company to enter an expanding market in the products worldwide, the Huawei Metro WDM country. solution has become a popular choice for constructing an efficient transport network for Huawei named supplier of WDM optical IP DSLAM, IPTV, and GE VPN, which is widely metropolitan network for Telecom Italia deployed in over 10 countries and regions. Huawei Technologies Co., Ltd. (“Huawei”), a provider of next-generation Huawei releases the industry-first FMC IMS telecommunications network solutions for Solution: IMS 3.0 operators around the world, announced that it Huawei Technologies Co. Ltd. has been selected by Telecom Italia to carry out announced the commercial introduction of its Wavelength Division Multiplexing (WDM) IP Multimedia Subsystem (IMS) 3.0 solution that technology projects. The first Chinese provides an open architecture for the telecommunication equipment supplier selected development of multimedia services. for Italian telecom programs, Huawei was Facing the challenges of intense awarded the contract to supply optical transport competition and limited innovation of new technology after the company underwent services, Huawei IMS 3.0 is a solution that many Telecom Italia’s stringent evaluation process. carriers are looking for. Huawei IMS 3.0 solution In addition to Telecom Italia, Huawei’s is the first commercial fixed-mobile convergence other successful partnerships with European (FMC) solution in the industry that complies with mainstream operators include British Telecom, both 3GPP (3rd Generation Partnership Project) where Huawei is a preferred vendor in the and TISPAN (Telecoms & Internet converged

14 China Telecom Newsletter December 2006

Services & Protocols for Advanced Networks), Huawei established joint labs with a number of and provides an open architecture over which partners, providing an environment for service providers, platform providers, and interoperability tests and service experience and terminal providers can work together to delivering competitive solutions for carriers. introduce diversified multimedia services. Mike McHugh, vice president and With the solution, carriers can create a general manager, BEA WebLogic subscriber-focused architecture based on FMC Communications Platform, BEA Systems Inc., and CT-IT convergence, which opens up said, “Both BEA and Huawei bring their unique network and service capabilities and promotes strengths to this relationship. Recently, we a healthy environment for IMS applications. completed IMS and SIP AS interoperability Based on a common hardware and testing that demonstrated Huawei IMS and BEA software platform, Huawei’s IMS solution can WebLogic SIP Server compliance with open help simplify the network deployment process standards. BEA has been integrated into the and decrease capital expenditures (CapEx) and Huawei IMS eco-system and together they can operating expenditures (OpEx) for carriers. provide an innovative service development Huawei and its partners have released scale environment for third-party development. commercial use of services, such as voice call This is designed to present our mutual continuity (VCC), IP Centrex, and Blended customers with a great opportunity to leverage Services. IMS technology and rapidly design, develop and These services can help carriers deploy revenue-generating customer services. accelerate their steps from the existing network These services can then become part of a to an FMC network smoothly, protecting reusable palette that helps further speed up customers’ investment efficiently. service design and delivery.” The VCC service, in particular, takes the “We have successfully assisted large lead in realizing bidirectional senseless Service Providers around the world in deploying handover. The guarantee of quality of service enhanced VoIP services for both business and (QoS) and unified session control and user consumer offerings and we bring this experience database will bring to subscribers a high-quality to our partnership,” said Marco Limena, experience that is different from traditional president and CEO of Sylantro Systems Corp. Internet service. “I am convinced that combining Sylantro’s “With the deployment of the IMS 3.0 feature server with Huawei’s core network and solution, we believe that this open, converged integration expertise is a winning combination All-IP architecture will become a platform for for both flexibility and time-to-market.” innovations, through which carriers, consumers Huawei has always been working on and our partners in services, platform and migration to an all-IP network. In 2003, Huawei terminal domains will benefit,” said Mr. Ding Yun, released V3 for its softswitch in Geneva, igniting president of Huawei core network. the core network’s migration toward an all-IP “Carriers will easily be able to consolidate network. resources, information and customer Over the past three years, Huawei has requirements, and at the same time continue to deployed over 800 softswitch-based networks, release cutting-edge services.” helping over 100 carriers with their all-IP goals. Huawei has been promoting the IMS The release of IMS 3.0 solution is a giant leap industry chain, together with over 100 industry- in the FMC evolution, strengthening Huawei’s leading partners in service, platform, access, position as an industry leader in the IP core and terminal domains. In December 2004, network domain.

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ZTE debuts the world’s first F3G multimedia Wireless, a provider of cost-efficient personal solution communications services in five states within ZTE Corporation, a global provider of the United States, has selected ZTE’s All-IP telecommunications equipment and network CDMA2000 platform to deliver high-speed, high- solutions, has launched the world’s first F3G quality third-generation (3G) wireless voice, (Fast Triple Gain) multimedia network solution, data, and multimedia services to subscribers in which was previewed during the recent “Network select markets. Evolution Summit 2006” jointly hosted by ZTE “Subscribers today are demanding and China telecom. better, faster and cheaper advanced wireless The ZTE F3G solution is an end-to-end services and a 3G foundation is essential for converged 3G network construction solution. meeting the demands of our customers and Instead of the current industry approach of continuing to attract new ones,” said Glenn simple, stacked voice, data, and video (triple- Ishihara, president of ClearTalk. play) networks, F3G converges IPTV, fixed-line, “After an extensive evaluation process, and mobile telecoms services onto a single we found that ZTE’s solutions were the best service platform, decreasing operators’ available for our current needs. operation costs and providing one platform for They represent superior technology and the provision of both current and future a comfortable price point. innovative services. The ZTE F3G solution was We are confident that the All-IP developed based on ZTE’s development of CDMA2000 platform will empower us to China Telecom’s intelligent fixed-line NGN significantly improve the customer experience network over the last 12 months and ZTE’s and further grow our business. extensive R&D programs focused on next- The fact that ZTE also has a handset generation telecoms systems. “Multiple-Play division was very important to us, as we plan to and convergence are the major current trends jointly develop applications that are delivered of the telecommunications industry,” said ZTE’s over both the client (handsets) and server vice president, Ms. Chen Jie. “End user demand (network). for Multi-Play services will become more and ZTE has shown a unique willingness to more important to telecom operators. ZTE’s work closely with us in this regard.” proven NGN based F3G solution will meet this In addition to supporting CDMA2000- fast growing requirement and speed up returns based services, ZTE’s All-IP CDMA 2000 for operators, customers and vendors.” platform will provide ClearTalk with a smooth As the largest NGN manufacturer in migration path towards offering EV-DO Rev. China, ZTE’s has successfully constructed A-based services, which provide faster many backbone networks, including the DC1 data transmission speeds and a better quality Project for China Telecom, a 9 million-port NGN of service (QoS). migration for Shanghai Telecom — the largest 3G refers to an advanced set of wireless local NGN network in China — and a 6.6 million- applications beyond voice, such as multimedia, port NGN migration for Guangdong Telecom, data, video, and Internet applications. the second-largest local NGN in China. CDMA2000 is the industry’s dominant 3G standard. ClearTalk selects ZTE USA’s 3G digital The EV-DO Rev. A standard, the next wireless solution generation of CDMA2000 technology, promises ZTE USA Inc., a subsidiary of ZTE to deliver even more advanced multimedia Corporation, announced that ClearTalk applications at a faster speed while allowing for

16 China Telecom Newsletter December 2006 enhanced network capacity. In today’s MARKET INTELLIGENCE competitive market, the ability to extend 3G services to subscribers enables carriers to China’s IP PBX market likely to reach $479 differentiate their services and generate a higher million in 2010 ARPU (average revenue per user). According to a report from research firm In order to do so, carriers must put In-Stat, the IP PBX market in China is going network equipment into place that will enable through a good phase and is expected to them to extend and support 3G services on increase from $164.1 million in 2006 to $479.5 CDMA 2000, with EV-DO. million in 2010. In-Stat analyst Kevin Li said that “At ZTE, we are committed to creating new solutions are being developed that technology innovation that will position our adequately address the customers’ concern customers to capitalize on current and future about security and reliability of carrying voice market demands,” said Jack Yang, executive on an open data network. Traditional PBX vice president of sales and marketing, ZTE USA revenue would reduce 31.8 percent in China Inc. CAGR through 2010. “In the US, CDMA2000 with EV-DO Rev. Chinese market to increase A is quickly becoming the most advanced The mobile video market in China will wireless standard for delivering advanced take off in 2008, driven by interest in the Beijing services that open up new revenue doors for Olympics. A new study from ABI Research carriers. forecasts total mobile video users at more than Our All-IP CDMA2000 platform gives 32 million in 2008; about 27 percent of these carriers in the U.S. and all over the world the consumers will use broadcasting technology, foundation for delivering high speed, superior and 73 percent will use unicast streaming quality services that attract new subscribers and technology, while a number of viewers are likely keep existing ones.” to use both. In 2006, SARFT, the Chinese State With the new ZTE platform, ClearTalk’s Administration of Radio, Film, and Television, subscribers will experience improved voice and announced two handset-related standards. DAB call quality and longer battery life for phones. is likely to be the first phase of mobile multimedia Subscribers will also have access to broadcasting standards development in China. advanced camera, text and multimedia DAB paves the way for upgrading to China’s messaging, ringtone, gaming, and high-speed proposed mobile multimedia broadcasting wireless Internet applications. standard, T-DMB, a terrestrial implementation ZTE’s All-IP CDMA2000 platform powers of SK Telecom’s mobile video format. high-speed 3G broadband wireless services Because both standards are voluntary, including data, voice, and multimedia there are questions surrounding their effect in applications, while also offering a migration path the market. “It is likely that local media groups to EV-DO Rev.A-based services. and TV stations will deploy DAB initially, and ZTE CDMA products have been implement T-DMB at a later date,” said ABI successfully deployed in more than 60 countries research director Jake Saunders. with over 100 operators, delivering a global “The Chinese government will give capacity of 50 million lines for commercial use. preference to a standard that will be used in the ZTE has built over 50 CDMA2000 1xEV- 2008 Olympics, and DAB has been listed as one DO systems for commercial or trial use in more of the broadcast services that will be available than 40 countries worldwide at the Beijing Games.”