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Mobile communications in China: An analysis of the diffusion p ro cess
Wang, Xiao dong, Ph.D.
The Ohio State University, 1994
UMI 300 N. Zeeb Rd. Ann Aibor. MI 48106 MOBILE COMMUNICATIONS IN CHINA:
AN ANALYSIS OF THE DIFFUSION PROCESS
DISSERTATION
Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate
School of The Ohio State University
By
Xiaodong Wang, B.S., M.A.
* * * * ■*
The Ohio State University
1994
Dissertation Committee: Approved by
S.R. Acker T.A. McCain Adviser J.J. Pilotta Department of Communication Copyright by Xiaodong Wang 1994 To China and Corporate America ACKNOWLEDGMENTS
I express sincere appreciation to my adviser Dr. Stephen R. Acker for his
guidance, insight, and encouragement throughout the research. Thanks go to the other members of my advisory committee, Drs. Thomas A. McCain, Joseph J. Pilotta, and
M. Eugene Gilliom, for their suggestions and comments. Gratitude is expressed to Mr. Li Zhigang and Ms. Li Mofang, Ministry of Posts & Telecommunications of China; Dr. Sun Lin, US. ComStream Corp.; and Mr. Zhang Xingsheng, LM Ericsson International AB, as well as other Chinese interviewees in my fieldwork in Beijing, for their support and inspiration.
To my parents, Li Feng and Wang Jian, I offer sincere thanks for your unshakable faith in my obtaining a US. doctoral degree. To my sisters, Xiaochun and Xiaofeng, I thank you for your strong backing to my endeavors. VITA
November 5, 1 9 5 4 ...... Born - Beijing, China
1979 ...... B.S., Inner-Mongolia Normal University, Huhehaote, China 1979-1981 ...... Physics Teacher Huhehaote 2nd High School, Huhehaote, China
1985 ...... M.L., Beijing Broadcasting Institute, Beijing, China 1985-1987 ...... Editor, Beijing Broadcasting Institute, Beijing, China
1987-Present ...... Graduate Associate, The Ohio State University, Columbus, Ohio, USA
PUBLICATIONS HDTV: Future Applications, future policy tools, (1992). In the Proceedings of the Symposium on Collaborative Strategies for Developing Telecommunications Networks. Columbus, OH: The Center for the Advanced Study in Telecommunications. (Co-authors: S. R. Acker & S. Bakhshi)
User assessments of stereophonic, high bandwidth audioconferencing. (1991). In ITCA Teleconferencing Yearbook 1991 (Compiled by Steinfield, C. W., & Ehlers, T. S.). Washington, DC: International Teleconferencing Association. (Co-authors: S. R. Acker & S. Bakhshi)
FIELDS OF STUDY Major Field: Communication
Studies in: Telecommunications Technology, Market, and Policy -- S. Acker, T. McCain, J. Foley
Critical/Cultural Studies — J. Pilotta
i v TABLE OF CONTENTS
DEDICATION i i
ACKNOWLEDGMENTS...... i i i
VITA ...... i v
LIST OF TABLES ...... v i i LIST OF FIGURES ...... v i i i
CHAPTER PAGE
I. A PROBLEM STATEMENT AND LITERATURE REVIEW 1
Introduction ...... 1 Rationale for the Study ...... 3 Relevant Theory ...... 7 Mobile Communications (MC) ...... 12 China Today and Its Telecommunications ...... 21 Social Change and Technology Transfer ...... 32 Research Questions ...... 39
II. METHODOLOGY ...... 40
Data-Collection Methods ...... 40 Personal interviews ...... 41 Document analysis ...... 34 Result Presentation ...... 3b Technology Assessment ...... 38
III. FINDINGS ...... 63
MC Systems Mainly Diffused in China ...... 63 Key Time Points in the Diffusion of MC ...... 7 1 Institutions Involved in the D iffusion...... 77 Categories of Chinese Adopters ...... 84 Driving Forces in the Diffusion ...... 87 Unique Features of the Diffusion in China ...... 91 Stakeholders' Concerns in the Diffusion ...... 96
v CHAPTER PAGE
IV. ANALYSIS ...... 104
Explanations for Difference among the Respondents .. . . 104 Problem Definition ...... I l l Technology Description and Forecast ...... 112 Social Description and Forecast ...... 113 Current Policy Environment and Institutional Changes . . 11K Impact Identification/Analysis/Evaluation ...... 125 Technology impact ...... 125 Economic impact ...... 127 Social impact ...... 12S Political impact ...... 130 Legal impact ...... 131 Environment impact ...... 132 Psychological impact ...... 132 Policy impact ...... 133 Policy Analysis ...... 137
V. SUMMARY AND CONCLUSION ...... 140
Summary ...... 140 Relation to Diffusion Literature ...... 145 Limitations ...... 14N Directions for Future Research ...... 149 Conclusion ...... 150
APPENDIXES ...... 151
A. Profile of Mainland China ...... 151 B. Profile of China's Telecommunications ...... 152
C. Multinationals in China’s Telecommunications Market ...... 154
D. List of the Chinese Official Interviewees ...... 155
E. Questions Asked in Beijing ...... 157
LIST OF REFERENCES ...... 163
v i LIST OF TABLES
TABLES PAGE
1. An Example of My "Quasi-Field-Test" ...... 53
2. A Blank Tabular Example for Result Presentation ...... 57
3. Stages and Techniques of A Technology Assessment 62
4. Types of Main Mobile Communications (MC) Systems in China 64
5. Development of Cellular Phones in China's Public Network . . 66 6. Development of Pagers in China's Public Network ...... 68
7. Timelines of the Diffusion of MC Technologies in China .... 71
8. Development of China's Radio Facilities Since the 1970s .... 74
9. Main Institutions Involved in China’s MC Diffusion ...... 78
10. Categories of Chinese Adopters ...... 85
1 1. Driving forces in China's MC Diffusion ...... 88
12. Unique Features in China's MC Diffusion ...... 92
13. Stakeholders’ Concerns in China's MC Diffusion ...... 97
14. Timelines of Recent Telecom Policy/Institutional Events .... 118
v i i LIS'! OF FIGURES
FIGURES PAGE
1. An Excerpt from Question Outline I ...... 51
2. User Increasing Rate of Beijing Mobile Network by Year .... 67
.3. Old Structure of China's Telecommunication Sector ...... 79
4. New Structure of China's Telecommunication Sector ...... 80
v i i i CHAPTER I
A PROBLEM STATEMENT AND LITERATURE REVIEW
Introduction
Mobile communications1 (MC) are increasingly being recognized as critical cutting-edge technologies needed to introduce new business and social services, change ways of delivering and accessing old services, and lower telecommunication- related costs. The trend toward mobile communications, and the role wireless technologies play in their future growth, are gradually being translated into stepped-up investment in research and development (R&D), complex alliances among wireless pioneers, fierce competition for domestic and international market shares, and merging policy concerns in the main developed countries. Mobile communications are becoming a worldwide phenomenon, reaching into the developing countries and affecting their social and economic ways to communicate.
Among the developing countries that are pursuing modernization of their telecommunications sectors, People's Republic of China ("China" hereafter) is a
1 The term "mobile communications" in this study will be mainly used for wireless telephonic communications rather than the one via wireless computing technologies though I know of the present tendency of convergence between telecommunications and computing. The exclusion is because wireless data communication would extend the study to China's computer industry which is a subject for a different study.
1 unique nation in the midst of a transition in its economy and society. Although China
is still under communist politics, its economic system is showing capitalist features
with the called "Chinese characteristics." Since 1978, China has developed the fastest growing economy in the world by gradually introducing market economy concepts and
mechanisms into its central planning economy. The "waiting giant" (The Economist,
January 11, 1986) in the global telecommunications market is eager to enter the
"Information Age" to further catalyze the nation's continuing economic boom in the
1990s. The world's largest developing country is undertaking the monumental task of
modernizing its weak communication infrastructure. The rate of deployment and
speed of this upgrade have major : ocial and economic ramifications.
With its vast market potential of i.2 billion consumers, "China is widely considered one of the most attractive telecommunications markets in the world, with its
unique version of quasi capitalism" (Financial World, September 15, 1992). China's telecommunications expansion plan is described as "the most ambitious in the history of global telecommunications," (Harrington, 1993) and has left the foreign telecommunications multinationals speculating on how they can increase their roles in this potentially lucrative market.
One of the economic/technical viewpoints expressed by Western telecommunications professionals since 1992 is that installation of mobile communication systems is a strategic alternative that would permit China to leapfrog to its "universal telephone service." MC services are seen by them as a short cut to solve
China’s shortage of conventional phone network. Upgrading old wired systems would take decades to create modem phone links (Levine, 1993) and "cellular service is one way of setting up service quickly" that "can accommodate 'impulse growth' as 3
the number of subscribers rise" (Shetty, 1993). "In five to 10 years time the Chinese
mobile telecoms market will be one of the biggest in the world." (Whent, 1994)
China is rapidly developing as an economic superpower and needs
telecommunications to do so. Since mobile communications may be a likely choice to rapidly build the final mile of China’s network, this research focuses on the diffusion process of mobile communications in China. Diffusion process research is defined as
"a type of information gathering and analysis that seeks to determine the time-ordered sequence of a set of events." (Rogers, 1983) Specifically, this study examines China's current situation in mobile communications, discusses relevant institutional
relationships, and addresses the outcomes of diffusion-~the implications of the introduction and spread of mobile telephonic communications into China for (1) China's telecommunications policy; (2) the Western telecommunications
multinationals; and (3) China’s changing society. The dissertation develops contextual scenarios and assesses potential consequences by using a technology assessment (TA) methodological approach.
Rationale for the Study New communication technologies, such as interactive television, computer network, and multimedia as well as wireless communications, change society. China
is a spectacularly changing society in today's post-Cold-War world. China’s rapid embrace of analog cellular—mirrored around the globe—has created an attractive market for telecommunications service and equipment supplies. New wireless technologies such as digital cellular, satellite-based mobile communications system, and personal communication service/network (PCS/PCN), hold the promise of "anyone, anytime, 4
and anywhere" communications--a key issue for the turn of this century, which is a
time when China might make a big leap in its national development. However, most
information on wireless technologies and China today available in the US is written by
non-Chinese authors, and most of the analyses are purely technology or business- oriented. There is little knowledge, in the US., of the Chinese social context and policy environment related to the emerging mobile communications with respect to the Chinese telecommunications institutional structure changes, communication channels, standard selection, Chinese attitudes toward high-technology innovations, and the multinationals involved which indeed affect the diffusion of this new communications technology in China. This unilateral Western perspective is understandable because of language barriers, cultural disparities, geographic distance, and ways of thinking. My
Chinese perspective, however, might offer additional insights. To provide this perspective, I, a native Chinese with Chinese fluency, drawing on a collection of the relevant information both from the US and China since 1992, attempt to contribute to the knowledge of technology diffusions in developing countries.
The communication theories on telecommunication and development in the developing countries provide a framework for this study. Searching the indices of
Communication Abstracts in the past five years, I have not found any articles that explore telecommunication-based development in China. My experience, understood from the Chinese viewpoint, may provide a unique perspective for research on the diffusion of innovations, social adoption, and policy-making context of a new telecommunications technology in developing countries, as many are facing similar challenges. Concluding that "little is known about effects of certain mobile communication technologies, no technology assessment has been undertaken, and 5 knowledge about the possible future effects of these technologies currently being developed," Dorrenbacher (1993) issues an urgent request to close the research gaps in the field. Therefore, my research may help to shape the transition to mobile communications in a way that preserves desirable cultural and social values in China. Another goal of the study is to provide an information resource in practice for the US telecommunications multinationals doing and/or planning to do business in
China, by describing China as a market for US wireless-mobile communication products and services in China's economic and social transition, and discovering the unique aspect of Chinese policy-making practices in mobile telephony. The main motive is that the US telecommunications multinationals need to understand China today and the Chinese way of decision making as "American companies elbow each other in their impatient rush to do business in China" (Pye, 1992). Sun Zi, China’s most admired military strategist said two thousands years ago, "know yourself, know your enemies; one hundred battles, one hundred victories." For success in bilateral telecommunications cooperation, the decision makers of American telecommunications multinationals need a better frame of reference to understand the Chinese market condition and political/institutional context.
Relevant information available in the US is scattered in various trade journals and newspapers such as Telephony, The China Business Review, and the Wall Street
Journal. One comprehensive market report on China's telecommunications was written by Ken Zita, published by the Economist Intelligence Unit (EIU) in l^ondon in 1987. Obviously, data and analyses in that report should be up-dated because of the changes and progress in China since then. Another valuable report was done by Sun
Lin, a Chinese Ph.D. from Michigan State University, in his 1991 dissertation, but it 6 mainly focuses on China's diversified financing of telecommunication industry growth. My study could fill in the gaps surrounding technology diffusion and the social context of China’s telecommunication policy-making.
Also, very little research has been done to deal with the cultural factors related such statements as why "mobile phone in China arc fast becoming one of the world’s most expensive—and useless—toys for yuppies" (The Reuters European Business
Report, Oct. 29, 1993) and why "(Hong Kong) people do not seem to buy mobile telephones for the same reason as in Europe" (Financial Time, Sept. 8, 1993). The culture-related exploration of mobile telephony in China is one of the motives in the study to find out the "mobile phone culture" influence to the Chinese users from Hong Kong, Taiwan, and Singapore—three small parts of the so-called "Great China" geopolitically. These "other Chinas" are the fastest adopters for mobile communications in East Asia and are the main gateways for wireless technologies diffusion from the developed countries to China. They also have similarities with China in social/cultural context for diffusion of mobile communication innovations. In my opinion, the "other Chinas'" adoption practices, implementation experiences, policy concerns, and social implications regarding mobile communications might have more reference values to the diffusion process of mobile telephony in China than those in the developed countries. This is especially true during the present period of economic recession in most of the developed countries and of the economic boom in
Southeast Asia which has historically been influenced by Chinese culture and business tradition. This study might not only help US companies doing business well with
China, but also might be selectively applied to the studies for mobile telephony in the "other Chinas" and other South-East Asian countries. 7
This Chapter (Chapter I) gives the problem statement and the review of the
relevant literature for wireless-communication technology and China's changing
society. Chapter II describes the methodology this study applies in methods of information collection, results presentation, and analytical approach.
Chapter III lays out the findings from my information gathering from China.
Chapter IV discusses the results by mainly following the TA format to tell the readers the reasons behind my findings. Chapter V is the last part of the dissertation in which a summary and the conclusions of the study are presented.
Relevant Theory
The following is a brief outline of macro-concepts for studying how mobile communications has been diffused from a Chinese perspective. These concepts are derived from theories relevant to communication and development, and diffusion of innovations. This framework is provided so that the analysis of the concrete case of mobile communications in China can be conducted and understood on a theoretical basis.
To understand the scope and evolution of the research linking communication and development, Mowlana and Wilson (1990) in their "The Passing of Modernity" claim that there are three major perspectives that have dominated the research on communication and development. The first approach, which was touted in the 1950s and 1960s, considers the causal relationships between communication and development processes. The central question is whether communication is a s
prerequisite for development or vice versa. The causal approach is influenced by the
social and economic change theories of Max Weber (Akwule, 1992), and stresses the
importance of communication in societal transformation. This basic tenet was
espoused by Daniel Lemer (1967), whose "causal model suggests a sequence of
institutional development leading to self-sustaining growth and modernization" such as
higher per capita income, urbanization, and political participation, etc. According to Lemer (1967), such progress would lead citizens in the developing world through
transition from traditional to a modern way of life. He argues that developing societies
would modernize along the lines historically witnessed in Europe and that empathy—
the ability of an individual to imagine significant positive change in one's own status—
was a major ingredient in the modernization process (Mowlana & Wilson, 1990).
This approach has been criticized for being ethnocentric, fostering capitalism, and
perpetuating the imbalance in economic and cultural flow between the developed and the developing countries (Akwule, 1992),
The second approach concentrates on analysis of the cost and benefits of a particular communication strategy in the process of social change and development.
The cost-benefit approach is pragmatic and places emphasis on measuring the benefits of investing in technology. Everett Rogers and his diffusion model has been the most
popular among the various strands of this approach. Rogers (1983) states that diffusion of technological innovation occurs in three stages: "(1) invention, the process by which new ideas, objects, or practices are created or developed; (2) diffusion, the process by which these new ideas are communicated to the members of a given social system; and (3) consequences, the changes that occur within the social system as a result of the adoption or rejection of the innovation.” This utilitarian model also has 9
(seen criticized as being Eurocentric, hence inappropriate for developing countries.
Specific criticism is that it is linear in approach, and it emphasizes communication from
top to bottom (Akwule, 1992).
Rogers' diffusion theory defines the diffusion is the process by which (1) an
innovation (2) is communicated through certain channels (3) over time (4) among the
members of a social system. He also describes the diffusion of an innovation as a
kind of social change, defined as the process by which alteration occurs in the
structure and function of a social system. When new ideas are invented, diffused, and
are adopted or rejected, leading to consequences, social change occurs. Adoption is
defined as a decision to make full use of an innovation as the best course of action
available. The five steps in the adoption process occur in a time-ordered sequence of
knowledge, persuasion, decision, implementation, and confirmation (Rogers, 1983).
Rogers (1983) also discusses why consequences of innovations are difficult to
measure because of cultural norms. He points out the concept of cultural relativism,
which is the viewpoint that each culture should be judged in light of its own specific
circumstances and needs, has implications for the measurement of consequences of
innovations. Because the view by observers of an externally introduced innovation is
likely to be subjectively flavored by their own cultural beliefs, consequences should be judged as to their functionality in terms of the users’ culture, without imposing
outsiders’ normative beliefs. Such cultural relativism, however, is extremely difficult
to accomplish. A researcher from one culture may find it particularly hard to make completely objective judgments of the desirability of an innovation in another country which works out its own set of norms, values, beliefs, and attitudes that function most effectively for itself. For example, an American researcher's conclusions about the 10
explosive diffusion of mobile telephony in China since 1992 may be different from the Chinese' own explanations.
The third approach examines the structure of communication at the national,
regional and global levels in order to rationalize about political economy, cultural
identity, and value systems. This structural or infrastructural approach sees a strong
link between a new world information/communication order and a new international
economic order, and accordingly focuses on whether the available communications infrastructure promotes or hampers economic development at the global, regional, and
national levels. The representative work on the telecommunications field is "The
Missing Link,” the Maitland Commission's Report for Worldwide
Telecommunications Development published in 1984. In general, according to the
Report, the constraints to developing countries' telecommunications development are limited economic resources and strength, long distances between towns and villages, difficult terrain, scarcity of primary power and qualified technical personnel, and a relatively small subscriber base, as well as the thorny problem of assessing the value of telecommunications. Akwule (1992) states that critics have observed that the social impact of telecommunications development is difficult to measure, especially when one looks at the relationship between communications and broad social phenomena such as the extent of citizen participation in national development or in the process of technical and political change.
As for the importance of telecommunications infrastructure modernization to economic development, McGovern and Hebert identify, according to the US experience, that a modern network contributes to economic growth in four ways:
(1) business attraction and business retention; (2) diversification of the economic base; 11
(3) enhancement of quality of life and delivery of vital social services; and
(4) increased competitiveness of existing firms (McGovern & Hebert, 1992). Pool
(1990) states communications aid the development of nations in three primary ways:
they serve to project national power, they are important in the conduct of foreign trade;
and they contribute to the efficient distribution of activities. Communication is
particularly important for the transfer of such capabilities to the developing countries
and developing regions within countries. He also points out that governments, fearful
of a loss of control over sovereignty and culture, will continue to resist opening new
communications channels. However, although new communication technologies were often controlled by governments at first, the control eventually gave way to freedom
and diversity.
By examining the role of political and institutional structures in shaping the
performance of the communication sector and identifying the key policy levers
available to public decision makers, Noll argues (1985) that the principal working hypothesis is that the performance of the communications sector depends on the political and economic environment in which it operates. The environment is taken to mean the kinds of organizations that make decisions affecting the basic economic and technical variables such as prices, technology, and quantities of service. How do a country's political institutions shape its political objectives in communication policy?
In the case of China, the statist approach which views the state as allocating p>ower within the society might be close to China's assumption of the state pursuing the
"national interest." According to Noll, policy will favor the enhancement of groups and sectors viewed as essential to the maintenance of state power, internal stability, and the structure that supports it, as well as of national wealth. Telecommunications is 12
important to the state because of the role of communications in maintaining social
cohesion and national security. Hence, statist view as natural a persistent government
policy to promote the sector. The purpose of government policy will be three-fold: (1)
to assure that the sector does not become a barrier to the development of other favored
economic activities; (2) to promote developments that support the state's overall
economic and political objectives; (3) to make sure that the use of the communications
network is consistent with the goal of promoting state social and cultural interests
(Noll, 1985). Although the social/economic benefits and values of a properly planned
and implemented telecommunications network have been acknowledged by almost all
governments, "there are still concerns about what services are essential and what
constitutes an appropriate technology for a given society" (Akwule, 1992).
In the following part of Chapter 1, additional literature is reviewed in three
theme areas. These theme areas are: (1) wireless-mobile communications in the developed countries; (2) China today and its telecommunications' development;
(3) social change and technology transfer.
Mobile Communications (MC)
Because mobile communications and wireless technologies originated in the
West —North America and North-West Europe-and the West has maintained the leading position in R&D, applications and policy-making with respect to wireless- mobile communications, the literature review starts by looking at the development of mobile communications systems in the West. This should help identify various factors that influence the shape of the wireless systems in Western societies and provides 13 technology description and forecast for the diffusion process of mobile communications in China.
Mobile communication is communication in which the originator of the message or its recipient (or both) can be in motion (Linnartz, 1993) allowing the freedom of mobility to communicate, compared to "stationary communications"
(Dorrenbacher, 1993). Mobile communication is moving from a supplementary communication means to a primary mode. Its network is thought of as a basic network structure of future telecommunication. Mobile communications systems m ainly include (1) cellular telephone systems; (2) radio paging systems; (3) cordless telephone systems; (4) mobile data systems; and (5) satellite-based mobile communication systems (Li, 1993). They serve either public network or special- purpose (often called ''private'*) networks. Their environment of use consists of land, air, and sea. Mobile communications systems are high-technology-intense, integrating modem radio technologies, network technologies, computer technologies, and microelectronics technologies.
The increasing availability of mobile communications over the past decade is freeing business and residential consumers from the physical constraints of wholly wired telecommunication networks. Cellular, together with paging and other complementary services, first brought mobility to existing telecommunications systems. Significant technological advances have expanded substantially the number and types of wireless telecommunications services. These services include advanced forms of cellular telephone service, in addition to advanced digital cordless telephone service, portable facsimile services, wireless private branch exchange (PBX) services, and wireless local area network (LAN) services (FCC, 1992) 14
Tn early telephone systems, the bulk of the capital investment was in the wires.
But any method of wireless telephony offered a great economy in building infrastructure. Two approaches were considered for communicating without wires; use of light waves and use of radio waves (Pool, 1983). However, although Marconi had demonstrated radio waves' transmission capacity and Carty of AT&T realized the importance of wireless telephony, AT&T thought that radio would not prove capable of providing the massive number of transmission for a total national point-to-point message system. Griswold (1922) states AT&T’s basic assessment in an article in the
Bell Telephone Quarterly: (1) Radio telephony is a supplement of and not a substitute for wire service; (2) Radio telephony would never replace universal wire service; and
(3) It is evident that the cost of radio service would be excessive and that the character of the very limited service ... would be far inferior.
Mobile communication was one of the earliest applications of radio communication techniques (Linnartz, 1993), and was used mainly for special-purpose communications. The first land-mobile-radio system for Detroit Police went on air on
April 7, 1928 (Calhoun, 1988). The first commercial pre-cellular mobile telephone system in the US was established in 1946 in St. Louis, Missouri (Datapro, 1988). In
1947, Bell Labs devised the concept of cellular radio for vehicular communications.
The concept of extending the range of a paging system to cover a local or metropolitan area was first introduced in 1963 in the US (Parsons & Gardiner, 1989). The Japanese Nippon Telegraph & Telephone (NTT) inaugurated the first commercial public cellular system in the world in 1977 (Roos, 1993). AT&T started its cellular service in Chicago in 1983, the first real commercial service in the US (Calhoun,
1988). 15
Although certain mobile services have been offered for many years, it is only
as the late 1980s dawn that they start to become widely available. As prices charged
for mobile equipment and services dropped, a surge in demand followed (Spector,
1993). In the past decade, driven by a series of wireless/network technological innovations and a spread social acceptance, mobile communications began entering a
new era: whereas, so far, wireless-mobile communication systems have been
complementary to the wired telephone network. Regulatory and standard-setting
bodies in the US and Europe are studying future mobile communication systems that
aim at replacing parts of the fixed telephone network, known as "local loop," by
means of a radio link (Paetsch, 1993) and connecting with other existing
telecommunication networks.
Technological description: Mobile communications systems in the West usually include (1) cellular radio telephony; (2) radio paging; (3) mobile-radio data
networks; (4) cordless telephony; and (5) PCS/PCN.
The concept of cellular mobile telephony evolved around the need to make
more efficient use of the radio spectrum in order to accommodate a rapidly growing
number of users for mobile services. Cellular radio allows a caller to reach a specific
mobile unit via a public switched telephone network (PSTN) after a positive
verification of the terminal identification number. It is also possible to conduct calls
between two mobile units (Datapro, 1988).
Radio paging generally supports only one-way transmission of messages, commonly to notify a person that s/he should contact a previously known wire telephone extension. Public paging evolved around the need of users to contact personnel even if they were not within the immediate vicinity of their workplaces. 16
Pagers are classified, according to their functionality, into tone-only, numeric, and
alphanumeric pagers (Paetsch, 1993). Data pager have recently been developed as a
new application that allow laptop and notebook computers to receive broadcast
messages and fax via conventional paging networks (Anderson, 1991).
Delegated mobile data systems are optimized to provide data, rather than voice
communications to field service organizations. Based on digital technology, radio data networks are intended to be operated as public networks providing quasi-nationwide
coverage (Stevenson, 1990). Possible applications range from simple dispatch
messages to a full integration of mobile units into a company's computer system
(Didner, 1991).
Cordless telephony was initially launched as a replacement for the wired telephone within buildings for low-speed moving users. Based on the principal idea of low-power radio links, it was increasingly developed to operate as a wireless private branch exchange (WPBX) or Centrex, wireless local area network (WLAN), or through public network access points like the telepoint in Britain. The second generation of cordless phone system (CT-2) adopts digital technology for outgoing calls. Because its cost and service charge are much lower than cellular, and its smaller handset and higher privacy, cordless telephony has received a big boost in Europe and
CT-2 has been seen as a precursor technology for PCS/PCN in South-East Asia
(Fong, 1992) while the new versions of CT-2 such as European DECT, Canadian CT- 2 plus and Swedish CT-3 are being developed with two-way calling, position registration, and roam functions (Li, 1993).
PCS/PCN is a new generation of mobile communications which is still in its infancy. It promises to integrate voice and data services, and in the process re-defines 17
the telecommunications network as "person-based" rather than "place-based" service
by using pocket-size transceivers at lower cost than cellular. The idea behind
PCS/PCN is to provide transparent and consistent communications capabilities-both
wireline or wireless-to nomadic users. PCS/PCN can be delivered by wide range of
mobile technologies, including cellular, paging, cordless, mobile data, wireless PBX,
specialized mobile radio and satellite systems (Perry, 1993). A twist on cellular,
PCS/PCN uses hundreds of micro-cell transmitters to blanket a calling area and
provides more than 20 times the capacity of conventional analog cellular (Ziegler, et.
al., 1993). PCS/PCN can even exist independently of local wired networks, filling gaps in existing communications and creating new markets (FCC, 1992). There are fundamental differences with regard to the how PCS/PCN should be designed. The so-called cellular PCN approach, as favored in the UK, differs from conventional cellular systems only in so far as it is chiefly designed for pedestrians and utilizes smaller cells (Calendar, 1990). In contrast, Bellcore in the US advocates the deployment of many, albeit substantially cheaper and less complex, low-powered transmitters, which will provide access to intelligence networks through the Central
Office (Paetsch, 1993).
Other debates of fundamental design alternatives for mobile communications systems are related to standard selection: digital versus analog, broadband versus narrowband, macrocells versus microcells, and time division multiple access (TDMA) versus code division multiple access (CDMA) in the US, and groupe special mobile
"(GSM) versus CDMA in the international market" (White, 1993). The key factors affecting the development of mobile communications, according to Paetsch (1993) can be classified into: natural resources like radio spectrum, technology like wireless 18
transmission and intelligent network switching, regulatory policies like spectrum
management and market access, standard-setting bodies like the US
Telecommunications Industry Association (TIA) and the European
Telecommunications Standards Institute (ETSI), manufacturers like the US's Motorola
and Sweden’s Ericsson, as well as system operators/service providers like the US
Regional Bell Operating Companies (RBOCs) and European Postal, Telephone and
Telegraph administrations (PTTs). He also identifies three major areas of relevant markets: first, the deployment of networks capable of providing the wireless public switching telephone network (PSTN) access to an increasingly consumer-type mass market; second, the anticipated development of networks that integrate various wireless systems to provide continental or even global coverage (e.g. Motorola's
Iridium satellite project for global mobile phone system); and third, the deployment of dedicated wireless systems (e.g., radio data networks) that serve the special needs of the business community (Paetsch, 1993).
Regulatory context: Based on the concept of "public interests’’ for spectrum allocation and regulatory structure, the US FCC intends to "ensure that all mobile services are provided with the highest quality at low-cost, reasonable rates to the greatest number of consumers, consistent with the goals of the Communications
Act" of 1934 (FCC, 1992). FCC has the attitudes of encouraging competition and of deregulation. For example, it has issued over 200 licenses to the US PCS pioneers for various trials and on September 23, 1993 granted spectrum for a PCS roll-out.
Another example is that in the US, a certain degree of competition is warranted by the fact that operators are allowed to construct their own fixed microwave links or route traffic through existing metropolitan area networks. Such options are not yet available 19
to European operators of mobile systems except the UK so that they have to rely on
the national regulatory bodies to determine and enforce cost-based network pricing.
Whereas US operators of PCS have the opportunity to carry traffic through strong,
independent network carriers such as community antenna television (CATV)
companies, European operators are almost entirely dependent on fixed network
services provided by the national PTTs (Paetsch, 1993).
The growing pro-competitive position of the US FCC manifests itself in new
approaches towards regulating mobile communication systems, as well as in the
licensing procedure, not only focusing on increasing the number of operators, but also
revising regulations to stimulate intra-system competition. The European national
regulatory bodies took a more cautious approach toward liberalizing the market for
mobile communications although they should follow the European Community (EC)’
Green Paper of 1987 for telecommunications liberalization. Process in licensing mobile communications like paging other than cellular has been significantly slower.
In contrast to the FCC, European regulators—with the exception of the UK—not only license fewer operators, but also try to avoid excessive intra-system competition in order to ensure the commercial viability of licensed systems.
In the case study of the diffusion of mobile communications in China, the regulatory comparison reviewed for the different policy positions and practices between the US and Europe might provide a reference to help consider what are the pros/cons of these policy from a Chinese perspective.
Social implications: The advent of mobile communications will have social effects. On the positive side, the new wireless mobile technologies could be a source of future growth and increased productivity. They could enlarge the chances for 20
employees to freely determine the time frame, contents and methods of performing
their jobs, as well as create new jobs in the service sector (Dorrenbacher, 1993).
Many mobile communications applications could create new markets and provide competition in many segments of the telecommunications industry. The many applications also could increase productivity and efficiency across a broad array of industries and have a positive impact on the international competitiveness of the national economy.
Jarratt and Coates (1990) outline eight areas in which cellular technology could have a major impact, affecting people’s lifestyle, behavior and expectations: cellular can (1) accelerate transactions; (2) expand the scope of short-term transactions;
(3) give more choices and more opportunities to do something immediately; (4) stimulate certain kinds of actions (either positive like social contact or negative like crime); (5) increase public and individual safety; (6) raise expectations; and (7) alter people's concepts of time and space, by both using time more efficiently and shrinking the spaces between events. Most of these impacts from using cellular phone seem to apply to other mobile communication systems.
On the negative side, most social concerns about the effects of wireless-mobile communication technology in the US focus on health and privacy issues such as whether brain cancers are linked with using handhold cellular phone, unwanted intrusion of anytime-anywhere communications overwhelmed by nonstop phone solicitation and fax frenzy, and eavesdroppers who use police scanners to pick up conversations between cellular callers (Ziegler, et al„ 1993).
In his paper "Mobile communications in Germany," Dorrenbacher (1993) portrays the current debate in Germany relating to the risks of mobile communication 21
technology such as road safety, exposure to radiation, and data privacy issues. He
argues that mobile communications in Germany are primarily used in the professional
world but have impacts that extend beyond the professional life. Although they have
been aimed at securing the permanent availability of particular employees, optimizing
the coordination of goods and personal transport, and increasing effectiveness in
emergency and security operations, it is possible that they will be used to monitor the time frame, contents and performance of jobs more rigidly. Jobs that currently are
hard to supervise could be made controllable. Under the influence of mobile
communication technologies, employees could lose their job security under the guise
of increasing their independence. He also claims that the application of mobile
communications in the professional world alone does not create a mass market, and
that only if a large private clientele can be won to the new technologies is it possible to
make sense about the future market development of mobile communications.
China Today and Its Telecommunications China today: As indicated earlier, this study is presented from a Chinese perspective. Therefore, a general review of China today is necessary. This review is based on the Joint Political Declaration (discussion version) issued in 1993 by the two major overseas Chinese pro-democracy organizations respectively in the US and
Europe. The two organizations mainly consist of a group of overseas Chinese graduate students and the Chinese intellectuals who were the brain trusters for China's reform program and forced into exile from China following the tragic Beijing Incident in 1989. The Declaration reflects their latest judgment of China's status quo. It is not an individual statement but represents a common agreement among these Chinese 22 intellectuals. Ignoring the strong anti-government attitude in it, it does provide a concise description to China today as follows:
With the end of the Cold War and the overthrow of Communist regimes in
East-Central Europe and the former Soviet Union, the ideological, social, economic, and political systems which were related to Communism, as well as the ruling way of the Communist totalitarianism, are becoming history. Facing this historical trend,
China is in rapid transformation economically, but still in gradual transformation politically (Goodman & Segal, 1992).
The development road of China's system is quite unique. The ten-year-long
"Cultural Revolution (1966-76) led by Mao Zedong and the later reforms lasting to today led by Deng Xiaoping have, from different directions, touched and changed the deep structures of China's economy, politics, and society. The former was a destructive political "civil war" in terms of power struggles and ideology abuse. It de sanctified the ruling structure and incited the mobilized masses to rebel against all authority but Mao's (Goldman, 1992 and Walder, 1992), resulting in economic standstill, political confusion, morality loss, and social chaos. The latter has been stimulating economic development and diverting social activities, but at the same time, highlighting the maintenance of social stability. The pro-democracy movement in
1989 had its deep, historical roots.
In today's China, politics is still connected with rigid totalitarianism but has the sign of transition to an authoriiarism. Its economy is evolving rapidly toward liberalization, marketization, and privatization. At the same time, the monopoly in ideology and culture is eroding. The ideological system in which the Marx-Leninism and Mao’s Thoughts were core has been on the wane (Kristof, 1993). The controlling 23
capability of Chinese Communist Party is receding in the countryside and in the economic, cultural, and scientific R&D fields, even in education systems. As a whole, China is in transition to a pluralistic civil society, a market economy and a decentralizing structure with different paces. It is these deep-seated changes that stimulate the vigor and steady increase of China's economy, though the changes are uneven in China because of regional development disparity.
The Chinese society is transforming from a closed one to an open one because China's economy is depending more and more on the international economic system so that it has to accept the principles of international economy and business practices, especially when more foreign investment and services are entering China and when China is striving to rejoin the General Agreement on Tariffs and Trade (GATT) (Dow
Jones International News, March 1, 1993). New values and cultural forms are disseminating from overseas into China. It is impossible for China’s present regime to seal the Chinese from economic, political, and cultural information from the outside world. China's future reforms will be undertaken in a system opened to outsiders’ eyes, via satellite TV broadcasting and the international phone/computer network. The information revolution will provide effective means such as fax and computer mediated communication for the democratic changes in China’s society. With the rapid changes in the economic system, China's first generation of entrepreneurs and of the middle class since 1950 is forming. The desires of the Chinese to pursue their own materialistic interests is radiating out. However, the changes above have been constrained largely by existing political and legal systems. Furthermore, various chaotic and corrupt phenomena in social/economic activities are growing and spreading. The gap between the rich and the poor is widening. The 24 imbalance among regional economic developments is sharpening. The ecology and natural resources are further deteriorating (China Spring, March 1993).
Over the last decade, the regional/provincial powers have rapidly grown in strength driven by the local interests, especially those in the economically booming areas. The ruling tradition of centralization of state power is going downhill.
Decentralization is a social trend favored by the provincial authorities but is seen as a threat to the central control of Chinese government.
With the increase of exchanges in economy and trade, culture and science and technology between China and Taiwan, the possibility of peaceful union has emerged and will influence the interests not only of people in Mainland and Taiwan but also another 30 million overseas Chinese. A question has been raised, and needs to be discussed regarding the so-called Circle of Chinese Economy (or Great China) which means to integrate the respective strengths of China, Taiwan, Hong Kong, and the other overseas Chinese business world, even Singapore if possible (China Spring,
1993).
Not many Western scholars deny the fact that China is in a state of economic transformation and this tends to bring with it social transformation and is likely to increase pressure for political change (Tisdell, 1993). But the reasons for the change of direction are complex. Jao et al. (1992) argues that undoubtedly the economic success of Japan, South Korea, Taiwan, Hong Kong, and Singapore have provided nearby examples for emulation, and given cultural similarities, may have lea China to believe that it can have similar success by modifying its system. Also, the failure of
Soviet-type centralized socialism to fulfill its economic promise in East-Central Europe and the late Soviet Union provides a further pragmatic reason for China to persist with 25
its economic transformation and greater openness to the outside world (Jackson,
forthcoming).
However, none of the above is meant to suggest that China's transformation
path is an easy and short one. If the general view of Von Hayek (1944) of the
relationship between markets, democracy and dictatorship is correct, then the economic reforms will result in increasing pressure for political reforms and the Party
is likely to be increasingly tested in its ability to cope with these. But, assuming that
political stability can be maintained in China and present direction will not be changed
much, "there is a very good prospect that the country ... will become a middle-ineome economy in next century” (Tisdell, 1993).
Since 1992, China is speeding up again for a new wave of economic reform and attraction of foreign investment. Its economic growth rate reached 13.4% in 1993
(UP!, September 22, 1993) although the Chinese government has been trying to cool this overheating economy since the middle of 1993. China’s economic boom is also fueling East Asia's growth as the rest of the world economy stalls (Zuckerman, 1993).
By using new statistical method of purchasing-power parity (PPP), the International
Monetary Foundation (IMF) has updated China as the second largest economy in the world, just behind the US (Asiaweek, July 7, 1993). And the World Bank ranked China as having the third largest Gross Domestic Product (GDP) after the US and
Japan (People's Daily, 1993). But the Chinese government contests these results, saying they are western exaggerations to make a concerted clamor of the "threat from
China" after the Cold War because the West would not like to see China getting stronger. China claims it is still a low-income, developing country. The Western media think China "may have an incentive to report GDP as low as possible to qualify 26
for soft loans from international financial institutions, or to get favorable trade
treatment" (Economist, May 15, 1993).
The economic development of China is likely to have several important
consequences for the rest of the world: (1) an expansion in international trade which
may be especially beneficial to China’s neighbors and to other Pacific countries; (2) expanded opportunities for foreign investment in China; (3) adverse global
environmental spillovers as a result of China's economic growth,... and (4) a change
in the relative economic power of nations which may alter the international balance of
military and bargaining power. For example, the relative international importance of
China in the Pacific may rise in relation to Japan and the USA; the Chinese sphere of
international influence might be expected to expand (Klintworth, 1989). The development of telecommunications in China: To study the
implications of diffusing mobile communications into China's changing society mentioned above, a briefly historical review of China's telecommunications development is necessary.
China’s telecommunications started from the set up of the first telegraph line by a Danish entrepreneur in 1871 (Wu, 1990). Later, Swedish Ericsson installed the first
telephone exchange in China in 1896, for the Empress Cixi at her Summer Palace in
Beijing, and China’s first automatic exchange at Shanghai in 1923 (Zita, 1987).
Depending on imported equipment from the West, China's telecommunications before 1949 mainly served the interests of the rich, merchants, high officials, and foreigners in major cities, as well as the military. Little attention was paid to developing communication in the large countryside and for the average city resident (Business
China, 1991) because of continuous wars and nationwide poverty. The result was a 27
telephone exchange capacity of 310,OCX) lines for China’s 450 million population by
the end of 1940s CWang & Wang, 1993). After the People's Republic of China was founded in 1949, China
implemented a policy focusing on agriculture to feed its vast population and on steel-
machinery industry to prepare for possible wars. Facing economic sanctions by the
West and ideology similarity with other Communist countries, China adopted a Stalin-
style pro-heavy industry policy and sought technology assistance from the former Soviet Union. The young electronics industry and communication technologies, like
microwave transmission and mobile communication, were emphasized to support the
broadcasting network which was regarded as a powerful propaganda tool to maintain
social control and to meet military needs, rather than to improve public telephone
systems for a universal service. Falling out with the Soviet Union during the late
1950s to middle 1970s, China's science and technology investment and policy
concentrated on development of national defense such as nuclear weapons and satellite
launch to show China's military strength.
In short, between the 1950s and middle 1970s, China considered capital and
labor as the only two drivers of economic growth. The telecommunications were seen
purely as a tool for administrative needs. The telephone was seen as typical office equipment and a luxurious privilege for the very important people in the Party and government. Leasing a phone line was a political favor and a symbol of social status.
The management of the state-owned telecommunications systems were semi-military and highly centralized (Ding, 1994). As a result of lacking of the concepts of public good and public service, China's telecommunications systems were largely outdated and their services were inefficient; its profit level was incredibly low (Sun, 1990), and 28
every 100 Chinese were covered by an average 0.38 phone in 1978 (People's Daily,
September 22, 1993), the lowest rate in the world.
Since 1978, science and technology and education have come to be added as new underlying drives for economic growth. "Science, technology and education
play very important parts in the development of the domestic economy. With the economic reforms, science and technology systems and the educational system are
becoming strategic tasks which need to be addressed urgently" (People's Daily, Oct.
21, 1984). The Chinese telecommunications experts who visited the West were
particularly impressed by Dutch telecommunications and British broadcasting technology and equipment, and they realized how backward China's telecommunications really was (Business China, 1991). However, Chinese planners were not concerned much with telephonic communication as a consumer service, and the possession of a phone was still a rare privilege until 1983. Instead, they viewed telecommunications as an important part of the industry and administrative infrastructure. For this reason, international telecommunications had been developing at a faster rate--around 30% a year —than domestic telephone capacity, which had been expanding by only 5% annually (E1U Country Profile 1990-91, 1991). Compared to other infrastructures in China such as transportation and energy, the scale and investment of telecommunications was always smaller before 1985.
The "take o ff of Chinese telecommunications started from 1985 when Chinese planners put it as a national priority because they at last realized that economic inputs must include effective communication networks and investment in telecommunications makes a powerful contribution to overall economic growth. As what Sinha (1991) finds, "governmental commitment to the growth of the (telecommunications) sector 29
positively relates with improvements in both sector performance and distribution.'*
The change also came from other various causes: the complaints of overseas investors
about China's poor communication services; the advocacy of experts after China
launched its first experimental telecommunications satellite in 1984 (Akwule, 1992); the introduction of concepts regarding the "information society" and "new-technology revolution” from the West through such best-selling books in 1983-84 as "The Third
Wave” by Alvin Toffler and "Megatrends" by John Naisbitt; and the market demand as a consequence of the transition towards a market economy which has resulted in a rapid growth in private small businesses and new private entrepreneurs in China. Since 1986, China has been the country with the fastest developing telecommunications system in the world. Telecommunications has become the fastest growing of China's national infrastructures, which include transportation, power, housing, and education. Telecommunications' growth rate (42% in 1992) has surpassed China's GDP growth rate (12.8% in 1992) for eight years (Yang, 1993).
About 3.5 million phone lines have been added into China’s network each year since
199() (Zhao and Wang, 1993) and 9 million new lines were added in 1993. According to China’s Ministry of Posts and Telecommunications' (MPT) statistics, the present
China's capacity of PSTN ranks 10th in the world and is the second largest PSTN in
Asia behind Japan.
The speed of telecommunications development in China is rare in the world.
During the "take off" period of Japan and the "Four Little Dragons of Asia" (Hong
Kong, Singapore, Taiwan, and South Korea), their annual growth in telecommunications reached about 15%. In contrast, China has kept a growth rate over 20% for eight years running (People's Daily, September 22, 1993). China's 30
Eight Five-Year (1991-95) and the Ten-Year (1991-2000) Plans have been revised
upwards twice already since their approval in the National People's Congress in April
1992. The target growth rates are impressive. In the last five years of this century,
China's phone line increase will average 10 million each year. During this decade, China's PSTN capacity is due to rise by an annual average of 18%, as are the number
of subscriber telephone sets. By the year 2000, one-in-five Chinese should possess a
fixed-wire telephone; in the large cities, penetration rates are expected to reach 30-40%
(Business China, 1993), and then China's network might come to rank as the third
largest in the world.
Before 1978, China’s technological level of telecommunications was 20 to 30 years behind the rest of the world. In the past 15 years, China has begun introducing
advanced telecommunications facilities such as fiberoptic, satellite, microwave, and
pro gram-control led digital switching, China's present portion of program-controlled exchanges is 70%. The technological achievement is attributed to the technology
policy of leaping over several stage of development to a high starting point by adoption of new telecommunications technologies as a result of keeping track of the new telecommunications innovations in the world. China's MPTs experts think that adopting the latest equipment to leapfrog is not only worthwhile in financial terms, but also required for interconnection with international networks (Zhao and Wang, 1993).
The cause of the China’s telecommunications high speed development in both network capacity and technology leap was attributed to the commitment of telecommunications as a national priority and to the encouragement of revenue sharing policy between the central government and the telecommunications authorities. That is, although the state could not allocate much investment into its telecommunications 31 sector, it could give an incentive policy to arouse the enthusiasm of the MPT itself and the provincial telecommunications authorities. In general, the State waives 90% of principal and interest of state investment in MPTs technical transformation loans; the
MPT can retain 90% of the non-trade foreign currency income; and 90% of MPT's profit can be kept for its own needs. Chinese planners think this policy accelerates
China's telecommunications development and want to keep this policy to the end of this century (Zhao and Wang, 1993).
Despite unexpectedly rapid and accelerating growth, China's telecommunications sector is still plagued by congestion and waiting lists (Di & Liu,
1994). Although the speed of capacity increase is remarkable, the MPT knows that
China’s phone penetration rate is still very low because of its huge population base-
2.15% versus the world average of 15% in 1993. At that level, China still ranks beyond l()0th in phones per capita in the world. The national penetration rate in China was about one line per 100 people at the end of 1992 (Business China, May 17,
1993). This compares with the rate of 32 in Taiwan, 41 in Singapore, 48 in Hong
Kong, and 50 in Japan (Friedland & Westlake, July 1, 1993). Further, China's telecommunications development is very unbalanced regionally. Even if in Beijing, the city having highest phone penetration rate in China at 23% in 1993, there are still hundreds of thousands of households waiting for installation of a wireline phone at home, not to mention that nearly half of all villages in China are still without any phones. Nationwide, there were about two million subscribers on the waiting list in
China in 1993. As estimated, China needs at least $30-40 billion in telecommunications investment to reach its goal and to catch up with the world telecommunications development from 1994 to 2000 (Zhao & Wang, 1993). 32
Social Change and Technology Transfer
Social change: Social change needs certain necessary and sufficient
conditions and actions which attempt to change practices constrained by existing
structures (Sayer, 1992). The social change in China today is based on identifying
both internal and external variables. Among the general state-of-society assumptions that can be made are the following:
China is in transition from an ideology-oriented socialist nation based on the
former Soviet Union model to a pragmatism-oriented quasi-capitalist country yearning for Japan and Singapore’s success. The most basic social change by many Chinese
feeling is the change in the mentality, an internal variable. The developing market
economy is affecting most Chinese, whether leaders or ordinary peoples, thoughts and
values. On one hand, the senses of competitiveness, efficiency, time, and distribution
according to work have aroused the enthusiasm of the masses, further bringing about a
great advance in economic development, life improvement, and national strength
(Qiao, 1993). The values of consumption and individualism have been accepted by
the younger generation. On the other hand, the negative parts of extreme egoism and
money-worship also are in vogue (Burton, 1993). In addition, socio-psychological
shocks, originating from relatively high inflation, increasing chances of
unemployment, and imbalance of income allocation, impact strongly on the urban
Chinese over age of 40s who were accustomed to the poor-equalitarianism and low- unemployment social environment during Mao's era (Sun, 1993).
Although the political structure of China has not changed much, the political atmosphere has become much more tolerant than in Mao’s era. Limited policy debates and social trials are allowed to be reported publicly. The premise is keeping social 33
order for economic development. Nationalism in the form of patriotic education is used to replace Communist propaganda which has been ineffective. On the surface,
the Party’s ruling functions are giving way to the government and the Congress. The legal system/institutions are being constructed and perfected. For policy-making purpose, the government has started consulting with experts, learning from foreign experiences or lessons, and establishing "brain banks" and national databases, which differ from the subjective approach of top leaders before. Service industries are encouraged to develop faster. Science, technology, and education have received more attention from the central government (Dewitt, 1993). In the field of economic management, the independence of enterprises in finance, personnel, and material supply is enhanced with decreasing government interruptions. New institutions, jobs and markets are emerging (Wash, 1993). Social life is becoming varied. Social contacts and activities are soaring. The work force mobility is increasing, either between working units or from labor-surplus countryside to the booming urban area.
At the same time, the negative parts of traditional Chinese culture are spreading in society: official corruption and bribery, local power abuse, business fraud, appropriation of public property, waste for parading wealth, and lack of public sense, etc. In addition, new social phenomena are emerging: property and stock-market speculation has attracted capital from infrastructure improvement and inland development (Brauchli, 1993); income disparity threatens social stability (UPI, May
24, 1993); smuggling is running wild; crimes, especially those in economic activities, are soaring (UPI, August 10, 1993); women's status is being lowered as current social trends lead people to pay attention to women's appearance and youth rather than their internal virtues or working ability; and the psychology of blind faith in things foreign 34 in terms of consumption and lifestyle is increasing, especially in the young generation living in urban areas. With reforms in its economy and opening to the outside world since 1978,
China has experienced the longest phase of sustained economic growth at an average annual rate of nearly 10% since the founding of the People's Republic in 1949. At the same time, many of the social and institutional structures established in the preceding years have been modified or replaced, and there has been an explosion of debate, experimentation, and innovation. Relating society with technology, analysis of development tends to focus on the relationship between economic, technical, social and political factors as growth takes place. It was not surprising to find that early in the debate over the need for reform, Deng Xiaoping, the so-called "general designer of
China’s reform,’’ raised the question of whether advanced technology placed new demands on social institutions (Deng, 1975), and the debates which preceded the reform decisions also saw social change as an essential cause and effect in economic development.
Watson (1992) argues that the reforms in China generated new sets of interests between different groups in society and that the evolution of these interests developed their own logic of political, social, and economic change. However, the party set out to stimulate a more open society but was not prepared to relinquish its political and institutional control. This contradiction brought problems of social change and institutional adaptation to the fore. He further argues that clearly economic parameters set limits on how a society can function, yet they are themselves conditioned by the set of institutions and values through which they are realized. Economic behavior can be understood only in its social context (Watson, 1992). 35
Arguments over the relationship between economic growth, institutional structures, and social changes in China can be traced back to the debate over the relationship between Chinese "essence" (called ”ti" in Chinese) and Western "know how" ("yong”) at the tum of this century. The assumption was that social and cultural forces are a prime constraint on economic growth and technical modernization. Tisdell
(1993) find that the Confucian system in China did not encourage technological inventions and their economic application, and the party leaders before 1978 held the view that a combination of foreign aid and dependence on foreign technology would hold back the economic development of the recipient by placing the recipient country in a neo-colonial position (Tisdell, 1993). However, the Confucian approach has proved to be an inherent weakness in the traditional Chinese economy after the Industrial
Revolution. The previous party leaders' view about dependence on foreigners is not true because Japan has been able to import foreign technology and catch up with other advanced economies without losing control of its own affairs. Therefore, current
Chinese leaders believe that new technology is an important means for increasing the public welfare of the Chinese people.
The debate also goes to technology transfer and social change. Chan (1992) states that the post-Mao leadership, including the pro-reform politicians,
believes that science and technology are what China needs most to learn from the West. It believes that science and technology have no value or institutional implications... (However) Leading intellectual exponents of reform, on the other hand,... are united in their common belief that ideal factors--cultural and institutional-play no less important, if not more important, a part in modernization than material factors. They do not believe that science and technology are value-free, and argue that over a century of importing Western science and technology has failed to modernize China's economy because there has not been a concomitant importation of Western institutions and Western values to make the science and technology work. 36
Technology transfer: The concept of technology transfer has been defined as "a process by which expertise or knowledge related to some aspect of technology is passed from one user to another for the purpose of economic gain." But "research on technology transfer, particularly theoretical research, is still in a very early development stage" (Schnepp, Von Glinow, & Bhambri, 1990). The earliest documented research on technology transfer was by anthropological and sociological researchers (Rogers & Shoemaker, 1971) and economists during the 1950s and 1960s
(Godkin, 1988). These researchers sought explanations for different economic growth rates, and rationales for the failures of US technology in the "transplant" process abroad during that time period (Jeremy, 1981).
Kedia and Bhagat (1988) note that three distinct conceptual trails of research exist on technology transfer. The first focuses on processes by which technology gets transferred to be received more successfully by users. The second focuses on the absorptive capacities of recipients. The third focuses on case-study relating to factors including industry characteristics, technological sophistication of supplier and recipient organizations, and technology maturity. More recently there have been attacks levied at the extant research literature on technology transfer for failure to include contextual or culture-based variations that account for success or failure (Von Glinow, 1988).
For example, decision-making in China are based on consensus among a number of agencies involving a relatively large number of individuals. "This decision-making procedure is seen by Westerners as cumbersome and unnecessarily time consuming.
From the Chinese point of view, however, obtaining as much information as possible and going through the consensus and approval process is essential to protect him/herself from subsequent criticism and recriminations" (Von Glinow et al., 1991). 37
Also in Chinese context, Fischer (1991) argues that technology transfer is as
much a political and social phenomenon as it is an economic one and that strategies that
involve the utilization of foreign technology for economic development also require
accompanying social and political policy changes that can be quite contradictory to the
initial rationale for the technology transfer. It appears unavoidable that benefits to be
gained fnom the utilization of foreign technology will come at the cost of increased
foreign participation in Chinese economy, which requires a degree of commercial
partnership between global manufacturing and distribution networks and Chinese
enterprises that transcends the traditional prerogatives of both the Chinese state and
Communist Party. For the overall indicators of success in a technology transfer to
China, Von Glinow et al. (1991) analyze the criteria from the interests of the Chinese
recipient enterprise and the Chinese government: (1) acquisition of new and modem
technology, as well as Western management skills; (2) earning foreign exchanges;
(3) conservation of power consumption; (4) creation of new job in preference to a
long-run joint-venture (JV); and ultimately (5) self-sufficiency or independence from the foreign technology supplier.
From their case studies in China and the comparative assessment with both
American perspectives and Chinese perspectives, Schnepp et al. (1990) outline and discuss three technology transfer strategies concerning (1) profitability and foreign exchange management; (7) information exchange and continuing feedback, and
(3) penetration of the Chinese domestic market. They conclude that problems of language, cultural differences, infrastructural constraints, different standards, and politicization of the technology transfer agreement complicate the transfer process.
Overcoming these hurdles requires attention to the micro dynamics of implementation, 38 to the nuts and bolts of managing the transfer of expertise through people, documentation, and equipment, when confronted with cultural and other problems.
Technology transfer in the forms of direct investment and joint-venture is one reason why the gap between some developing countries like China and the developed countries on the average possibly narrows, plus low labor costs and vast market potential which attract overseas capital to China. China might grow faster than the advanced industrial countries in certain areas, partly because of the advantage of being able to borrow rather than invent advanced technology like mobile communications. As Pool (1990) argues, those countries that join the game later learn from those that joined earlier. The latecomers can skip stages that the pioneers have to experience step-by-step. Those who come late can acquire in their full fruition technologies that evolved elsewhere by trial and error. Those who came early have sunk large investments in existing systems. It is a continual game of leap-frog. Therefore, it seems that mobile communications may, in the future, come more easily to China than to some developed countries because there is no existing system to be abandoned. 39
Research Questions
In this literature review, I have summarized/described (1) mobile communication and its role in developing telecommunications infrastructure; (2) the
changing society of modern-day China; and (3) several theoretical approaches to
technology transfer. Integrating these three literature provides the context for this dissertation. The specific research questions explored in this dissertation are:
1. What is China's current situation in mobile communications? How did it evolve from the past? Why has mobile communications become popular in China? And, what criteria have guided the choice of mobile communications innovation that is being diffused?
2. Which stakeholders influence how mobile communications are being diffused to the Chinese adopters and who controls the communication channels by which the innovations are diffused? What are the main concerns regarding the rapid diffusion of mobile communications in China for the stakeholders?
3. What is the nature of the Chinese social structure, and to what extent and in what ways do social factors in China influence the diffusion process of mobile communications?
4. How will the diffusion of mobile telephony impact Chinese society? Have mobile communications widened or narrowed socioeconomic gaps among the Chinese people? CHAPTER II METHODOLOGY
Data-CoHection Methods I used two qualitative methods in this study to collect information in China: personal interview and document analysis. I conducted the interviews following Patton’s (1990) recommendations: I paid attention, listened and watched in real-world
situations, was open, thought about what I heard and saw, and applied what I learned.
I chose the paradigm of qualitative inquiry because (1) it is "a discovery-oriented
approach that minimizes manipulation of the study setting and places no prior
constraints of what the outcomes of the research will be" (Lincoln & Guba, 1985),
especially since there was no previous research available on my topic which related to the diffusion of mobile communications in China; (2) qualitative method by way of
one-to-one interviews and open-ended interview formats were suited to the Chinese communication environments in which the relationships between the interviewees and interviewer were interactive so both sides were in a state of mutual simultaneous
shaping; and (3) detailed data from in-depth interviewing captured interviewees’ experiences, perception, and perspectives.
In addition, qualitative methods provided a vehicle for "thick description'’
(Geertz, 1973; Denzin, 1989) which presents interrelated information useful for communicating with the readers of my dissertation. Lincoln and Guba (1985) stated
40 41
that a case study provides a grounded assessment of context. If phenomena not only
take their meaning from, but also actually depend for their existence on their contexts,
it is essential that the reader receive an adequate grasp of what that context is like. My
case study on China represented an opportunity for communicating contextual information that is grounded in the particular setting that 1 studied.
Personal interviews One primary method of information collection used in this study was 24 in- depth, open-ended personal interviews in Beijing, China. The interview as a form of social research is not merely a means of gathering information, but a form of inquiry which requires that information be translated into a relevant language. Pilotta, in his article The interview as data collection: An excursion into hermeneutics, makes the case that it is only from the dialogue which exists between the interviewer and interviewee that accurate data can emerge, and therefore the proper interpretation of interview data is possible only when an interpretive dialogue is maintained throughout the interview process (Pilotta, 1983). Pilotta's work reminded me that personal dialogue is a preferred, effective way in Chinese communication environment to generate information and to grasp how a particular situation or issue is viewed by various Chinese individuals. Thus, this qualitative data-collection process could be kept interactive and open-ended so that the interviewees might pose and discuss concerns and reconsider their positions as the interviews progressed. I also might obtain serendipitous information from these dialogue-type interviews.
As a native Chinese and former journalist who was trained in investigative journalism in the US, I believe that the one-to-one, face-to-face personal interviews 42
method was effective because (1) 1 could easily reach a common language with the
Chinese interviewees; (2) I could obtain, in fluent Chinese and through my personal
network, first-hand information and direct views that are impossible to be obtained
either by the US government agencies or corporate America's research facilities; and
(3) personal interviews were appropriate for the Chinese traditional communication
pattern that prefers one-to-one, face-to-face dialogue. In China, which has the
tradition of not encouraging freedom of speech in public, personal interviews in the
"two-person world" allowed me to get some "inside stories" in-depth through personal
network extension and informal conversational situations that the formal "public" method or focus group research would not allow. Through my personal interviews, I established a relaxed atmosphere that allowed me to probe and explore more deeply the background information, opinions and concerns from the individual Chinese. This type of setting allowed new, corroborating, or otherwise useful information to be collected in a socially unconstrained setting (Patton, 1990).
Data were collected from 24 personal interviews in Beijing, the capital city and political-cultural-technological center of China, from the mid-January to the late-
March, 1994. The rationales to select Beijing were: (1) it is a key city that, to a large extent, represents China's economic development, policy context, and social change; (2) it has the highest telephone penetration rates--23% in 1993—in China; and
(3) almost all Western telecommunications multinationals have established their representative offices in Beijing. Beijing is also the city where the central government policy agencies and major research institutes/universities are and where I could get higher-position introductions to facilitate my interviews. This top-down way is suited to the Chinese tradition of respecting the power hierarchy. Purposeful sampling: The interviewees were contacted through a
combination of snowball or chain sampling, criterion sampling, and opportunistic
sampling (Patton, 1990). 1 thought this kind of mixed purposeful sampling technique
would be the most feasible approach in my fieldwork situation to allow me to find
qualified respondents because of my limited time and limited resources, especially
when I arrived in China and found that only two "most innovative" interviewees out of
18 on my original interviewee list were available in Beijing. 1 used the snowball or chain sampling to identify good interview subjects from
people who knew people who were in formation-rich in the field of mobile
communications. Under the unexpected circumstance above, I had to locate
information-rich key informants by asking the first well-situated person I had
contacted "Who knows a lot about China's mobile communications?" and "Who should I talk to?" By asking a couple of early interviewees who else to talk with, the
snowball enlarged. In this way, I accessed eleven appropriate interviewees. My criterion for selecting telecommunication expert interviewees were
(1) work experience in technology, market, or policy aspect relevant to mobile communications in China; and (2) availability in Beijing. Through my network and
institutional visit procedure, I found five interviewees who met my criterion from the institutions concerned, including four multinationals' Beijing offices.
For accessing eight non-expert interviewees—three journalists and four users, 1 used opportunistic sampling, taking advantage of the flexibility and convenience.
Although I had known the journalists through long-time personal connections before I started graduate studies in the US, I did not know their current involvement in relevant media reports or data gathering. When I met them this time and knew their relevance 44
to the information about mobile communications, 1 at once followed the new leads to
talk with them in relaxed contexts. For the users, convenient availability to interview
or chat when I randomly saw they were using mobile communications was the only criteria.
Sampling procedure: The three purposeful samplings in China reported above largely relied on personal connections ("Guan-xi" in Chinese) which is usually the most effective way in China to make things work, particularly when my field research was an individual investigation rather than an institution-organized/sponsored one. Therefore, I tried to use personal connections to start accessing most of my interviewees and other valuable information sources.
Before I left for China, I had made personal contacts with two Chinese, Li Zhigang and Sun Lin, as my starting point for further access to interview subjects.
Mr. Li works at the Ministry of Posts and Telecommunications (MPT)' Policy and
Regulation Department as the one of MPT's main draftspersons for policy/regulation making. He also presented his second-place paper at the first Symposium on
Development and Prospect of China’s Mobile Communications held in October 1993.
The purpose of the Symposium was to discuss mobile communications in China and to establish the development approach that best fit China’s national conditions. I obtained a draft of his paper through my journalist network in Beijing before the
Symposium and wrote to him. He wrote back and promised to meet me, to introduce me to some people concerned, and to provide access to the documents from the
Symposium.
My other lead contact, Mr. Sun, is the China market director of ComStream—a
US satellite communication company-who obtained a doctoral degree in 45
telecommunications from Michigan State University. Sun was a Beijing-based
telecommunications consultant and previously worked for several US telecommunications companies conducting business in China. I had known Sun since
1986 and he told me that he would like to talk with me in his Beijing office because we have a similar background in educational training and research interest.
In addition, I had obtained a list of those having papers presented at the
Symposium through my network in Beijing so I made a tentative list of 18
interviewees. However, the list I planed before going to China largely changed except for Li Zhigang and Sun Lin because of two factors I discovered when I arrived in Beijing: (1) most of the planned interviewees from my planned list were not working
in Beijing and were scattered in several cities; and (2) time, expenses, transportation
problems in purchasing air/train tickets and travel safety, and the inefficiency of
China's working environment, forced me to limit my field research in Beijing. Thus I
had to change my interview plan to suit the new situation to reach my goal. Fortunately, I obtained the complete Proceeding of the 1993 Symposium in my third interview from its editor, Mr. Sun Jiang. The proceeding includes almost all my planned interviewees' papers and as well as other papers. Therefore, 1 obtained their views from these papers rather than through most of my planned interviews.
At the end of my second interview with Li Zhigang, I asked him who I should talk to next. From this I obtained Sun Jiang’s working address and phone number because Li thought Sun should have all information to contact all authors in the Proceeding. When I interviewed Sun Jiang, he gave me the Proceeding and wrote down five persons’ phone numbers because he thought these people were important to talk with and available in Beijing. Of the five, three working on national development 46
strategy were interviewed later but one in the National Radio Regulatory Committee
(NRRC) could not be reached by phone. I dropped another one who was an engineering professor because I thought he might be too technical after I glanced over the Proceeding. Another chain sampling allowed me to find two more experienced respondents later when I interviewed Ms. Wang Yue who was working for the MPT's
"soft science" center in Beijing.
In addition to the chain from Mr. Li Zhigang, a friend who was a human
resource manager in a Beijing computer company helped me, either through his
accompany or network introduction, get another four interviewees. Two of them were business managers in sales and marketing of cellular phones and pagers. Another two were in technology management.
I found four interviewees among my family's relatives and friends. One journalist, Ma Xiaoyi, once interviewed the president of Motorola in its wireless
product exhibit in Beijing. Another official, Huang Zuping, was my relative who was
working on the State-level technology management and was the first one to reveal the pro-competition attitude toward China’s telecommunications sector because he could
know the inside positions in advance among senior officials in the State Council system. For the mobile communications users, I randomly met and talked to them in different situation and places, for instance, a big ballroom dancing party in the lobby of Beijing Hotel, a black market for deals of imported electronic appliance, and my uncle's office building.
The most difficult interviewees to access were the local managers of the multinationals -Motorola, Ericsson, and AT&T. I did not know who I could talk with and did not find personal connections with the foreign offices. So, I had to walk into 47
their reception rooms to ask someone in charge to recommend the appropriate manager
to interview. Obviously they were reluctant to arrange appointment because of the
busy business context and the concern for company secrets. Although I finally
obtained the names and phone numbers of the interviewees, I had to wait and call
several times to fit their business schedules.
Ultimately, the interviewees in Beijing were classified into five groups with
respect to mobile communications (Appendix D lists the names and positions of these
interviewees):
1. Officials at the MPT and its research centers, and the managers of the Posts
& Telecommunications Industry Corp. (PTIC) which is the MPTs manufacturing
arm. The MPT has been entrusted as the state-monopoly by the government in
operating and regulating China's national public telephone network for 40 years and
still strives to keep its monopoly, including developing mobile telephony in terms of
establishing a single standard, complete national mobile communications network for
nationwide automatic-roaming. There were five interviewees in this group.
2. Employees in the Ministry of Electronic Industry (MEI)'s
telecommunications sectors and other non-MPT state agencies such as the State
Economic & Trade Commission of China and Beijing CATCH Communications
Corp.. Because the MEI and several other ministries recently began working to establish a prospective second national telecommunication network (Business China,
August 9, 1993) including operation of mobile communication systems. These
interviews led to an understanding of issues concerning competition between MEI and
the MPT, and other issues such as inter-institution politics in China's telecommunications policy environment. There were four interviewees in this group. 48
3. Experts in Chinese research institutes related to telecommunications. These
individuals usually work as the main technological intelligence source, think tank, and
design team for the MPT and MEI because most of the institutes concerned are
associated with the two ministries. There were three interviewees in this group.
4. Journalists and the random-sample mobile phone users. These individuals
provided general information on the social phenomena of mobile communications and
the social opinions concerning the diffusion of mobile communications in China.
There were three journalists and four users interviewed in this group.
5. The local managers of four Western telecommunications multinationals
(e.g., Motorola, AT&T, and Ericsson). Their business experiences, regulation concerns, and market analyses could provide a different perspective on the realities of
China’s mobile market condition and policy contexts. There were five interviewees in this group.
Overall, I conducted a total of 24 interviews in Beijing. As an individual researcher, I believe this number was appropriate for my time in China and my ability to analyze completely the rich data collected. The purpose of these interviews was to find out how these individuals were thinking about current situations and problems of mobile communications in China and their implications, rather than to conduct a large- scale survey for generalization. Qualitative research for data collection begins with the assumption that the perspectives of those purposely-chosen interviewees are meaningful, knowable, and capable of being made explicit. The interviews as developed through naturalistic inquiry obtained here-and-now constructions of persons, institutions, motivations, and concerns. "They will be unstructured, although at later stages of the inquiry more structured forms may be found; they are 49 usually in-depth interviews in that interviewer and respondents may view one another as peers" (Lincoln & Guba, 1985).
The I*cation selected for the interviews was decided by the interviewees’ preference, either in their offices or at home. Most interviews were done in isolated office rooms like meeting rooms of their working units. The main requirement was to keep a quiet background and two-person context. However, the interview context for four Chinese mobile phone users were on the street and at social meetings. Audio tape recordings of the interviews were used, subject to the agreement of interviewees.
Only eight of them permitted tape recording. The low rate (33%) of tape recording permission did not mean that most interviewees did not trust me. In fact, no one rejected my request to interview him or her. Most of them, except the local managers of foreign multinationals, even liked to talk with a Ph.D. candidate from the US and to exchange information about such topics as the US's "information superhighway" and the American digital cellular standard Code Division Multiple Address (CDMA). The rejection of tape recording was only the traditional precaution of the officials, prepared for the worst politically from the law of national security. Therefore, hand-written note-taking was used for the remaining 12 purposely-chosen interviews. Most interviews, except the random social chats with the Chinese mobile phone and pager users, lasted about 45 minutes to one hour.
Trust building: I used three ways to win the trust of the Chinese interviewees because my Chinese fluency and culture understanding were not enough to allow them to tell me their perceptions or perspectives in my “one-shot” interviews.
First. I gave a frank self-introduction and directly told them my purpose for the interviews. Being honest was my first offer to build mutual trust. Then I told them 50
who recommended them or introduced me to interview them so they could trust me
from my networking. Finally, I kept the interviews in a dialogue style to exchange
MC information thus they would not feel they were passive information providers.
Instrument development: Instrument development involved the
completion of three sets of interview questions. The first set of questions were written
to the Chinese telecommunication professionals concerned. These questions covered
such topics as China’s mobile telephony status, strategic intention, spectrum management, various considerations for standard selection and technology transfer,
investment arrangement, and main concerns, as well as policy environment and
comparative research. The second set of questions were asked of the local managers of the Western telecommunications multinationals in China. They focused on such
market-related topics as market analysis, factors influencing their business expansion
in China, and their attitude toward competition. The third set of questions were asked
of the average Chinese mobile phone users and the journalists. These questions
included such topics as user satisfaction, user expectation, and social concerns (The
sets of questions that were asked is in Appendix E).
A personalized interview guide served as a starting point to determine the overall attitude and perceptions of the interviewees. It consisted of a short
introduction; brief, customized social "hook” or rapport to narrow the psychological
"distance” between the interviewee and me; a brief description of this study; small talk to relax the interviewee; explanation for need of tape recorder; and assurance of anonymity if needed. Then the questions functioned as tools that permitted an exploration of the rationale and the "why” in the minds of the participants. The main type of my interview instrumentation was a mix of the “interview guide approach” and 51
the "standardized open-ended interview" (Patton, 1990). The questions were designed
to be open-ended, singular, clear, concise, and well thought-out probes (Norland,
1992) in a structured outline form to set up the scope of the interviews. The Figure 1
shows an excerpt from my question outline I:
Name and Title: Sex and Age: Date and Time: Occupation: Place and Phone #: Mobile phone user:
Introduction: Now let's talk about the policies of dealing with the foreign telecommunication multinationals.
QX: WHY HAS CHINA REAFFIRMED THREE TIMES IN 1993 THAT IT WONT ALLOW FOREIGNERS TO MANAGE OR RUN ITS TELECOMMUNICATION BASIC SERVICES?
PROBE 1. Do the "foreigners" include those Hong Kong or Taiwan mobile communication companies?
PROBE 2. Is mobile telephony thought of as a basic service or value-added service?
PROBE 3. Are there any intentions or actions from both the foreign telecommunication multinationals or domestic agencies to favor the foreign involvement? If any, who have been involved?
PROBE 4. What are the concerns about foreign operations? State sovereignty? National security? Profit drain?
PROBE 0. What’s your personal opinion toward this policy? Is it possible to change in near future? If not, why not? Now let's focus on the criterion or priorities of selecting certain foreign telecommunication multinationals to introduce (or improve) mobile telephony technology for China...
Figure 1. An Excerpt from Question Outline I. 52
Because my instruments were qualitative, validity or reliability were not
discussed (Norland, 1992). Instead, credibility (analogous to validity in a quantitative
study) was established by prolonged engagement and peer debriefing. Prolonged
engagement had been accomplished through my two-year-long written information
tracking of mobile communications development and China’s telecommunication
environment. As for peer debriefing, my advisory committee members were briefed to
keep me "honest" to the cause so that my "biases are probed, meanings explored"
(Lincoln and Guba, 1985). Dependability (analogous to reliability in a quantitative
study) and confirm-ability was strengthened by means of an audit trail (Lincoln and
Guba, 1985). In other words, my inquiry process was examined by the faculty
members as auditors to reduce the possibility of fraud and error.
After the instrument was completed, it was submitted to a panel of experts
again--my advisory committee members--for final evaluation before I left for China.
Because all interviews were held in China and most questions were asked in Chinese
ways of talking and thinking, the evaluation might not be a true pilot test for
Dependability but could be used to fine-tune my original questions for stimulating better quality responses. I believe the faculty members had strong ability to advise my question writing. Although a field test was critical for credibility to test the quality of the interview instrument and to develop interview skills, it was impossible to do it in the US because there were no representative groups here. However, since there are hundreds of Chinese students at the Ohio State University (OSU) campus, I did a
“quasi-field-test” on some of them as prospective Chinese mobile phone users. The following Table 1 is an example of the “quasi-field-test” for user interviews with seven
Chinese students of OSU in a social situation (similar responses are omitted for space): S3
Table 1
An Example of Mv “Ouasi-Field-Test"
Question: Have you heard that frequent use of cellular phone may cause brain cancer? What is your opinion about this health safety issue?
R esponses: (Interviewee 1) - No, I haven't. Where did you get this news? Tell me the story, (after told) Only two law suits, not make sense.
(Interviewee 2) - Really? Are there any scientific evidences published? If not, I don't care.
(Interviewee 3) - It happened in the US. The Americans like law suits for money and the lawyers always try to use any excuse as an "evidence."
(Interviewee 4) * The mobile phone is so useful and convenient that I will keep using it as long as no scientific evidences show up. Further, car accidents killed thousands of people in the US, do you think the Americans will give up driving?
(Interviewee 5) - The Americans concern this health issue because they overvalue life. We Chinese would not care unless use of mobile phone really causes cancer.
(Interviewee 6) - Media always exaggerate things. If you believe all they report, you do not want to live in the world. Any thing could cause health problem: watching TV, working with computer, stand close to the power cable, etc. I don't believe these alarmist talks.
(Interviewee 7) - Maybe it’s true, but I think technology improvement can remove this kind of danger later.
Comments: 1. Most Chinese student interviewees do not believe or do not care about this possible health issue. 2. They care about the positive functions and technological improvement of mobile communications products.
3. Notice the cultural differences in value of life and Chinese' misunderstanding about the Americans and American society.
4. Need probes like "What evidence would change your mind?'1 54
Knowing that possible bias or difficulties might occur in the process of my
information collection in China, I tried three activities to increase the quality of the data
and to obtain more available data:
(1)1 did second interviews with two MPT interviewees. In this way, I not only obtained more information and feedback once a good relationship was established during the first interview, but also had opportunities to compare the possible differences between the two responses from the same person. Sometimes people needed time to disclose facts or ideas after having developed a deeper feeling of trust.
(2) I used the "informal conversational interview" (Patton, 1990) under two circumstances: (a), when there was time left after the interview which followed my interview instrumentation mentioned above and the interviewee wanted to continue to talk about the issues that concerned him or her about the development of mobile communications in China; and (b) during three social chat1’ with Chinese mobile phone users that were difficult to follow my interview guidelines.
(3) I tried my best to select key informants wisely and used them carefully, especially for the institutional representatives, rather than accepting all they told me at face value. Because of both institutional interest and personal bias, sometimes the
"politics of information" among them might result in inevitable misinformation, evasions, lies, and fronts. Therefore, I had to draw on the wisdom of their informed perspectives, but kept in mind that their perspectives were limited.
Document analysis
Another method of qualitative information collection I used for this study was document analysis which provided behind-the-scenes information besides my 55 interviews. Information was gathered and read in my fieldwork in Beijing by accessing Chinese policy documents such as the Gazette of the State Council, trade journals like China Telecommunications Construction, mass media reports, and the
Proceeding of the 1993 Mobile Communications Symposium in China. Those institutional documents were valuable data sources of the official
Chinese perspectives on mobile communications. Particularly, the Symposium
Proceeding provided valuable information sources that reflected various participants’ perspectives directly related to development of China's mobile communications. I also reviewed published data and journalistic reports from current Chinese trade journals, newspapers, and other official publications in the Library of Beijing Broadcasting
Institute. All hard copies of selected documents and articles were obtained through my network and marked for later reading and reference. Prompt document analysis in
Beijing not only provided valuable information but also provided stimulus for generating or re-constructing my questions for later personal interviews. Furthermore, the document analysis itself produced organized data and valuable insights that were useful for later discussion.
I have also been keeping track of the information at OSU about China's mobile communications since 1992. I reviewed various trade journals such as The
Economist, Telecommunications Policy, BusinessWeek, and The China Business
Review, and the relevant information through e-mail access to the on-line computer databases such as Lexis/Nexis and China News Digest (CND) daily reports.
These Chinese and English documents not only provided a great deal of timely or vivid information for this study, but also let me be able to do triangulation of data sources, comparing my interview data, the Chinese reports, and the English articles. 56
Result Presentation I tried to use a type of stakeholder's analysis matrix in this study to help present the basic results obtained from my information collection in China. This kind
of brief provided analytic categories and interpretative schemes, bringing an empirical
method with my emerging textual material from interview content, and helped create an easy-reading format to present the basic findings.
All audio taped interviews were first transcribed into written Chinese textual versions immediately after the personal interviews. Written contents, both from the
personal interviews and notes and comments from the Chinese document analysis,
were sorted systematically in the form of the pre-meta-analysis word table in English,
according to theme areas and their associated categories. The theme areas were
derived in this way: (1) the types of mobile communications systems diffused in
China; (2) history of the diffusion of mobile communications in China; (3) institutions
involved in the diffusion process; (4) category of the Chinese adopters; (5) driving forces in the diffusion; (6) unique features of the diffusion in China; and (7) the stakeholders' major concerns in the diffusion.
Within each theme area, the responses were organized in a table as general syntheses of the major points, according to their similarities and differences and exceptions, if any. Each table presents one theme, the responses from all interest groups, and my personal interpretation. A three-layers matrix format was used to present the interview results. The header is the theme; the main table body lists representative responses to the question; the footer of the table is a short description of my interpretation and my short comment. The following Table 2 is an example of the result presentation format: 57
Table 2 A Blank Tabular Example for Result Presentation
Basic responses Sources ------
MPT:
Non-MPT:
Expert:
Public:
Multinational:
Interpretations
The question of deciding how much to trust my data analysis also was addressed. To enhance the quality of my analyses, a triangulation of qualitative data sources was used by both comparing interview data with document data and by comparing the perspectives of people from different points of view—various telecommunications professionals views, local manager views, and user views, etc.
This meant comparing and cross-checking the consistency of information by different means within qualitative methods so that information could be validated. However, this triangulation of data sources did not guarantee a single, totally consistent picture for mobile communications in China. The point was to analyze and understand when and why there were differences. Consistency in the overall patterns of data from different sources and reasonable explanations for differences in data from divergent sources contributes to the overall credibility and dependability of my results. 58
For increasing the verifiability of my interpretations, I presented findings in context (i.e. I reported both methods selected and resulting data in their proper contexts) and I have provided supporting evidence such as reference and quotations. I have also reported my focus of analysis, opinions and perspectives as results are presented because my credibility and perceived trustworthiness are critical in determining the validity and meaningfulness of my findings.
Technology Assessment
This study adopted the technology assessment (TA) methodology recommended by Porter, et al. {1982) for the evaluation of the impacts of the diffusion of wireless-mobile communication technologies on the Chinese society. The technology assessment methodology used in Chapter IV establishes a clear and logical structure to organize the findings for impact identification/analysis and policy analysis.
TA is "a class of policy studies that systematically examine the effects on society that may occur when a technology is introduced, extended or modified. It emphasizes those consequences that are unintended, indirect, or delayed" (Coates,
1976) and is used to evaluate the social consequences o f technological changes and to foresee not only which technological alternatives are likely to be adopted, but also what secondary consequences such adoption or rejection will have. In the US, public concern over the consequences of technology on the natural environment and on society led to the establishment of the Office of Technology Assessment (OTA), under the Technology Assessment Act of 1972.
The assumptions of TA are: (1) as technology continues to change and expand rapidly, its applications are large and growing in scale and increasingly extensive, pervasive, and critical in their impact, beneficial and adverse, on the natural and social 59 environment; (2) technological benefits should be weighed and compared to potential economic and social costs; (3) economic gains are not sufficient in themselves to justify proceeding with the transfer of new technologies; (4) social costs may overwhelm and neutralize any potential economic gains that occur from adoption of a new technology; (5) the consequences of technological applications could be anticipated, understood, and considered in determination of public policy on existing or emerging national problems by equipping governments and other public or private institutions with effective means for securing competent, unbiased information (OTA,
1989); and (6) TA may help overcome and manage some of the negative consequences of technology or provide various policy options from which to choose better technological alternatives (Madu, 1992). These assumptions of TA assist policy makers in conducting a comprehensive social and technical analysis for proposed innovations. Pool (1983) discusses TA in this way:
Most technology assessments seek to catalog all the effects of a given technology, but some, on the other hand, seek to explore the technological conditions of a particular effect. ... Some technology assessments are highly normative, the assessment incorporating judgments of what is good or bad for society ... Other assessments are purely descriptive. Some assessments seek rigor by using various formal methodologies such as the Delphi technique or cross-impact analysis; others use the intuitive insights of historians or ethnologists. What almost all who call themselves technology assessors share is a belief that if rational methods are used to anticipate consequences of different technical alternatives, better social choices can be made.
In addition. Pool argues that for a TA, one needs first to bring to bear a technical- economic analysis of the investment and marketing possibilities of each technical alternative. "A large proportion of current technology assessments make little use of market analysis. Many of them compile expert evaluations of (1) available and likely 60 technologies; (2) the potential uses of them; (3) their side effects ..." (Pool, 1983) but not their markets.
As for the unfeasibility of forecasting technology impacted futures, Pool
(1983) argues that "almost every important invention" has been "anticipated in fantasy long before it was proven by practice or science. Mythology is full of men flying, walking on the moon, transmuting materials one to another, or communicating without being present." However, correct anticipation in reality is very difficult to guarantee, especially when we relate technological forecasting to future social change. Implicit in this is the fact that TA is a continuous process, similar to the design process. Braun
(1987) points out "that assessments have to be reviewed and supplemented from time to time, as circumstances alter and when new commercial or technical activities in an already assessed area are impending." Though the consequences of a new technology are usually difficult to identify in early stages of diffusion, China should at least identify some consequences of the diffusion for mobile telephony that have emerged in the early adopting countries, leam from the adoption experiences/lessons of its neighbor areas with similar cultural traditions, and consider them in its decision making process for the support, management, or regulation of wireless communication applications.
While TA is an integral phase of any technological developments in the US, "it has received only marginal attention in the developing countries" (Madu, 1992). In my opinion, the factors that impede TAs in China could include: the government's particular stress on technological benefits and economic gains, pressures from market myopia, corruption and bribery of officials, illiteracy and ignorance of the masses, the public fear of state power and prosecution, lack of adequate, timely information, and 61
lack of expertise and experience needed to effectively conduct TA. However, the
current social environment in China should begin to present a better prospect for
applications of TA methodology. With the increase of policy-making democratization,
international exchange, and expert consultation in today’s China, TA can become an
integral phase for appropriate diffusion of innovations. This study applied TA as a specific trial for any Chinese interest groups to consider the implications of diffusing
mobile telephony in China.
According to Porter el al. (1982), a TA should begin with a definition of the
problem, describe the state of art of the relevant technology and forecast the changes
that the technology is likely to undergo. The technical dimension of TA requires that
potential technological risks, opportunities, and challenges be identified and analyzed.
It also is necessary to compare the new technology with existing technological capacity
and identify the pros and cons of any possible changes. Then the TA should describe
the relevant features of the society, and forecast how these social factors limit and
shape the context in which the technology must function in the future. Clearly, social
forecasting is far more complex and uncertain than technology forecasting.
"However, its importance demands the attempt be made with common sense, insight,
and intuition, because the technological environment is only one small portion of the
larger societal context " (Porter et al., 1982). Furthermore, the TA must identify areas
of the social environment that are likely to be impacted by the technology, and analyze
the character and extent of significant impacts. These impacts can be categorized and
analyzed in such areas as environment, economy, society, psychology, technology,
the legal system, social institutions, and politics. Finally TA identifies policy options open to decision makers (Porter et al., 1982). Thus, this step-by-step, technology- 62
society-implication analysis format provided a systematic structure to analyze my
findings since the crux of practical TA is the melding of social and technological
analyses. Table 3, according to Porter et al (1980) and Wad & Radnor (1984), shows each stages and techniques of a common TA:
Table 3
Stages and Techniques of A Technology Assessment
STAGESTECHNIQUES
Problem definition Brainstorming; Individual scanning.
Technology description Panels; Data acquisition.
Technology forecast Interviews with experts; Literature searches.
Social description Context specific indicators of development.
Social forecast Scenario construction.
Impact identification Checklist; Holistic strategies
Impact analysis Expert opinion; Cross-impact analysis Impact evaluation Decision analysis; Interviews with stakeholders.
Policy analysis Formulation of options; Summary comparison.
Note. From Technology assessment: Review and implications for developing countries by Wad, A. and Radnor, M„ 1984, Paris: UNESCO. Adapted.
In short, I used personal interviews and document analysis methods to collect qualitative data, used tables to present basic findings, and used the TA methodology to organize multi-aspect analyses. CHAPTER III FINDINGS
This Chapter presents, theme by theme, the findings about the development of mobile communications (MC) in China from my personal interviews with the Chinese informants and from my document analysis in Beijing. These qualitative information are categorized and reported to identify the time-ordered sequence of a set of events in the diffusion process of China's mobile communications. Each of the theme sections summarizes the data collected first by briefly stating the basic findings and then report the data in sufficient detail to justify the statement.
Mobile Communications Systems Mainly Diffused in China At first, reporting what types of mobile communications system diffused in
China is necessary to further report other relevant findings. China’s mobile communications in this dissertation focuses on land mobile communications technologies. According to my sources, four types of mobile communications systems are mainly diffusing in China: analog cellular phones; pagers; the second generation cordless phone (CT-2); and trunk mobile communications system (TMCS).
Cellular phones and pagers are generally recognized as mobile communications by the
Chinese and have diffused very rapidly in the past 10 years. CT-2 and TMCS have been the other two wireless technologies mentioned most.
63 64
Table 4
Types of Main Mobile Communications Systems (M O in China
Basic responses Sources
MPT: Cellular phones; Pagers; CT-2; and TMCS
Non-MPT: Cellular phones; Pagers; CT-2; TMCS; Two-way radio; Small-capacity auto-dialing radio phones; No-center site-selection communications; Single channel dispatching communications; Private wireless systems for police, railway, and pit bottoms
Expert: Cellular phones; Pagers; CT-2; and TMCS Public: Cellular phones; Pagers; CT-2
Multinational: Cellular phones; Pagers; CT-2; TMCS; and GSM (trials)
Interpretations: The first four types of mobile communications systems are mainly diffused in China. Of them, trunk mobile communications system are not known by the public because it is not designed for PSTN. There are more special-purpose wireless systems applied in various now-MPT ministries' private networks.
Cellular phone (or what is often called mobile phone): This is a telephone service mainly for mobile users provided by low-power, high-frequency radio transmitters arranged in a honeycomb pattern to permit re-use of a frequency many times in a given area. In China it comes in a variety of analog standards such as UK’s
9(X) MHz TACS (Total Access Communications Standard), North-America's 8(X)
MHz AMPS (Advanced Mobile Phone System), and Nordic 450 MHz NMT; And digital standards such as pan-European 900 MHz GSM (Global Standard for Mobile), and US's 800 MHz D-AMPS. UK’s 900 MHz TACS has been established as the analog cellular standard for China’s national PSTN by the NRRC and MPT in 1985. 65
As an exception, five of the poorer Western provinces had been allowed to accept AT&T’s gift of second-hand AMPS systems and the relevant 800 MHz frequency was leased from the military in 1992. There are a couple of explanations advanced for this unusual standard permission: an MPTs policy/regulation official said it was based on political consideration for using AT&T’s lobby power to the US government (Li, 1994)—to loosen high-tech export control on China and to renew
China's most-favored-nation (MFN) trade status; others interviewed about this policy exception said it was an expedient measure to allow the poorer provinces to develop a mobile phone system quickly (Lai and Li, 1994). Mr. Dong Aiguo, the local manager of AT&T China interviewed, refused comment, saying that it was too sensitive for
AT&T’s future strategy to discuss.
In China, public cellular phone networks are regarded as a basic service rather than a value-added service and therefore provided by a monopoly, the MPT and its provincial telecommunications bureaus (PTBs) and municipal telecommunications bureaus (MTBs). The MPT learned that cellular phones were diffused into commercial service in 1984. Then it started considering the possibility of diffusing analog cellular technology in 1985. Cellular phones with the analog standard of 900 MHz TACS was first introduced by Motorola in Guangzhou (Canton), the capital city of Guangdong
Province, in 1987. The MPT in the late 1980s predicted that the number of cellular mobile phones in use in China by 1995 would be about 30,000 (Li, 1994). However, there were already 784,(XX) users in MPT's public mobile communications network by
March, 1994. The average growth rate per year from 1988 to 1993 was 290% (See
Table 5). But a shortage of cellular handset and system equipment is still the principal problem. 66
Table 5 Development of Cellular Phones in China1 Public Network
...... -...... 1987- — 1988—— 1989—— 1990— -1991 — -1 9 9 2 — -1993— -1994
# of users (thousand) 0.7 3.2 9.8 18.3 47.5 177 648 1.200 Growth rate annually (%) 457 306 187 260 372 366 185
Rate of penetration (%) 0.0(XX)7 0.0003 0.0008 0.0016 0.0041 0.017 0.054 QJ.
Note, a. The data from 1987 to 1992 sourced from China’s Telecommunications Statistics, not including cellular users in private networks.
b. The user number underlined is a most current estimated one to the end of 1994, according to the Agence France Presse, July 10, 1994. The growth rate and penetration rate at the end of 1994 are calculated in light of the estimated user number of 1.2 million.
With continuing import of wireless technologies and communication products and increasing domestic production by means of component assembling, major municipalities and some ministries are evaluating the potential for the two-way communication cellular radio systems for their districts and operating areas. The mobile phone users in Guangdong, Beijing (see Figure 2), and Shanghai accounted for 60% of the total Chinese users in 1992 (Chen, 1993). China began its own R&D on analog cellular system relatively late in 1989. The MPT approved the first generation of 900 MHz analog cellular handset made by China in May, 1992. So far, the main form of analog cellular technology transfer is the introduction of production 67
lines, starting by component assembling, from Motorola and Ericsson in terms of joint
ventures. A domestic digital cellular system is predicted to be trial-manufactured
during the last five years of this century when China decides between the pan-
European GSM and the North America CDMA or TDMA for its technical standard.
Subscriber thousands)
32 30 28 26 24 22 20 18 16 14 12 10 8 6 4 2
1988 89 90 91 92 93
Figure 2. User Increasing Rate of Beijing Mobile Network by Year.
Radio paging: This is a service that allows calling from any phone through a base station to a radio receiver, which beeps or vibrates to let the user know that a 68
message has been transmitted. As an obsessively popular technology in Hong Kong,
paging was the first public-adopted mobile communications service in China. The first
paging network was established in 1984 in Shanghai, China's largest industry and
commerce center. The prediction of MPT for the number of pagers in use in China by
1995 was four million (Chen, 1993). However, there already were nearly eight million pager users by March, 1994, including three million users of the non-MPT
private paging networks. So in 1993, China ranked as the third largest paging
network in the world, after the US. and Japan (Wu, 1994). While the sale of pagers seems to show signs of saturation in Beijing, the increasing impetus is strong in many other Chinese cities (Yang & Sun, 1994).
Table 6 Development of Pagers in China s Public Network
1987- — 1988— — 1989— -1 9 9 0 —-1991 — -1992— 1993 - -1994
# of users (thousand) 30.9 97.2 237 437 873.8 2,220 5,000 lO.O(X) Growth rate annually (%) 315 244 184 2(X) 254 225 m Rate of Penetration (%) 0.0028 0.0088 0.021 0.038 0.075 0.088 0.42 0.84
Note: a. The data from 1987 to 1992 sourced from China's Telecommunications Statistics, not including the pager users in private networks.
b. The user number underlined is an estimated one to the end of 1994, according to the Agence France Presse, July 10, 1994. The growth rate and penetration rate at the end of 1994 are calculated in light of the estimated pager user number of 10 million. 69
Smuggling and import were and still are two diffusion paths to enable more
Chinese users access the mobile devices. Because of lack of the key technology ability
to make microchips in pagers, most early pagers were smuggled from Hong Kong or
imported from Japan’s Matsushita. So far, most of paging system equipment such as
base station, antenna, and operation board have been able to be made in China, but the
paging terminals are still imported from Motorola or bought from its wholly-own
venture in Tianjin, China, The two popular types of pagers in China are the cheaper
numerical code displaying with code books and the updated Chinese characters
displaying which is more popular except its price, which may be a request for a calling
back, but also may be a message in its own right, both with beeper or vibration
function.
CT-2: The second generation cordless telephone is a less costly form of wireless than traditional cellular phones. The British innovation CT-2 can make calls but cannot receive them, unless modified as CT-2 Plus from Canadian Northern Telecom or CT-3 from Swedish Ericsson. The MPT sources saw a promising market for CT-2 because the units can be to bundled with pagers to allow users wider access to the PSTN than is possible using the insufficient residential phone lines. As yet,
CT-2 is still in a trial stage in dozens of Chinese cities. The trial is being run by several provincial telecommunications bureaus (PTBs) or the municipal telecommunications bureaus (MTBs), the provincial and municipal level organizations of the MPT.
CT-2 was first installed in the middle of 1992 by Motorola in Shenzhen of
Guangdong Province, which is China’s first and most successful Special Economic
Zone (SEZ) bordering on Hong Kong. A payback period of about seven months was sufficient to cover initial costs in Shenzhen which is always rapidly adopting and 70 adapting to Hong Kong ways in many aspects. With hostility on CT-2 by some senior engineers I interviewed in China, who regards it as a diversion of PSTN circuits for a technology that may not last, more caution is in discussing the prospects for this technology (Li & Chen, 1994). The interviews and documents show the Chinese experts are divided on CT-2: MPT personnel believed it to be a good interim solution to the shortage of PSTN and vandalism of public phone booths, the non-MPT ministry sources believed CT-2 is an intermediate technological innovation that simply diverts needed circuits into massive "telepoini" coverage. According to Motorola source, however, six provinces were committed to adopt CT-2 (Huo, 1994). Another concern about CT-2 diffusion in China is that 2 MHz bandwidth of the spectrum used for the adopted European CT-2 standard has been allocated to the early adopted American
TMCS standard.
Trunk mobile communications system (TMCS): This is a combination of advanced communication technology and micro processing technology with a strong dispatching function for a frequency-sharing for multi-users and multi-signal- channels. TMCS is mainly for private network use (but also can be connected with local PSTN) so TMCS diffusion is not in the hands of the MPT but in the hands of non-MPT ministries. While it is not the focus of this research, many Chinese professionals in the 1993 Symposium on development of China’s mobile communications said that TMCS was an innovation that needed to be energetically diffused since it had a huge market potential. The key issues in TMCS diffusion are that China's standard of the 8(X) MHz TMCS system introduced by American
Motorola is different from the Chinese national analog cellular standard adopted from
UK, resulting in difficulty for the interconnection between TMCS and mobile PSTN. 71
Kcv Time Points in the Diffusion of MC
Table 7 present the basic time-order sequence of a set of technological events in
the diffusion of mobile communications in China.
Table 7
Timelines of the Diffusion of MC Technologies in China
Time-order sequence Technological events
1950s to 1960s: Military applications
1974: Opened four civil radio spectrums; Approved standard of equipment; Mobile phone frequency in 150 MHz 1976: Various non-MPT ministries/agencies began to establish private networks
1980: Approved new standard of equipment Mobile phone in 450 MHz for private networks
1983: Began to import MC products
1984: Pagers were first introduced in Shanghai
1985-1986 900MHz allocated to public cellular network 800MHz allocated to private cellular network
1987: Analog cellular first introduced in Guangdong Adopted the 900MHz TACS standard from UK
1990: TMCS was first introduced in Beijing and Shanghai by Motorola
1992: CT-2 system first installed in Shenzhen 800MHz AMPS standard introduced by AT&T
1993: GSM trials started in a few cities
1994: Digital AMPS introduced by Ericsson 72
China's wireless communication technology started from military R&D in low
frequencies, developing through three period of electron tube, transistor, and
integrated circuit (Li, 1994). Land mobile radio was first diffused into the military and the public security organs like the police. Some equipment was sourced from abroad for them because of superior encryption capabilities. But civil mobile radio communications were used in very limited industrial applications. This military-first innovation diffusion pattern is not uncommon in the world. The former USSR and
Mao's China always have put national security and unity as top priorities by intensifying military power by any technological means or at any cost to prepare for possible wars with the West, or with each other around 1970, and to maintain domestic stability. The Chinese information sources did not mention the historic reason because they assumed anyone could understand it as long as he/she knew the history of the Cold War period. This technology diffusion order in China, starting from military use, was not special to mobile communications innovations.
With the unfreezing of Sino-American relations in 1972, and domestic need for economic development, four civil radio spectrum slices were opened and equipment standards for civil use were set. By 1985, 100,000 radio handsets, transportable terminals, vehicle units, and fixed base stations below 150 MHz were produced by the affiliated manufacturers of the MEI and MPT, including mobile phones in the 30 MHz spectrum. Most of the communication equipment made in
China was used for the private networks. The new technical standards and spectrum allocation issued for the Ministries in 1980 raised the working frequency up to 470
MHz for mobile communications equipment. The order of using frequencies in China matched the technological trend from low to high frequencies in wireless 73
communications evolution, and also might represent the Chinese technical influence at
that time from technological reference to the Nordic countries, which had earlier
interests in diffusion of mobile communications.
1949-1974: China's mobile communications started from tactical communication of the Chinese military. There was very limited wireless communications technology transfer from the military to civil applications in the MPT and Transportation Ministries during the 1950s and 1960s. The National Radio
Regulatory Committee (NRRC) did not open any public radio frequency channels to society because the Chinese government saw communications and especially telecommunications as a national security issue relating to information control and access. For 25 years, the policy that "(radio) stations should be as few as possible and regulations must be as restrictive as possible" was implemented in China. Therefore, until early 1970s, there were only about 10,000 various radio devices for civil communication in China (Zhang, 1991). However, no sources in my interviews and document readings confirm whether those radio devices also included those in China’s broadcasting network using lower radio frequencies.
A general idea of the development of China’s radio communications since the
1970s could be presented from the following table and description over time:
1974-1980: The year 1974 witnessed a turning point for the mobile communications development. The reason for this change was to improve communication in emergencies such as natural disasters: flooding and earthquake (Lai, 1994). During that year, the 1974 Standard Series of Radio Telephone Equipment was approved by the State and four civil radio frequency channels were opened to private use for a few ministries. The manufacturers affiliated to MPT and MEI started 74 to research and develop the "74 Series" products with signal channels slotted in 100
KHz and 50 KHz bandwidth. About 100,000 mobile stations (handset, portable equipment, and car phone) working under 150 MHz were manufactured and used in more than 100 private networks by 1980. Beginning in 1976, ministries such as
Transport (roads, rivers, canals), Energy Industry (oil fields, mines, electricity power, water conservancy), Railways, and Aerospace were authorized to develop networks of their own. One reason these non-MPT ministries established their private networks after the 1970s, is attributed to the MPT's poor service and facilities (Tan, 1994).
Table 8 Development of China’s Radio Facilities Since the 1970s
Time Rough no. of radio facilities Annual increase rate
Early 1970s 10,000
1980 100,000 25.9%
1984 180,000 15.8%
1988 500,000 29.1%
1990 920,000 35.6%
1995(estimated) (around) 2 million 43.5%
Note. "Radio services development and regulation in China” by Zhang Duanquan, 1991. China Telecommunications Construction. 3 (1). p. 5. Adapted.
1980-1990: In 1980, after some technical improvements, the 1980 Standard
Series was approved. The R&D was started for the "80 Series" mobile products 75
working under 470 MHz with the signal channels allocated in 25 KHz blocks. This
equipment functioned better than the "74 Series" and 25,000 were produced annually.
In 1983, China imported more than 30 kinds of mobile technologies and products
from 15 foreign manufacturers because these imports were smaller, lighter, and more
reliable than the domestic "80 Series" mobile equipment. In 1984, the total number of
mobile base stations reached 180,000, 90% of which were working in small private
networks or were portable telephones. Of the early mobile phone services in China, fishing boats, railway transport, oil production sites and forestry entities were the
major users, and highway transport, telecommunications entities were the second main
users (Zhang, 1991). These private networks consisted of both fixed-wire and radio based facilities and became a substantial part, nearly 40%, of China's
telecommunication scene (Ure, 1994). During this period, the major technological innovations of mobile communications were diffused into China from the outside world:
In 1984, paging networks with hundreds of subscribers were established in the cities of Guangzhou and Shanghai. There were 437,000 subscribers in 130 cities by
1990. Many city networks were connected for provincial long-distance paging networks in the rich provinces such as Guangdong and Zhejiang. Chinese paging first appeared in Beijing in 1992. China now can manufacture the base station for paging, but pager production still depends on assembling imported components.
In 1987, analog cellular phone emerged with the establishment of 900 MHz
TACS networks in Guangzhou and two neighbor cities, then spread into other cities like Beijing and Shanghai. The 900 MHz band has been specifically allocated to the cellular mobile phone systems working within the public telecommunication network. 76
The TACS standard is adopted from Britain. The wireless equipment diffused in
China are mosdy made by Motorola and Ericsson.
In 1990, Beijing and Shanghai opened the imported 800MHz TMCS by
Motorola. This type of mobile system is seen as very appropriate for different kinds of users in big and medium-sized cities, and to jointly establish specialized services networks with this system is an effective measure to expand the public
communications network capacity.
1990-1994: Although the 1990 Standard Series of Mobile Communications
Equipment is yet to be approved by the State because of China's technological
backwardness and the consideration of leapfrogging to the more advanced
technologies, some new types of mobile communications like CT-2 and GSM systems
have been introduced on a trial basis into a few Chinese cities.
In 1992, the CT-2 system was first installed in Shenzhen and then appeared in
several cities as a technology and market trial. Although CT-2 has been successful in
Hong Kong and Singapore because of its low costs (only 1/3 of analog cellular phone price), the Chinese technical experts interviewed (Li & Chen, 1994) close to the MEI think that CT-2 service is a failed product in other telecommunications markets, even in its originator—Britain, and that it should be developed cautiously. They concluded that the CT-2 trial in Shenzhen was not successful so CT-2 should only be opened in the few Chinese cities that have more local trunk lines, high rate of wired phone penetration, and more pager users (Li & Chen, 1994). The MPT persons interviewed disagreed and saw the rapid adoption of CT-2 technology. They mentioned the success of CT-2 in both Hong Kong and Singapore, and the fact that the Shenzhen's
CT-2 network repaid its owners' investment within seven months (Li, 1994). 77
In 1993, the pan-European GSM system introduced by Ericsson was first
tested in Jiaxing City of Zhejiang Province. Then Guangdong and Shanghai also were
added to the GSM trials. The digital cellular phone system is one choice of China's
standard selections for digital technology transfer. During the period of 1993-1994,
China’s MPT had not yet made a decision to choose GSM or America's CDMA
standard. The local managers of foreign multinationals 1 interviewed did not think that
China would jump into the digital revolution for at least five years because China is still in a boom of analog cellular phone which continues to make money, and it is too
early to know which digital cellular standard will be accepted by more countries in the
world. However, in early July of 1994, Ericsson has delivered and installed its first
AMPS system for commercial service in China with a capacity of 3,000 to 12,000
subscribers (Business Wire, July 11, 1994)). This North American AMPS standard
now includes a digital standard, D-AMPS. In middle 1993, another digital AMPS-- E-
TDMA (Extended Time Division Multiple Access)—system from American Hughes
was planned to introduce into Chengdu, the capital city of Sichuan Province, by a
Hong Kong-based paging company. The Army agreed to lend certain spectrum and
local authorities approved this project. This introduction was stopped by MPT, not
only because it annoyed the standardization consideration of the MPT, but more
importantly, it violated MPT’s reiterated policy of forbidding foreign participation,
which includes Hong Kong business, in China's network management in any form (Li, 1994).
Institutions Involved in the Diffusion
There are about a dozen of state institutions involved in the diffusion of mobile communications in China. Of them, the most important operators are the military. 78
MPT, the ministries of railway, public security (police), and the energy industry.
NRRC is in charge of radio management and frequency allocation. MEI, united with
several non-MPT partners, is challenging MPTs monopoly in China's
telecommunications operation and trying to compete with foreign manufacturers led by
Motorola and Ericsson in production of mobile communications equipment.
Table 9
Main institutions involved in China's MC Diffusion
Basic responses S o u rc e s
MPT: MPT, Military, MEI, NRRC, Non-MPT/MEI Ministries, and Multinationals
Non-MPT: MPT, Military, MEI, NRRC, Non-MPT/MEI Ministries, and Multinationals
Expert: MPT, Military, MEI, NRRC, Non-MPT/MEI Ministries, Multinationals, and Hong Kong paging companies
Public: MPT, Military, Police, Multinationals
Multinational: MPT, Military, MEI, NRRC, Non-MPT/MEI Ministries, and Multinationals
Interpretations: All sources with the exception of "users" provided the similar list of "stakeholders." The public did not realize the MEI as a main player in manufacturing because almost all terminal products they used or knew were foreign brands. They also did not realize the importance of the NRRC in frequency allocation and management because they usually lacked the concept of frequency as a natural resources. The two-way radio used by police was the private use most often seen by the public. 79
...'T i .p .t -1- — r z : > __ r Telecom PTBs | D.G.T. PTIC if _ _ \ _ 7 / 'P o l i c y Regulation/' ervice provision Manufacturing^,'
N r Foreign , .Ministries,' •.Authority; Firms /
Figure 3. The old structure of China's telecommunications sector 80
M.P.T.
P & R RTSs D.G.T. PTIC Dept.
Policiy Regulation
Service Manuf acturing Provision
Local Foreign Authorities Firms
Figure 4 The new structure of China's telecommunications sector 81
The MPT is a traditional monopoly which combines three functions under its
umbrella: (1) policy/regulation making; (2) service provision; and (3) equipment
manufacturing (See Figure 3 & 4). It is responsible for development and management of national public communications in China, as both the national regulator and national
PSTN operator. The MPT's PTBs and MTBs perform as local regulators and service providers under the supervision of the MPT from Beijing. The MPT has four research
universities in China as its own human resources so that most of China’s
telecommunications officials and the local managers of telecommunications
multinationals are the graduates of the universities. It also has its own research center-
-China Academy of Posts and Telecommunications—including an intelligence institute and a "soft science" team—the Research Center of Economic & Technological
Development —in Beijing. The MPTs China National Postal and Telecommunications
Industry Corporation (PTIC) manages 29 equipment manufacturers, which were
directly affiliated with the MPT before 1980. I was told by the Chinese information
sources that an institutional change was underway to remove the MPT’s operator
status {Sun, 1994). This reorganization was happening when I left China at the end of
March, 1994, As a result, the MPT remains the national regulator of China's PSTN
with the authority to inspect the credentials of would-be operators as well as issue licenses to operate. Its long-time service/regulatory arm—the Directorate-General of
Telecommunications (DGT) becomes a state corporate enterprise that can set up subsidiary companies to run China's PSTN services on a self-financing basis.
The Commission of Defense Science & Industry and the communication ann of the Headquarters of the General Staff of China's military are in charge of the deployment of military communication systems. Traditionally, the Army has a strong 82
political influence on the Chinese leaders to meet its needs. The military also has a
tradition of controlling the majority of radio frequencies and constructing its private
networks to conduct its communication activities. It has its own manufacturing
facilities and intelligence network to undertake the R&D of mobile communications
with the MEI. Recently the Army is very much involved in booming civil paging, cellular phone, and satellite businesses to make money from its own corporate enterprises operating its wireless networks.
As mentioned above, radio communication services in China are divided into two categories, the civil and the military. Although the utilization and the regulation of the radio frequency-the most valuable resource for mobile communications'-required by each category are different, the National Radio Regulatory Committee (NRRC) which consists of government and military technocrats, has been providing the national radio frequency allocation guidelines for all the civil and military radio regulatory work. The NRRC allocated the 900 MHz band specifically to the cellular phone systems working within the public telecommunications network, and the 800
MHz frequency was reserved for private networks. The NRRC, independent of the
MPT, has its provincial bureaus, and the bureaus themselves are becoming partners with the provincial telecommunications bureaus and other interest groups in paging and cellular networks.
The Ministry of Electronics Industry (MEI) has been the main state- manufacturer of telecommunications equipment and becomes the main coordinator of the non-MPT ministry coalition challenging the MPT’s monopoly on China's PSTN.
Compared with the MPT, the MEI has more R&D institutes and 106 affiliated manufacturers, which also can produce communications equipment. The MEI had set 83
up its own Ji Tong Corp. (Ji Tong means "Auspicious Telecommunications" in
Chinese) in June, 1993 to operate wireless systems after a MPT approval, Ji Tong's
goals include setting up joint ventures with overseas companies in the building of local
paging, cellular, CT-2 and TMCS, and the running of other value-added services in
China. In December, 1993, the MEI jointly organized, under support of Chinese government, a company China United Communications Corp. (UNICOM, which is called "Lian Tong" in Chinese) to enter the long-distance voice and fax. business with the Ministries of Railway and Energy Industry that have had their own private communications systems with excess capacity for a long time. These non-MPT ministries, plus China's Central Bank and the Army, have begun to challenge the
MPT's monopoly by jointly creating a rival national phone network run by UNICOM which combine MEI's manufacturing and technology expertise with these mature nationwide private networks of the non-MPT ministries. Two leading multinationals in the world's mobile communications, American
Motorola and Swedish Ericsson, are the major suppliers of wireless technology in
China. Motorola has a good reputation for its mobile terminal products among the
Chinese pager users and has a strong relationship with the MPT. Motorola has been the first foreign multinational in terms of technology transfer since 1986 to introduce cellular phone, CT-2, and TMCS systems into China and has the greatest provincial market presence with over 140 cellular systems in 21 provinces and all three municipalities directly under the Central Government (Zhang, 1994). In 1993,
Motorola's turnover in China was $1.4 billion, 80% came from finished imports. In
1994 its China turnover is expected to hit $2.5 billion--as much as 15% of its global income (Business China, March 21, 1994). 84
Ericsson is well-regarded for its system products among the Chinese technocrats, and also has a good relationship with the MPT and has the second largest provincial market presence in 16 provinces (Zhang, 1994). It first introduced GSM and D-AMPS digital cellular systems into China and is now installing a national auto roaming network by interconnecting of all its cellular mobile infrastructures in China
(South China Morning Post, May 24, 1994). Ericsson has doubled its sales in the past two years and made China among its top five country market, accounting for 7% of its annual sales worldwide (Carnegy, 1994).
The German Siemens, Finnish Nokia, American AT&T, and Japanese NEC and Oki are minor suppliers but trying to expand their market share in China. Through the forms of product exhibits, staff training, and business seminar, all these multinationals have tried to diffuse their wireless innovations to the Chinese communication professionals and average users.
Categories of Chinese Adopters
Among the 784,000 Chinese cellular phone users, most of them use cellular phones for business purposes. With the unreasonably high cost for Chinese cellular users, the "new rich" is the social group with the most "cellular craze" desire. They also have the most negative social image because of their using manner. Having money and business needs enable this social minority to become early adopters of cellular phones. Pagers used to be carried by business people, but with the reduction of device prices, they have been entering more common Chinese’ hands. 85
Table 10
Categories of Chinese Adopters
Basic responses Sources
MPT: Company staff, Private business people, the new rich, and Government officials
Non-MPT: Company staff, Private business people, the new rich, and Government officials
Expert: Company staff, Private business people, the new rich, and Government officials
Public: Company staff, Private business people, the new rich, Government officials, and smugglers & gangsters
Multinational: Company staff, Private business people, the new rich, and Government officials
Interpretations: All sources provided the same list of users except the public source mentioned smugglers and gangsters as a group of users because the public knew this from the illegal deals or media exposure in daily life and spoke out. Cellular phones are the favor of company staff and the new rich.
1. Managers and sales people of state enterprises and various "semi-state" companies—this group is estimated to account for more than 35% of the mobile phone users (Dong, 1994). These managers have basically the same reasons for adoption as the government officials do. But compared with the government officials, these state business people have more needs for business communication and more money that can be allocated by themselves. Because doing business is the social fashion in today's China, they use the mobile communication devices to show off a business-like image to others. 86
2. Private business persons—this group is estimated to account for 30% of the
mobile phone users (Dong, 1994). These users are the earliest adopters in China and
real "subscribers" in the Western sense. They have a strong need for mobile business
communication to make money, and have more social contacts with other earlier
adopters such as Hong Kong business people. Also, they can afford the expensive cellular phone handset (average $3,5(X) in 1994) and its high service charge (average
$1,500 per year). A relatively large portion of them have low social status and limited
educational background. So, a cellular phone for this group becomes a symbol of
wealth to show their success in business. Some of them even bought extra devices for
their family members though they are a clear extravagance.
3. The new rich from speculation, entertainment, sports, etc.--this group is
estimated to account for nearly 20% of the Chinese mobile communication users
(Dong, 1994). Some of them are seen by the public as "upstarts" in the past two years. These new rich prefer the Hong Kong business/consumer culture and find that cellular phones are symbols of wealth for their social needs. They are absolutely able to pay the charges and are the group that very much enjoys showing off their use of cellular phones in public places. The conspicuous consumers have a very negative image in the public's eye. 4. Government officials—though this group is estimated to account for only about 10% of the total 784,000 Chinese cellular phone users in March, 1994 (Chen,
1993 & Dong, 1994), the influence of this group's adoption to the mobile communications diffusion is noticeable (Zhang, 1994). Most of these early adopters are the directors of various government departments who have section budget power.
None of these officials pay their cellular phones or pagers and service charge themselves, instead their work units budget pays. In terms of work needs, much of
the equipment is only partially justifiable. The mobile devices are public property, to
be returned back when the user leaves his/her work unit, but can be used for private
communication, depending on individual ethics. Therefore, the "free-lunch"
advantage and ’mixing up" of work use and private use are appealing. Diffusion is
speeded by the early adopters' colleagues or subordinates attempt to obtain the mobile
devices through various excuses of work needs, as long as the work units can justify
more work communications and have an adequate budget for this need.
5. The gangsters who do smuggling and other illegal activities—this is the
smallest user group but also the earliest mobile communications adopters, because
smuggling originated from the black markets of Hong Kong, Macao, and Taiwan where mobile communications were diffused earlier than in China. In fact, the
informal name of the cellular phone--"Dageda"—is the Cantonese form of address of
the gangsters to their supreme chief like “Godfather” in Mafia. “Dageda” is such a
popular term in both mass media and the public that it was selected as one of the top
five popular social words, such as "jump into the sea" which means "join in doing
business," in China in 1993. The formal name of the cellular phone in Chinese—
"Fengwodianhua"—is only heard among the telecommunication professionals.
Driving Forces_lii lhe_J?iffiision China's rapid economic growth and its shortage of wired communication capacity create the strong market demand for mobile communications services. Then domestic demand provides opportunities for profit-chasing through re-selling and smuggling mobile communications equipment or operating mobile communications systems. The state also wants to use this chance to keep pace with global MC trend. 88
Table 11 Driving Forces in China's MC Diffusion
Basic responses Sources
MPT: Market demand. Catch-up global trend, and Circle effect
Non-MPT: Shortage of wired phones and Market demand
Expert: Market demand and Profit chasing
Public: Market demand and Shortage of wired phones
Multinational: Market demand and Circle effect Interpretations: China s economic growth and open-door policy create market demand for communications which has been constrained by the long-time shortage of wired phones. So the easiest way for the Chinese is not to lay wire but to turn to wireless systems. Although the experts indicated that profit chasing is a driving force, others did not mention it. Because MPT and multinationals have made a good profit from wireless business, and other ministries also wanted to enter the profitable market, they may not want to admit their intentions at this time.
Most interviewees and documents seldom mention the causes of the early adoption of mobile communications in China. They only say that mobile communications were innovated by the developed countries, then introduced into
China like other foreign ideas and objects. However, the Chinese sources indicated the following reasons for the explosive diffusion of mobile communication since 1992:
1. Market demand aroused by a new wave of economic growth and the "open- door" pdiicy—the Chinese paramount leader Deng Xiaoping made an inspection tour in southern China in early 1992 and expressed his new call for speeding up the economic development and further opening to the outside world to extricate China from the negative influences after the Beijing Incident of 1989. His political action re-generated 89 many Chinese's incentives to get rich. The Chinese economy reached the rate of 13% growth in both 1992 and 1993. As a result, there is now more power in local governments, more freedom in business activities, and more money in the new rich. The rapid economic development resulted in the phenomenal growth of the
Chinese demand for telecommunications. With the high economic growth rate and more open policy, business activities dramatically increased so that more and more
Chinese see advanced communications as a way to leapfrog stages of economic development and to foster both internal and foreign investment. By installing optical fiber, digital switches, and the wireless communication systems, urban centers and industrial zones in China are stepping into the Information Age. Because of its
"anytime, anywhere" convenience in terms of mobility and fast access to information exchange, mobile communications, mainly cellular phone and pager, have become the rage among business people who can remain in communication despite the logjams of location. China’s mobile telecommunications market demand makes Ericsson,
Motorola, and other foreign companies very eager to market their products there. The result: there are nearly 800,000 cellular users and eight million pager users in early 1994.
2. Shortage of wire telecommunications and transportation capability— although the MPT installed 15 million phone lines in 1992 and 1993, more than two million Chinese households are still on the waiting list for wired home phones after they have paid a $600 installation fee (A video clip from China Central TV, March 5,
1994). The waiting time is usually long from six months to two years unless a waiting household could ask the right personal connection often with some kind of bribery to quicken its installation. Further, business people often rank poor phone links as a 90
chief headache in conducting their business. Also, multinationals want to set up where
the infrastructure is the best it can be, but it may take a long time to unclog China’s bottlenecks in wired telecommunications and transportation. As a result, cellular
phone and pager are the fastest way to get a communication system up. It is faster to
build radio towers and base stations and sell handsets than to string lines across an
area, and businesses eager for reliable service and the new rich eager to show-off are
willing to pay the significantly higher charges for the cellular phones and for the wireless calls. According to my personal observations on Beijing’s streets and the social chat with several cellular users, vandalism to the public phones on streets was
another reason for adopting cellular phones. One could see a lot of public phone kiosks with human attendants in Beijing because most of the unattended public phone booths were vandalized.
3. Profit-chasing--Mobile communications have been a source of revenue well- profited from strong market demands. China's present market economy is an immature, irregular one, full of unfair competition and "short-sighted” behaviors which expose extreme greed and selfishness. Selling a pager at $150-400 and charging an annual fee of $50, a paging operator can get its initial capital back in a few months. The attractive profit chasing has led about 100 paging networks to appear in Beijing, and even many non-electronic stores are selling pagers. The 900 MHz TACS cellular phone for China's PSTN is still monopolized by the MPT, but the PTBs also profit from the local monopoly: the price of a cellular phone handset and registration stand at around $4(XX), with local variations. The annual service charge of mobile service is about $2000. Like call charges within provinces, the mobile tariffs are set by the PTBs so they can get their initial capital back in less one year. An extreme 91
example happened in Shanghai in 1992, with the price of a cellular phone in Shanghai
black market reaching $8,000. Certainly, the profiteering comes from the eager market demand. However, the high cost and MPT’s high-tariff policy also slow down the rate of diffusion of cellular phones to the general public (Li, 1994). 4. The national pride of "catch-up"-*with its 5,000-year-long civilization and latest 300-year-long shame for economic/technological backwardness, the Chinese always have the intention of "catch-up-with-the-developed-countries-in-science-and- technology.” One example of this is that Beijing's largest and most successful mobile communication company has named itself "CATCH.” Wu Jichuan, the minister of MPT, claimed on June 21, 1994 that by 2(MX) China will have all telecommunications technologies and services in the world (People's Daily, June 22, 1994). Although
China cannot compete with the well-known multinationals in R&D and manufacturing of mobile communications, it does closely watch the updated technology innovation, market trend, and world policy change through its intelligence institutions. This gathered information is first diffused to the Chinese communication professionals.
5. The demand-circle effect—that is, more mobile phones provide more reachable the people who use their phones more, thus requiring even more mobile phones (Wang, 1994). This effect also stimulates the faster diffusion to the later adopters of mobile communications when they see more mobile communications devices around them.
Lnioue Features of the Diffusion in China According to the Chinese information sources I contacted, the most notable reasons for the diffusion of cellular phones in China are that (1) the user's employer 92
pays for the phone and service charge; and (2) ostentatious display of status is desired
by the Chinese new rich. The other two unique features mentioned by my
interviewees are handset popularity and technology dependence on imports. The interviewees' no-interest responses regarding health, privacy, and social division
issues shows the traditional lack of concerns among the Chinese about social consequences of adopting new technological innovations
Table 12
Unique Features in China's MC Diffusion
Basic responses > > i i 1 i 1 1 i i i i i 1 i 1 i i i 1 i i 1 1 1 1 i 1 i i i i 1 i i i 1 1 1 i 1 i 1 1 1 i i 1 1 1 1 1 1 S o u rc e s < * t * 1 * 1 1 1 t 1 * • I * t *
MPT: "Free-lunch"; 95% handsets; Show-off by cellular phones; and Lack of concerns about social consequences
Non-MPT: "Free-lunch"; Import dependence; Show-off by cellular phones; and Lack of concerns about social consequences
Expert: "Free-lunch"; Import dependence; Show-off by cellular phones; and Lack of concerns about social consequences
Public: "Free-lunch”; and Show-off manner by using cellular phones
Multinational: "Free-lunch", 95% handsets; Import dependence; and Show- off by cellular phones
Interpretations: "Free-lunch" means personal use paid for by institutions such as work units or employers. Show-off from the manner of using cellular phones is the agreement from alt sources. MPT and the Chinese public like the imports, but the non-MPT sources pointed out the technology dependency is a negatively unique feature. Handsets rather than car phones suit China's national situations. Lack of concerns for social consequences and public policy are the typical Chinese technocrats’ traditional attitude toward technology. 93
1. Personal use paid for by institutions--while the phenomenon is seldom mentioned in the documents I gathered in Beijing, nearly 90% of the interviewees indicated this is a salient factor in the diffusion of cellular phones and pagers in China.
Otherwise, the number of cellular users could not have reached the high published statistics. The business manager of AT&T China’s Network System estimated that nearly 60% of the users of cellular phone in China were this kind of "free" users such as government officials and the managers of state enterprises as well the staffs of
"private companies" funded with public moneys (Dong, 1994). The manager of business development for Ericsson China reminded me that the austerity measures in the middle of 1993 to cool the overheating economic growth did temporarily reduce the growth rate of the "free users" of cellular phones (Zhang, 1994). Strictly controlling the excessive expenditure of institutional purchasing power, Chines government has listed cellular phone as one of nine controlled consumer products (e.g., cars and certain advanced electronics) because these expensive commodities often are purchased by state work units in terms of work needs, but actually for personal use. So public servants require authorization by the prospective user's company or department to be able to buy the handsets. Despite the preventive measure, many institutions still could concoct various pretexts to get mobile phones and pagers. Therefore, current high unit price and service charge only limit the diffusion of cellular phones into the Chinese public, but do not matter to those institutional users by the “free lunch” adoption.
2. Handset rather than car-phone--unlike the US and many developed countries, China is not an "automobile society." Private cars are still few in China though more of the new rich have bought cars in the past three years, and many
Chinese dream of owning their cars. The Chinese mostly use the bicycle, walk, or use 94 public transportation for intra-city travel. Car phones are therefore not useful in
China, differing from the US conditions in which they serve as work/family communications and for road emergency. More than 90% of the mobile phones sold in China are portable or pocket handsets that can be carried with the users for flexible use (Li, 1994). Also the "anywhere, anytime" feature of a handset matches many
Chinese cellular phone users’ show-off manner of "anywhere, anytime," so even the small group of the new rich who can afford cars prefer handsets as well. Plus, the car phones can be stolen relatively easily because of the increasingly bad public security, but not the handsets.
interestingly, several interviewees said many earlier Chines adopters even liked to use the old, bigger portable cellular phone rather than the up-dated, smaller pocket cellular phone because the former was eye-catching in public locations (Li & Huang,
1994). The local manager of Ericsson China even saw promoting the bigger mobile phone as one of the experiences for Motorola's successful marketing in China (Zhang, 1994).
3. Dependence on imports, not technology transfer-six papers that won prizes in the 1993 China's Mobile Communications Symposium underlined this phenomenon. Two of the four local managers of foreign multinationals interviewed noted that MPT preferred to imports (Dong and Sun, 1994), a state of affairs that suits the western firms that would like to keep this dependence going for as long as possible. The paper "A strategic development study on China's mobile communications industrialization," written by two MEI's R&D institutes and that won the first prize in the Symposium, reported 90% of China's mobile communication market depended on the finished imports and China spent several billion US dollars of 95
its scarce foreign exchange reserve to import mobile communications equipment. As a
result, many domestic manufacturers were facing bankruptcy. Because the key
components like microchips cannot be made in China, most domestic manufacturers can only assemble imported components.
In addition, two papers of the Symposium advanced another explanation for
the rapid diffusion of the product in China: their Chinese offices of the large
telecommunications/electronics multinationals hired many MS. and Ph.D. students of
China's prestigious universities as well as some core members of telecommunication
institutions as their salespeople to promote foreign products to the Chinese users. The students and officials are attracted to the jobs by higher pay and the status that goes with working for a large multinational. These well-educated Chinese are easier to train and are more effective persuaders of prospective users. Thus, they play an important role in helping the diffusion process in China.
4. Cultural conflict between the haves and the have-nots with respect to the showing-off use of mobile communications—this is often revealed by China's media reports and social chats. Those who do not have the mobile handsets tend to associate the use of handsets with the gangsters, the upstarts by speculation and commercial fraud, the new rich showing off anywhere, and the corrupted officials using power for personal interests. On the other hand, those who can afford and do have the mobile handsets insist that mobile phones were really necessary for business/work and believe that the handsets bestow prestige and style. For instance, cellular phones often be used in negotiations among the Chinese business people (Chen, 1993). They are proud of having these high-tech tools or symbols and discount the negative social reaction from the have-nots as a case of envy. 96
5. Lack of concerns for social consequences and public policy of the diffusion
—because the Chinese adopters of mobile communications assume that the
consequences are positive, no social concerns were heard in the interviews or from
documents, even three Chinese scholars interviewed could not talk about the concerns concretely. Most surprisingly, Sun Lin, who obtained a Ph.D. in telecommunications
from a US university, made it clear that he just paid attention to the technology policy and did not care about the social policy relating to mobile communication. About 16 papers in the Proceeding of the 1993 Symposium also all concentrated on how to make
an appropriate industry policy for development of mobile communications in China. The potential health hazard of using high-frequency cellular phones, which is a concern in the US, is not at all a concern in China. Privacy, another big concern of
Americans, seemed to be of little interest to the Chinese. The only concern mentioned was the intrusion of "anywhere-anytime" communication brought about by mobile telephony. Some interviewees said such words like "leave me alone, I don't want to be reached anytime or anyplace." (Li, 1994) However, the Chinese usually believe the technological improvement could solve it, for instance, the vibration replacing the beep sound on a pager in a meeting occasion. Basically, the interviewees thought people should, or had to be, tolerant to the two-edge effects of any technological innovations. Otherwise, just take it or leave it depending on the person's priorities. Thus, lack of public interest to the negative consequences of mobile communications leads to a lack of public policy concern in the minds of the Chinese technocrats.
Stakeholders* Concerns in the Diffusion Although the chaos in frequency use and standard selection are the basic concerns by most telecommunications professionals, different groups have different 97
concerns for the diffusion of mobile communications in China. MPT wants to
maintain its monopoly status to keep the chaos in order, but non-MPT institutions, led
by MEI, want to create a desired competition environment to take a slice from the
profitable wireless market. The public, like other people in the world, mostly are
concerned with the costs and benefits of adopting mobile communications technology.
The multinationals want a favorable policy context to expand their business in China.
Table 13
Stakeholder's Concerns in China's MC Diffusion
Basic responses S o u rc e s
MPT: Uncontrolled frequency use; Tighten control; Digital cellular standard selection between GSM or CDMA; Regulation enforcement; and Relevant crimes.
Non-MPT: Uncontrolled frequency use; Allow competition; Selection for GSM; and Mobile communications industry policy-making
Expert: Uncontrolled frequency use; Allow competition; Standard selection; and Mobile communications industry policy-making
Public: Lower cost; and Better service
Multinational: Uncontrolled frequency use; Allow competition and localization but keep in order to eliminate the mobile device smuggling; Allow foreign operation; and Relevant crimes.
Interpretations: The cause of paging market chaos admitted by all the sources is uncontrolled frequency use in which too many profit-driven operators appeared. Standardization is another common concern: criteria are international acceptance and technological advances. MPT and multinationals want to keep China's mobile communications house in order, but non-MPT ministries want to compete with the MPT and to protect the Chinese mobile communications industry. Relevant crimes were reported but not seen as a big concern. As other users, the Chinese public only concern cost reduction and service quality. 98
1. Uncontrolled frequency use--Paging service is seen as a value-added service
in China open to market competition. The problem in China's present paging market
from both interviews and documents are common; too many paging operators appear
in a city-size market so radio frequency is wasted or not efficiently used because the
spectrum allocated by local Radio Regulatory Office (RRO) to one city is limited. Because of this, it was thought that there would be no spectrum left to add new paging networks in Beijing (Li, 1994). Most of the interviewees and documents indicated a chaos had been created in the craze of installing local radio paging networks.
Particularly, the interviewees from the MPT expressed indignation at the out-of-control situation. In Beijing alone, there were about 100 local paging networks in operation.
However, there could have been 10 and they would be enough for the existing paging subscribers in Beijing, on the covering capacity of appropriate radio frequency allocation (Li Sl Sun. 1994)
The cause for the waste of frequency was attributed to two parts: (1) most
Chinese have no sense of frequency as a scarce natural resource like land and water and few of the profit-driven paging operators have radio communication background.
Most of the operators might think the radio frequency is inexhaustible due to its invisibility, not like land and water they could see being diminished; (2) the combination of departmental selfishness, institutional protectionism, and corruption, that is, many paging operators backed by various non-MPT institutions with sources of money and technology could win over the permission from the NRRC or the local
RRO to be allocated certain spectrum, most by persuasion in the guise of a personal connection, interest exchange, even covert bribery. No interviewees could give an example for the latter, but social connections with potential backers often work better 99
for inaking deals than following regulations, especially the actions done in the name of
a state institution rather than personal interest.
Some of the non-MPT interviewees thought the chaos in paging management
was just a temporary phenomenon at the beginning of diffusion and that the law of
market competition would ultimately eliminate the marginal players so the paging
market would return to normal, with fewer good operators and more efficient use of
frequency. But the MPT interviewees and others doubted this optimistic views. They thought free market rule might work well in the developed countries with a more
functional market mechanism, more complete regulatory system, and more effective
law enforcement, but the rule could not fit China's present underdeveloped market, not
to mention the increasing individual greed and institutional protectionism that are
pervading business in China. They pointed out the latest license regulations on
vendors of pagers and cordless phone, issued in October, 1993, was a dissatisfied
reaction of the Chinese government toward the wireless market chaos.
2. Monopoly or competition-the MPT interviewees said the telecommunications industry should be regulated by forcing others to get MPT licenses to avoid the chaos like that in paging market, but also admitted there were different understandings among the state decision-makers about the technological and regulatory uncertainties so the MPT could not totally handle the diffusion of mobile communications in China (Li & Li, 1994). The other non-MPT ministry information sources stressed the advantages of competition—better service and lower consumer coit—and the world trend toward liberalization, privatization, and deregulation in telecommunications, to justify their actions involved in mobile communication business. 100
Thus, the MPT sources revealed the idea that the other contenders only use the
concept of competition as an excuse for wanting a slice of the huge potential profit and
more institutional freedom/convenience of communications. Allowing the private
network operators to enter China's telecommunications market would lead to
competition only in the most profitable areas such as mobile communications rather
than in the basic services. Competition from the private networks would also make an
integrated, efficient, and reliable national PSTN even more difficult from the point of
view of technical standards and network planning. While MPT knows its monopoly
will be ended possibly as early as 2010, according to the model analysis by MPT’s
"think tank"--MPT's Research Center for Economic & Technological Development, the process of competition must be gradual. One of the local managers of foreign multinationals even said telecommunication must be monopolized because the Chinese reality needed the monopoly and there were not any real private corporate forces able to compete with the MPT at present time (Sun, 1994). His points seemed to be supported by the official mobile communications suppliers like Ericsson and Motorola that favor the MPT getting its house in order so the Western innovators could maintain their monopoly status in long-term equipment supply. Otherwise, the cheap smuggled mobile units from Hong Kong, Taiwan, and South Korea will diminish these leading suppliers’ sales.
The non-MPT players with their pro-competition bias, according to both MPT and non-MPT sources, did won a certain level of support from the State Council,
China's supreme national body that represents the Chinese government. The government gave approval for Ji Tong Corp., a company established in June, 1993 by the MEI, to start a pager and data communications service that links with the PSTN but 101
needs an MPT license. A new joint company, UNICOM, is a coalition of by a few
non-MPT Ministries such as MEI, Ministry of Railway, and Ministry of Energy
Industry with the government approval, which have technological strength with spare
cash, their own spectrum from the NRRC, and their own communication systems with
excess capacity.
However, the interviewees from the MPT did not think these new companies
could really threaten the MPTs position much because they were also the similar state-
bureaucracy institutions rather than private enterprises, complete with internal
struggles among the parent Ministries with respective interests (Li, Li, and Wang,
1994). The director of China market in the US ComStream company said that the new companies like UNICOM would not do head-on competition with the MPT so they only could provide the services which the MPT had not done, or would not like to do, or had no time to do now (Sun, 1994). Few wireless veterans suggested the establishment of a higher telecommunication authority as a national coordinator above the MPT and the other ministry institutions, especially for the infant mobile communications industry (Chen, 1994).
3. Standardization—it is the main concern for the MPT which plans a national mobile communications network with automatic roaming in a few years. While there are not many problems in connecting all analog TACS standard cellular infrastructures in China, except the five poorer provinces’ networks that have adopted analog AMPS standard, most interviewees mentioned the hesitation of China in selecting digital cellular standard. From the data sources, most Chinese professionals, including some MPT people, predicted China would adopt GSM, the pan-European digital cellular standard, with more adoptions in the world and longer commercial use so far. 102
However, a few of the MPT interviewees mentioned that the CDMA innovated in the
US did arouse interest in Zhu Gaofeng, the Vice Minister of the MPT who is in charge of telecommunications and visited the US in 1993. The MPT official in the Policy and
Regulation Department interviewed clearly expressed his desire to obtain more information about CDMA and the technical comparisons between CDMA and GSM (Li, 1994).
So far, almost all interviewees have thought that China had better take a wait- and-see position to let time, technological improvement, and market adaptation show which standard would better fit China's future digital needs because in the near future, analog systems should be able to handle the demand.
4. How to make and implement an appropriate industry policy for mobile communications—this is the key concern among the authors of the 1993 Symposium, most of them from the MEI. They knew of the mobile communications’ industrial features of huge-market and high-technology and the world trend, but they really worried about China’s current situation of the industry: domestic manufacturers were stagnant and many of them were near bankrupt while foreign mobile products flooded into China’s market. One paper written by two MEI’s research institutes, made a long list of causes of China's backwardness in development of mobile communication: decision-makers' inadequate understanding of the role of mobile communications in today's changing society; too little investment; component assembling replacing technology introduction, inefficient industrial structure; lack of practical goal and plan: lack of a high-level R&D center; weak coordination with relevant industries; lack of
"soft science” teams to conduct social research to help the Chinese decision makers form appropriate policy; uncompleted policy & regulation; mistakes in standard 103
selection and spectrum allocation; slow-acting management mechanisms; power abuse
in business; rampant smuggling; and brain drain, etc. The basic suggestions were to
establish two key R&D centers by the State's large investment and cooperation with
overseas mobile communications research centers. This first-prize paper is self-
serving, representing the MEI's altitude toward MPTs monopoly and insufficient
government investment.
5. Relevant crimes—it was reported the director of an MTB in Zhuhai in south
China and his son masterminded an operation an mobile phone racket which was
called the “biggest graft case” by Chinese officials. Authorities said that during the
past two years, the director (has been arrested) and his son may have accepted
$350,(XX) worth of bribes from firms for the illegal distribution of mobile phones
smuggled from Macao and Hong Kong (UPI, August 4, 1994). With increasing
cellular phone use and the unreasonably high service charge for cellular calls in China,
a new criminal phenomenon appears—usurping other users’ personal registration codes
to make cellular calls. The manager interviewed at Ericsson China said, and was
corroborated by media repons, that this kind of activity is increasing and creates a loss
of millions of yuan (China's currency) each year. Also, a Chinese newspaper reported
a case of nuisance paging: a few people in Huizhou City of Guangdong Province
purposely made trouble to the pager users of a local paging network. They stole the
secret code of the network and used their radio devices to connect thousands of local users, then frequently paged them with many phone numbers picked from local yellow
pages. Some of the "bad people" reported in cellular phone fraud and nuisance paging
have been arrested, however, they are hard to convict because China has no legal provisions yet to deal with these kinds of high-technology crimes. CHAPTER IV ANALYSIS
This Chapter opens with explanations for the differences among the responses from Beijing to further interpret those findings presented in Chapter III and draw inferences from them. Then as mentioned in Chapter II, I used the technology assessment (TA) methodology to further analyze China's diffusion environment for mobile communications and various consequences of the diffusion. A discussion of recent policy context and institutional changes in China's telecommunications, however, is added to the TA procedure.
Explanations for the Difference among the Respondents
Through a triangulation among the interview data and the two kinds of document data, my impression is that (1) the information from the interviews is more directly relevant to my focus on the diffusion of mobile communications in China because I was partly able to control the framing of the interviews; (2) the information from the Chinese document analysis reveals more about technological development/trend abroad, social phenomena and critics about use of cellular and pagers. The suggestions for China’s mobile industry policy/strategy making mostly come from the Proceeding of 1993 Symposium on China's mobile communications development held by the Ministry of Electronic Industry (MEI) which is eager to
104 105
become involved in the mobile communications market; and (3) the information from
the English document outside China pays more attention to China's emerging
competition in its telecommunications sector, because the authors, including a couple
of Chinese, want or need to express their views in a West-preferred framework. The
Chinese sources, both interviewees and documents, did mention competition, but did
not give much detailed description or further discussion, partly because the market
mechanism is relatively new to the Chinese, partly because the Chinese usually would not like to talk about their competition intentions in public arenas or to strangers.
From a triangulation of the responses from different interview groups, I found
that despite many similarities of my findings between the five information sources,
there are some differences in the findings such as whether or not mention shortage of
wired communications capability, competition, and import dependence. I think most of these differences come from the positions, strategies, and interests of the different institutions involved.
As China's version of Ma Bell with part of FCC's functions, the MPT is always trying to maintain its monopoly with its increasing financial ability and granted policy-making power. Although internal reorganization and external competition occurs recently, and most interviewees would like to see the end of MPTs double status as "both a player and a referee" (Sun, 1994), the short-term effectiveness of this power-split to MPTs monopoly is questionable (Li, 1994). As for mobile communications, the MPT has its general development goals but still does not have a concrete policy measures to further diffuse them from current early adopters to the early majority because (1) mobile communications consists of a series of new, improving technological innovations with more uncertainty; and (2) mobile 106 communications has been largely used as a golden revenue source to contribute to the financing of its other national PSTN targets. So mobile communications are not an investment priority on MPT’s list. MPTs current strategies seems to be to (1) let its
PTBs and MTBs install the local mobile communications networks and provide services, according to local financial resources and market demands; (2) implement a macro-control through issuing regulations and import/operation licenses; and (3) keep cooperative relations with the foreign wireless leaders, Motorola and Ericsson, to dominate the product sale and technology transfer. State sovereignty, national security, and the need fora unified national PSTN are MPT's main statements in the inter-ministry politics.
The MEI became the leader of the anti-MPT coalition because of its threatened market and its special personnel ties with the Chinese government. Since 1980, MEI's traditional customers, such as military and other ministry-users, have shifted to foreign suppliers for advanced equipment and technologies undermining the MEI's guaranteed market. The MEI also is excluded from the MPTs rapidly growing telecommunications market because of the intra-organizational links between the MPT and its manufacturing affiliates. Thus, the MEI's role in telecommunications has been shrinking. That is why the MEI is the most active advocate of a liberal telecommunication environment fora competitive market in both equipment supply and service provision (Tan, 1994). Most importantly, several Chinese senior leaders were in charge of the MEI successively so it has very strong personal connection with the chiefs of the government. The power advantage from the close relationship and the convincing rhetoric in terms of reform in telecommunication infrastructure-- competition and a self-reliant industry policy for equipment manufacturing--are MEI's 107
bargaining chips in politics. Through the establishment o f Ji-Tong and UNICOM, the
implication of MEI's actions show a changing model of China’s telecommunication
sector from monopoly to duopoly. But some interviewees still doubt UNICOM’s
viability because it is still a state-run bureaucratic enterprise with the conflict of interest
between the partners, rather than a real private competitor with strong incentives to
improve services and lower costs (Sun & Li, 1994).
The multinationals have been very aware of this feud between the MPT and
MEI. They have been reluctant, however, to enter negotiations with any agency other than MPT despite a State Council directive which allows them to enter into negotiations with any government agency that controls a part of China's radio frequency such as the Amy, railway ministry, and public security organs. Their adoption of pro-MPT strategy reflects MPT’s existing power in an aspect. Unlike the
Hong Kong paging companies, the multinationals also know that dealing with the
Amy is a hard business deal to sell back home, especially back to the USA where US
Congress is making plans to attack China's military-affiliated business. Since the multinationals have their eyes set on providing other mobile communications services to China, they do not want to alienate the MPT (Business China, June 13, 1994).
As mentioned above, most of China's domestic manufacturers for communication equipment belong to the MPT and MEI. But the quantity and quality of the equipment made in China are unable to compete with the imports the Chinese people prefer. It is reported that China’s domestic manufacturing capacity can only meet a quarter of its telecommunications demand by 2000 (Business China
Supplement, May, 1994). So technology dependence on the major international mobile equipment suppliers is inevitable. In addition to the sale of products and 108
technology/know-how transfer, joint ventures with the leading foreign suppliers have
become a popular way for diffusing the innovation of mobile communications, and a most desired form to the Chinese (Sun, 1994).
I will offer two detailed explanations of MPT’s poor prediction for China's cellular phones and pagers growth and the role of localization in the diffusion as follows:
The MPT in the late 1980s predicted that the number of cellular phones in use in China would be about 30,(XX) and that the number of pagers would be four million by 1995. However, there already were 784,(XX) cellular users in MPT's public network and eight million pager users in both public and private networks by March,
1994. Even the successful profit-maker Motorola has to admit that "the recent proliferation of cellular across China has been phenomenal and has exceeded our expectations" (Johansson, 1994).
Why did the MPT and multinationals underestimate the rapid growth of cellular phones and pagers in China at that time? The short answer is that MPT underestimated the increasing market demand for communication and the purchasing power of some
Chinese which were both generated by China's economic reform and the double-digit growth rate since 1990. Its market prediction paid too much attention to the price calculation for normal economic analysis to assess China's irregular market. Also, before the late 1980s the multinationals were largely unfamiliar with China’s market. Before 1990, the MPT still thought cellular phones were either a luxury for the senior leaders in big cities and their vacation resorts or a special tool for military and police. This led to the assumption that cellular phones would not be diffused rapidly.
This was based on a MPT's internal economic analysis, which found that alt cellular 109
adoption countries at that time had annual income per capita above $10,000 and China
had only $300 (Li, 1994). As a result, the MPT did not think about whether this
normal method was appropriate because it ignored China's huge population and the
unbalance of China’s income distribution among its social members. In addition, the
MPT might have come to this conclusion by relying on the early experience of pager
diffusion.
Before 1986, pagers did not diffused fast in most part of China. One of the
reasons was that the full effectiveness of one-way communication radio paging depends on improvement of the basic wired telephone service in China which was
very poor by 1985. In other words, a Chinese user found it difficult to access a wired
phone to answer a pager call. Another reason was that the high price of pagers (about
$1000) at that time did not match the common public's relatively low communication desire at that time. The price of a pager in China in the mid-1980s equaled the annual income of a Chinese college professor. However, with increase of communication demand, improvement of wired PSTN, and decrease of pager price, the diffusion of pagers has been very rapid nationwide. So the experience of pager diffusion in mid-
1980 did not provide an effective model for cellular phones prediction.
An important part involved in the diffusion of mobile communications in China seldom pointed out by my interviewees is the local-provincial and municipal—interest groups. One explanation might be the difficulty for the Beijing-based sources to distinguish these groups clearly because of the complex relationship among the local change agencies. Another reason might be the relatively negative attitude of my sources toward the mushrooming local participants. Actually, in the past ten years, the percentages of total telecommunications investment raised by MPT’s PTBs/MTBs and 110
local government increased rapidly and reached 60% to 70% in the developed
provinces. The increased financial and technical cooperation between PTBs and local
interest groups leads to the joint operation, even non-MPT operation, of the profitable
mobile services such as paging and cellular. There are non-MPT paging networks dedicated to workers in the science and technology field in Beijing (Tan, 1994). The involvement of local government and interest groups promotes the localization of the PTBs’ mobile communications diffusion. The provincial governments via the PTBs obtained more decision making power to introduce foreign wireless technologies and mobile products into their territory in rapid succession, depending on their regional market demands, financial strengths, and their own business connections with the outside world. The results are that rich areas enjoy rapid growth and advanced mobile communications networks and poor areas lag behind. A county in Guangdong province may have better telecommunications facilities and services than the capital city in an inner province such as Guizhou. Certainly, these local implementations still must need licenses issued from the MPT and radio frequencies allocated by the NRRC. They also need to meet the requirements of the MPT's technical standardization to connect to China’s PSTN, including the local trial licenses for testing the new mobile communication systems in consideration such as GSM and CT-2 (Sun, 1994).
Driven by the current social trend of making money as fast as possible in
China, various forms of ''companies," most of them affiliated with local government agencies or other state institutions, engage in the craze of operating paging networks, or just selling pagers. Some of the non-MPT operators improve their services and obtain good reputations, but many others are seen as "one-shot" profiteers through Ill smuggling illegal Taiwanese and South Korean equipment or as frequency wasters in the eyes of China’s telecommunications professionals.
The following part is a TA style discussion to further bring to light the social environment in which mobile communications are being diffused and to analyze the impacts of the diffusion to various aspects of today's China.
Problem Definition
To analyze the findings presented in Chapter III, it is important to understand that the diffusion of mobile communications occurs within a Chinese social system, because the social structure and cultural psychology of the system affects the diffusion of innovations. Otherwise, it is hard to explain why the rate of diffusion of cellular phones and pagers has always exceeded the predictions of telecommunications professionals, either the multinationals (Zhang, 1994) or the MPT; why radio-based mobile communications is the first area in which the MPT’s monopoly over China's
PSTN has been eroded (lire, 1994); why the imported mobile communications equipment can flood the China's market; and why China lacks social concerns about the consequences if the diffusion linking one billion Chinese into a national mobile communications network.
Restricted to descriptions of what wireless technologies were adopted, how rapidly mobile communications were growing, and what the planning targets were, most of the information gathered from Beijing demonstrated that the Chinese informants preferred a technocratic world view and no one comprehended the political and social consequences of diffusing mobile communications into hundreds of millions of Chinese hands. In part because they were usually not trained to think in 112
terms of political economy, but mainly because technical discussions were much safer
than policy debates in China, a country not known for the pluralism and openness of
its political process. However, technology is only one of the factors shaping China's
telecommunications. Social trends, regulation for pricing, finance, and competition,
ministerial politics, trade policy, national security and sovereignty, relations with
foreigners, and political control are also decisive considerations. In fact,
telecommunications policy in China is not as monolithic as official pronouncements often make it out to be (Mueller, 1994). The following is a discussion of the social, political, cultural, and economic problems raised by the diffusion of mobile communications technology.
Technology Description and Forecast
The second stage of a technology assessment (TA) begins with a technology description and forecast for a technological innovation is being introduced. I have described mobile communications technology in earlier sections of this dissertation
(see particularly pages 12-18 and 63-70). Therefore the following discussion skip over the technology description part and jump to the forecast part.
The present trend in development of mobile communication technologies in the world may be technologically characterized: digitalization, microminiaturization, intelligent networking, and integration (The Seventh Research Institute of MEI and
The Research Center for Development of Telecommunications, Broadcasting,
Television of the MEI, 1993). For applications, the trend shows personalization, globalization, and networking. Because PCS/PCN is still in infancy in the developed countries, there is no real R&D for personal communications in China. 113
The technological situation in China's mobile communications shows that
China cannot overcome a dependence on the finished products or limited technology
transfer from multinationals at least by 2000, regardless of how strong its desire to
catch up with world advances or to "buy Chinese." China may obtain the update
information about the technological trend by its various intelligence-gathering sources
but will be hard to apply it in domestic R&D and commercialization. China may
leapfrog, following the diffusion pace of Hong Kong, its mobile communication
systems in its key cities and the economic developed areas, but still cannot digest the
key wireless technologies. With the historical, social, and market causes, China's
lagging in mobile communication technologies is inevitable in near future. So the key question for the Chinese is not about technology itself, but diffusion of technology: which technological standard and products as the appropriate innovations should be diffused to the Chinese adopter and how to be diffused to more Chinese?
Social Description and Forecast
Overall, the Chinese social structure is changing from a former Soviet Union model to a Singapore-Japan model, which means to have an effective government- corporate cooperation for economic success and a peaceful environment for social stability. This model is highly desired by many Chinese leaders and scholars. In this transition, China's society have become a mix of freer economy and decentralized politics since 1978. The prosperity from the freer economy and the localism/individualism are creating a freer Chinese society which also is rapidly becoming suffused with Western culture. Despite the bloody Beijing Incident in 1989, a quiet social revolution is taking place. 114
China’s 15-year-long gradual economic reform, originated from liberating
agriculture mechanism and enlarging international trade, and years of double-digit
growth, have resulted in strong purchasing power and new market demands. Then
these economic factors have begun to transform China's social life, loosening the
Communist Party's iron grip on the country’s 1.2 billion citizens. The entire fabric of Chinese state and party control is starting to unravel. Virtually no one, except a few propaganda veterans, accepts the communist ideology anymore in today's China.
New privaie-sector jobs and a massive wave of manpower mobility are breaking down the all-must-be-central-planned system. Since the 1980s, a new class has been formed that is outside the direct control of the government or work units (People's Daily, June
20, 1994). Making money, getting rich, and doing business have become the major social trends these days, with the generated incentive to chase personal happiness. As the economy and decision-making powers become increasingly decentralized, the trend undermines the power of the Party to control what the Chinese see, hear, and say. The "open door” policy to the outside world not only has absorbed foreign investment and technology that create a modem business environment, but also has led to more contact with the foreign cultural and political influences that would challenge Communist rule. The explosion of information via communications innovations such as satellite dishes, phones, media products, faxes, and computers is tying millions of Chinese into the global culture and business practices. Various new information technologies can be used to reduce the time required for the Chinese decision-making process, thus freeing more time for more individual activities.
Do these developments, however, eventually conform to Western norms of liberalism, democracy, and the market economy? The answer may not be very 115
positive in the short term. The information sources in Beijing indicate that China’s
development pattern in the past 15 years did not follow any known precedents but
proceeded according to its own rules. China's development is driven by a unique
dynamic which is usually not fully understood by Westerners and depends on the zig
zag path cut out for China by the operation of the paradoxes summarized by Professor Milton Mueller at Rutgers University, School of Communication, Information and Library Studies as follows:
Its (China’s) development is driven by a jarring dialectical tension between economic freedom and political authoritarianism, between decentralization and centralization, between capitalist practice and socialist ideology. China has a centuries-long tradition of xenophobia, reinforced by a 150-year-long of mistreatment by Western powers, yet its (present) growth is driven by foreign technology and investment, and is highly dependent on exports to foreign countries. China routinely trades access to its market for foreign technology and investment while guarding its sovereignty and autonomy with a ferocious zeal ... China's authoritarian politics ... and its market size (make) the outside world simultaneously repelled and seduced. ... Communication is central to the playing out of these paradoxes. (Mueller, 1994).
Looking more closely at the social changes in China, some negative social
changes have been shaping China’s modernization drive but have seldom been considered highly by the Western multinationals, the technology/business innovators
who have the edge in the world's biggest market. To a large extent, the combination of greed, corruption, and ostentation has created an image of a lopsided market in a
’bubble economy". A class of ’’upstarts" or young nouveaux riches, many of them are cellular phone users, mostly profited by power abuse, speculation, and entrapping consumers into purchasing fake, even harmful products because imitation cannot be stopped by effectively enforcing copyright and trade mark laws. The spreading money worship and unfair income distribution have led to a lose of values in kindness and honesty. And worse, a general discontented mood of society increases mutual hatred 116
and various popular dissatisfactions among the members of the Chinese social system.
Most of the interviewed were not cellular users and expressed their aversion to the
lopsided social phenomena such as the "free-lunch" and showing-off in use of cellular
phones.
In addition, although economic growth and market potential has rocketed
China to the forefront of the West's attention, for a large country like China, it is
almost impossible to achieve geographically balanced economic development. With
1.2 billion people living across nearly 3.5 million square miles of often rugged and remote land, many ethnic groups, languages, and large regional disparities, China has a history of tension between center and periphery, city and countryside.
Thus, there are certain paradoxes in the Chinese society to show the widening socioeconomic gap: while 20-30 million rich Chinese are enjoying the advantages brought by the imported luxuries and high-technology products, about one hundred million Chinese still cannot obtained enough basic food and clothes; while hundreds of thousands of Chinese, most are college graduates, are working in China for foreign companies' modem offices, millions of Chinese children and teenager, mostly female, are forced by poverty or greed to "work1' without basic education, childhood, and work protection; while the urban, coastal areas and the industrial zones around the key cities are showing off their prosperity with more foreign inputs, mostly from Hong
Kong, Taiwan and the developed countries, the remote countryside and the poor inland areas are still developing slowly. In other words, the prosperity and the freer society are not evenly distributed.
No one can be an exact forecaster for this changing, large country. If the general direction of today’s Chinese society keeps unchanged, the most optimistic 117 scenario is the Taiwan model, in which economic growth continues relatively smoothly, accompanied finally by gradual political reform. In this way, the three major concerns of many Westerners regarding China, free market, democracy, and human rights, may gradually improve, The huge market potential will become a true market with hundred of millions of consumers for foreign companies, and the foreign ideas and ideals will spread faster to promote freedom with the increasing contact of foreign culture and business practice. The most pessimistic scenario is a reassertion of tight central control over both the economic activities and individual behavior. But it is also probably least likely because the results of a 15-year-long economic reform and social changes cannot turn back overnight. Most of the Chinese interviewees believed that once the door is opened, it will not be closed again like the isolated situation in the
Mao era.
The scenario most feared by the Chinese now is the possibility of government immobilization and a consequent spread of luati, which means chaos. The fear is indeed reflected by increasing violent unrest and uncertainty about the Chinese's place in the new society. At least in the near future, the Chinese socioeconomic gap will continue to widen and the disparity among areas’ developments will be greater. Also the unrest factors such as most people's resentment to income distribution unfairness and spread official corruption, millions of semi-unemployed workers, double-digit inflation, and the one hundred million of labor migration, most of them are young peasants, from the countryside to the city, will increase the danger of social unease, even the possibility of the civil wars because of the power struggle after Deng
Xiaoping's death or the increasing national independence movement in Tibet, Xinjiang, or Inner-Mongolia. 118
While some Chinese interviewees thought the negative parts of China's social changes were just the inevitable costs in its modernization process, many common
Chinese feel uncertain of their future. For both Chinese and Westerners, the next 20 years in China will be a time of great opportunity and great danger. Just as the good and the bad are mixed together in economic reform and social transition, so are they represented in the diffusion of mobile communications innovation.
Current Policy Environment and Institutional Changes Since 1992, some changes have occurred and affected China's telecommunication environment in which mobile communications are diffusing. Table
14 presents the basic time-order sequence of a set of policy events relevant to the diffusion from 1992 to present:
Table 14
Timeline of Recent China's Telecom Policy/Institutional Events
Time Events
1992: MEI submit its competition proposals to State Council; Motorola and Ericsson speeded up their supply to China
1993, May: MPT re-stated the ban of foreign participation in MC
1993, June: MEI's Ji Tong Corp. established & involved in MC
1993, Sept.: The Army allowed to use its radio networks for commercial purposes after a protracted battle with MPT
1993, Oct. 6: MET organized the First Symposium on China's MC
1993, Oct.: MPT made new regulations on the MC vendors 119
Table 14 (continued)
1993, Dec.: MPT issued regulations for MC device registration; UNICOM establishment prepared by three non-MPT ministries and backed by the State Council.
1994, March: Operating and regulatory divisions of MPT separated
1994, June 21: MPT first called for foreign investment for China’s Nil
1994, July 11: Manufacturers backed by MEI claimed to compete with foreign MC suppliers and seize back the lost market.
1994, July 19: UNICOM formally launched. Its president declared it will control 30% mobile phone services by 2000,
China's unique economic and political history gives its telecommunications policy environment and institutional structure specific features. Unlike other developing countries, which have pursued telecommunication reform in a top-down manner using the national PTTs as an instrument of policy, what is happening in
China now is being driven by forces outside the MPT and largely against the MPT's will (Tan, 1994). The present trend in China's policy environment is institutional restructuring and decentralization from its changing political economy, but not deregulation, privatization, or foreign ownership from the world liberalization process like those examples in Malaysia, Mexico, and Chile.
For instance, separation of telecommunications regulation from service operation is a global trend. In China, however, this issue is not raised largely by the international influence but as the results of its domestic economic reform. One of the major goals of the reform announced in 1988 was to separate governmental functions form enterprise management. So the MPT was required to separate its regulatory 120
function from service operation when the time is ripe. Even the MPT interviewees
agreed on this separation and told me that would happen soon (Li & Sun, 1994).
A recent internal change at China’s MPT proved that MPT cannot be a
regulator and also an operator anymore. The reorganization of the MPT separates the
Directorate-General of Posts (DGP) and the Directorate-General of
Telecommunications (DGT) under the MPT into two state corporate enterprises. While MPT remains the national regulator of China's public telecommunications
networks with the authority to inspect the credentials of would-be operators as well as
issue licenses to operate, the DGT will be responsible for the operations of the national
public network and the tariffing of services.
What does this internal change of MPT mean for diffusion of mobile communications in China? If we think that the foreign investment is an indirect business way to diffuse innovations and more competitors means more change agents
in the diffusion process, it seems that the influence will be transferred indirectly from policies regarding the sources of telecommunications investment and domestic competitors. Under the new regime the DGT will set up subsidiary companies to run
China's telecommunications services on a self-financing basis; and the PTBs, may be allowed more freedom to raise money, which possibly involves foreign investment which is still banned under the present policy.
In fact, the reorganization hints at compromise, or may means a covert monopoly of the MPT. This is not a major liberalization, but the tentative nature of the steps taken reveal policy makers warily feeling their way forward —willing to embrace change, but apprehensive of what this will mean for themselves and their bureaucratic structure. It is hard to believe the separated DGT will operate the national PSTN 121
beyond the MPT influence. The DGT officials are the same previous employees of
MPT and working in the same headquarters building. The MPT, through the DGT,
may retain its veto on unwanted issues such as foreign operation in China's networks.
As for Directorate-General of Posts (DGP), the MPT would like to put the money
loser on a self-financing basis because the DGP needed the MPTs cross-subsidy from the telecommunications part in past years. Now the MPT casts off a burden, controls indirectly a national PSTN through DGT as a money maker, and shows its new image of regulator only. So what does the MPT really lose?
As the external forces, the MPT's principal telecommunications rivals, the ministries of electronic industry, railways, energy industry and others with access to communications networks are searching out opportunities in the form of the joint-firm
UNICOM. The new firm is allowed to offer value-added mobile services like paging and cordless phones and possibly network access in areas where the DGT is unable to offer such services either as a result of lack of facilities or a lack of capacity. Thus,
China will exhibit a duopoly model in its policy environment relevant to the diffusion of mobile communications. In addition to the rival state-institutions, local authorities have also been seeking to break the MPT's stranglehold on mobile communications development.
On the other hand, the liberalization called by the Western professionals may not look that great in reality. In other words, the separation of powers so far announced have limits. The discussions within MPT and between the MPT and other ministries have far more to do with internal power politics and the interests of different ministers and factions in running these areas than with a more technocratic view of adopting measures that have proved successful in the rest of the world. 122
The best example of where such a perspective can throw light on China's telecommunications policy is the establishment of a second national voice and fax
network. At the end of 1993, the State Council appeared to give provisional approval
to UNICOM to do this. Everything then went quiet with the exception of words
emanating ffom the MPT casting doubts on UNICOM overall viability. Three MPT
interviewees and one from a US communication company expressed the same views
when I interviewed them (Sun, Li, Wang, and Li, 1994). They knew the advantages
of competition and the world trends in telecommunication sector. But compared with
the market chaos in China, they still believed in MPTs ability, based on the fact that
China’s PSTN has been greatly improved since 1985 and it is now able to provide
services for most large private users. However, UNICOM has now received some
form of go-ahead to develop a fixed-wire, long-distance system based on the railway
ministry’s existing network to supplement the MPT's existing PSTN (Business China Supplement, May, 1994).
To understand what competition means in China needs to understand the relations between the Chinese institutions. Unlike the Western way to compete, which means to do better than others, for a lot of bureaucrats in China the competition way of stop-others-from-doing-better is the routine way of life and thoughts, especially in the current atmosphere of trying to make money by all means. Lack of independence and choice within China's power structure discourages new ideas and bold initiatives. An institution who gets ahead is often viewed as a threat to others. The immediate reaction is often negative lobbying through personal favors (i.e., figuring out ways to block others rather than opening up one's own road to success), as the MEI did so to receive support from the State Council. In China, different ministries can focus their 123
efforts and cooperate on tasks when someone above them in the hierarchy takes the
initiative. But if there is no such authority calling the shots, they often fight rather than cooperate, even if they all agree on a common goal (Zheng, 1994). What Mr. Sun
said in my interview is quite reasonable from a Chinese professional's perspective:
"about 70% conclusions in their articles written by the Hong Kong-based foreign telecommunications experts are theoretically right and practically wrong because their judgments come from information analysis based on their pro-competition bias. Those so-called China old-hands are often limited within their Western frameworks and ignore China's reality." (Sun, 1994).
The direction of China's telecommunications policy has major implications for foreign multinationals involved in the diffusion of mobile communications in China.
For them, three factors should be borne in mind when reviewing China's policy environment and institutional changes :
1. Never underestimate the role of politics in determining policy. Telecommunications has a central place in China's political arena as well as its economic structure. Whatever new policy and business operations emerge will be subservient to retaining national control over various key areas. The central government resolutely opposes the idea of having separate regional operating companies because of the political implications of decentralizing power. For an economy struggling with transition, having a telecommunications network in place would be the first step in installing macro-economic levers for regaining some of the power the central government has lost to the provinces in the past few years.
Therefore, the MPT puts more investment in the construction of a national fiberoptic cable trunk network connecting all capital cities of its 27 provinces and the three key 124
cities Beijing, Shanghai, and Tianjin than on development of mobile communications,
because the former will help the government secure information more quickly or
efficiently and increase its macro-control and information access to the provincial
affairs. A regulation requiring the registration of mobile phones and pagers and similar electronic devices was announced in October, 1993. As one articles in China's
Economic Daily (Jingji Ribcut in Chinese) put it: "Communications is the nation's nerve system and involves the nation’s secrets and security. If China's information system is spread about and not grasped firmly in hand, how can people feel safe?"
(Far Eastern Economic Review, November 4, 1993) This paranoia may sound slightly ridiculous to a Westerner who has become used to telecommunications being treated less as a utility and more as a commodity, but it underlines the real fears and concerns of the Communist Party as its grip over the minds and pockets of the Chinese weakens. For many years, the Chinese government has always been placing national interest above civil rights. That is the reason why China still does not allow any private entities and foreigners to be involved in management of its telecommunication infrastmcture.
2. China prefers to run national affairs administratively rather than legally. Instead of asking whether something is allowed or not in China, examining the administrative concerns is more important to bypass the interest conflicts among the different ministries and regions. The more parties that have to be involved in a decision making process, the more likely it is someone will object, the administrators feel. Consequently, there is no due process presumption in Chinese telecommunications. Mobile communications is a case in point: wireless systems are usually installed at a local level, roads do not have to be dug up or cables installed and 125
no major demands on resources, except radio frequency, are necessary. These factors
suggest why this wireless sector has proved comparatively open to foreign, especially
Hong Kong investment. There are reports of foreign companies' involvement in
mobile communications services in Guangdong and Hainan provinces (Tan, 1994).
3. China’s telecommunications industry needs expertise more than equipment.
Maintenance of its telecommunications networks is a problem in China because of its
multiplicity of different equipment systems from different foreign manufacturers. For
instance, there are nine types of the program-controlled digital switches in China's
PSTN, which have been imported from eight countries. China has also managed to
acquire a lot of second-hand equipment inexpensively, but interconnect ability is a
serious headache. The MPT is aware of these difficulties, and is already consciously
looking abroad for expertise in running and operating its networks, training staff and
handling technology transfers. In the mobile communications area, the digital cellular
standard selection is an important concern for a completed national network to fulfill automatic-roaming and easy maintenance. However, this presents a dilemma: China
would not like to lean on one or two equipment suppliers but to diverse its technology dependency onto more suppliers so it can stay in an active negotiation/bargaining position among the competitive foreign exporters. On the other hand, how China can be sure that the competitors will adopt the same standards, especially given the when or whether standards in mobile communications will occur is difficult to predict.
Impact Identification I Analysis / Evaluation
Technology impact: The diffusion of mobile communications help more
Chinese become aware of the technical advances of the wireless innovations. In 126 general, the Chinese think natural science and technology are value-free and the continuing technological improvements and adaptations are a positive drive to national development. They see the winners in today’s world as determined by economic strengths and technological advantages, rather than ideology and military. So most
Chinese usually take a "welcome" attitude to new technologies and like to get more knowledge about the innovations, unless they cannot afford or understand these new technologies.
As for the Chinese communication professionals, the diffusion of mobile communications can make them learn more about equipment design, production, and standards either from imported products or from various technology transfer means such as joint venture and cooperative development. Because of their high-education and tech-management background, they have more ability, as change agents, to persuade the decision makers and common Chinese to adopt or reject certain technologies.
The diffusion has helped China leapfrog its communications systems to catch up with the mobile communications technological trend in the world. The Chinese have accepted the fact of their backwardness in most high-tech fields, but the professionals also know the leapfrogging advantage in China as a later adopter: having more technological choices after comparative evaluations, saving time and capital. The quick adoption to program-controlled switches and optical fibers has provided a successful experience to the Chinese’s improvement of wired networks.
So the improvement wireless communication technologies also gives China more alternatives among the updated and appropriate innovations to leapfrog its mobile communications system. 127
On the other hand, the diffusion also increases the technology dependence of China on foreign wireless innovators. Although China can take advantage of leapfrogging by importing, it will never obtain the most advanced technology and the key techniques. But the diffusion will stimulate market demands for newer mobile innovations, thus China has to technologically rely on the wireless pioneers from the developed countries for quite a long time, regardless of how strong its national pride is.
In short, the diffusion of mobile communications in China, on one hand, does raise the Chinese' knowledge level and enhance China's communication capability.
On the other hand, it also reinforces the technology determinism in the Chinese minds and its technology dependence on the developed countries.
Economic impact: The diffusion of mobile communications can help
China s economic development. Wireless communications devices can provide convenience to commercial mobility and prompt access to business information in the current social wave of doing business first in China. Business becomes more mobile than ever in an Information Age, but China’s still-poor wired telecommunications network cannot meet the demand for mobile communications which keep the information sharing and exchange fast to avoid the long-time economic bottleneck-
China’s limited wired networks and transportation capabilities. Therefore the Chinese business people, believing time is money, turn their eyes to pagers and cellular phones as a very useful business tool to make money. As a result, the diffusion of mobile communications adds a new push to China's increasing economic activities.
China is a unique, large market where a low per capita income combines with consumer's desire for advanced communications products. Mobile communications in 128
China have created a profitable business in China in the past two years. Benefited by
the present demand exceeding supply, sales and operations of pagers and cellular
phones can get capital back very fast. The MPT and its local administrators are taking
this advantage, by their monopoly of cellular phones, to collect their needed capital for
further network development.
Also according to the Western telecommunication professionals, the economics
of wireless technology as an alternative to wired services looks even more appealing.
Due to difficult terrain, long local loops and the constant need for repairs, the cost of
adding a new wired subscriber in China averages around $2000—and is often more.
But wireless technology cuts this by half.
The demand for mobile communication has made the multinationals such as
Motorola and Ericsson increase their sales and investment in China. Thus China can
improve its inadequate communication system which has been one of the bottlenecks of its economic development by having the aid of these foreign resources. Also with more foreign players competing in China’s market for mobile communications, China will be in a favorable position to make better business deals by the way of using one against another. However, the increasing market demand for imported finished products also drains more scarce foreign exchanges out of China’s reserves. In turn, the foreign reserve drain may hurt China’s economic expansion in other areas such as energy and transportation.
Social impact: The diffusion will change the way the Chinese communicate and work. With more mobile communications devices used, the social contacts will increase so much that more social activities will be arranged easily and on time. These objects also provide a convenient channel for the personal dialogue among family 129 members and friends who have not been able to get together often like before because of busier individual time schedules and scattered living spaces. Also with more mobile communications adopters, social concerns about health safety, privacy, and intrusiveness will become salient gradually, though some of them are ignored by the
Chinese at present time because of the Chinese basically positive attitude toward technological innovations and the relatively small portion of mobile communications users among the Chinese.
At the same time, the diffusion, along with other socioeconomic factors, has widened the socioeconomic gap between the early Chinese adopters and the late adopters or have-nots. Cellular phones with their unreasonably high cost add a new symbol into the "upstart culture" which is usually regarded as a negative social phenomenon in China’s media and a disgusting social habit in most Chinese eyes. A cultural conflict between the haves and the have-nots occurs. The haves want to show their mobile phones in certain public occasions to let others know their social images: they are busy, they are dealing business, they have money, they have more social connections, so they are important. Most users also think the negative social comments on them are from the have-nots'jealous psychology; the have-nots hate to see the impudence because they know most of the self-funded Chinese cellular users are dubious people with less educational background and less social taste, some of them even are former criminals. The have-nots also believe many of the users can afford a cellular phone because their money is made not through productive activities but through trade, speculation, or gambling on the stock market (Sun, 1994). The show-off manner of wealth has been accepted by many Chinese interviewees as an eye-catching feature in the Chinese culture though it is never seen as a good behavior. 130
They think, however, that when more Chinese can afford the price-lowering cellular phone and accessing mobile communications, the social-cultural conflict will be resolved automatically because the present symbol of social status will be worth nothing when more people have cellular phones. This judgment is reasonable, but its prerequisite depends on the diffusion rate of cellular phones in China.
In addition, the diffusion of mobile communications may increase government's social control resource by equipping the police with various wireless devices to locate possible protesters, as one of the government preventive measures showed during the Beijing Incident anniversaries these years. Conversely, diffusion of point to point mobile technology may also increase the opportunities for organization of protest, like what some private business youth did in May of 1989 to inform the Army's locations to the students and Beijing citizens promptly to organize timely mass blocks. Another logical scenario might be like that if the anti-government activists, either the urban unemployed or the remote uprising minorities, use mobile communications to organize their movements, the central government will find it difficult to stop them in initial stage as it used to do before.
Other examples of the negative social impact in the diffusion were heard during my fieldwork in Beijing. One was the increasing use of cellular phones by gangsters and smugglers. Another was a few high school students in Beijing were found using
Chinese character pagers to practice fraud in exams by exchanging data to get answers to exam questions.
Political impact: Whether the diffusion of mobile communications will contribute to information control and national unity, as China's government hopes, or strengthen information flow and centrifugal forces is a question. However, it may 131
enhance individual rights of political involvement by spreading political information
and critiques easier and faster than before. A sa result, traditional government control
of information traffic may be weakened. In fact, after the Beijing Incident in 1989,
communication technologies-faxes, pagers, and mobile phones—are being used by the
underground to help thwart surveillance (Calgary Herald, June 3, 1994). In addition, by using the increasing economic interests of the foreign business
in China, the Chinese government could take advantage of the lobby power of the foreign telecommunications multinationals involved in the diffusion of mobile communications in China as a political card to force foreign governments to make favorable policies toward China. The permission of allowing AT&T to sell its used mobile communications system in part of China and China's good relation with
Motorola are two examples of an indirect political impact from the diffusion. Legal impact: The diffusion of mobile communications will call for a series of relevant law making for effective spectrum management, cellular phone fraud, and nuisance paging. In January, 1994 the MPT imposed new regulations for equipment certification of cellular terminals in an attempt to control fraudulent use of mobile phones, but perhaps a more affective measure would be to enforce the law to stop the unabated under-the-counter sales of smuggled mobile phones. The increasing use of mobile communications by Chinese gangsters and smugglers also challenging China’s anti-crime efforts. Another potential legal impact may occur when China handles
13,(XX) cases a year involving trademark-infringement and counterfeiting.
Fortunately, unlike compact disks, computer software and videotapes, microchips—the key components of mobile phones- cannot be made by the Chinese yet. Thus, there is no need for legal protection to punish pirates or copyright violations in the wireless 132 field. Otherwise, mobile technology piracy would be a new challenge to the relevant Chinese laws and their enforcement.
Because some PTBs and provincial governments allowed Hong Kong paging companies’ involvement in China’s mobile communications construction, it remains a grey area in Chinese administrative law whether the PTBs and provincial governments do or do not have the authority to authorize foreign involvement. With recent MPT policy change in calling for foreign direct investment, the law clarifying is more difficult, not to mention the secret deals between the local authorities and overseas
Chinese business in any legal rhetoric to bypass the long-time ban of foreign engagement in China's wireless services
Environmental impact: The diffusion of mobile communications may increase possibly harmful high-frequency electronic pollution and increase frequency waste because of too many profit-chasing paging operators with typical short-sighted behaviors in China's business world. On the other hand, establishment of mobile communication does not need much land use to lay wires or cable so that it could reduce negative environmental impacts.
Psychological impact: There may be three negative impacts in China:
(1) the explosive diffusion of mobile communication increases the have-nots’ psychological unbalance of facing the widened socioeconomic gap which reflects on their in afford ability for cellular phone adoption; (2) the haves are flattered through the happy feeling to meet their conspicuous consumption psychology by increasing the spending distance between them and others; and (3) importing a vast amount of mobile communications devices from overseas foster the "foreign worship" psychology which has been expressed by most Chinese consumers preferring to buy imports. As 133
a result, the third psychology increases the Chinese technocrats' fear of forever
lagging behind foreigners because domestic manufacturers cannot develop and
compete without loyalty of customers.
Policy impact: The diffusion of mobile communications is generating policy concerns and debates regarding restructuring, competition, and relations with foreigners that are discussed above. The diffusion has called for an urgent national framework which sets an independent wireless administrative institution with high- authority to plan the overall development of mobile communications. Guangdong
Province which has 40% cellular users in China, has done this well in its territory through 22 regional bureaus in charge of mobile communications specifically.
Besides, the chaos in China's paging market has impacted policy concern on spectrum allocation and effective management of frequency. Enforcement of operation licensing by the MPT has been announced in late 1993.
Though mobile communications have been said to be a major communication means rather than a supplemental one, a consensus understanding of its role in China’s telecommunications has not been reached yet. To a large extent, the diffusion is still in a half-hearted focus in MPT's development plan. The MPT has a general numeric goal but lacking of completed policy how to implement it, because the MPT's investment mostly goes to establishment of a national fiber optics network and improvement of wired PSTN. Mobile communications is largely regarded a golden goose to make revenue as much as possible to cross-subsidize its key projects. MPT’s half-hearted attitude toward diffusion of China’s mobile communications led to the opportunities for its rivals. For instance, in September of
1993, the Amy was allowed to use its radio networks for commercial purposes after a 134
protracted battle with MPT (Adonis, 1994). For the MEI, the diffusion calls for an
urgent industry policy-making to develop China’s mobile communications. The main
reason is because many MEI’s affiliate manufacturers involved in the craze of
component assembling become stagnant or bankrupt, defeated by the competition from
direct imports and smuggling. The policy concern not only represents the needs of
protecting domestic industry and national pride, but also reflects the interest conflict
between the MEI and MPT. The MEI blames MPTs monopoly and dependence on
foreign suppliers, which hurts the domestic manufacturers. But the MPT thinks the
MEI just wants to sell its low-quality products with excuses of competition and self-
reliance. While the MPT has stronger political reasons like state sovereign and
national security to claim that only it can keep the industry in order, especially during
the present profit-craze time, the MEI has more personal connections with the top
leaders so it can finally be a state-backed competitor in telecommunications field.
Anyway, the diffusion of mobile communications did provide an opportunity for the non-MPT stakeholders calling for creating a competitive telecommunication sector. The recent reorganization of MPT and the establishment of UNICOM hints at compromise of the conflict. In the long run, liberalization will come. But in the near term, the present separation of powers will have limits. For the foreign multinationals involved in China's telecommunication business, the MPT must still have to be dealt with. This is a common agreement from the interviewed local managers of the telecommunication multinationals, because the MPTs institutional power in telecommunications technology, market, and policy has not been diminished.
In fact, decentralization occurs more in the relationship between the MPT and the provincial/local governments than between the MPT and the newly established 135 companies backed by the non-MPT ministries. In the last few years, many local governments with stronger economic strengths have been interested in the construction of mobile communications facilities, from the provincial city to the prefectural centers, even to the county town and township centers. Their achievements have helped to address the problem of the PSTN capacity shortage. The MPT would like to let its local telecommunications authorities do this development of the infrastructure because of their network limits and their self-funding abilities. Thus the MPT only needs to keep watching the issues in technology introduction, standard selection, and foreign involvement, as well as in frequency management via the NRRC.
Because mobile communications are a money earner, many PTBs and MTBs have set up mobile communication business units. Looking to the future, costs and revenues will emerge as key questions, and issues such as network services development and customer relations will become important, although the latter may have to await network competition before it takes hold. So far, the business units of the local monopoly mobile operators usually have had little idea of what the actual costs of the network really are, especially the incremental costs of adding more customers. Right now they do not need to know since they can sell handsets and registration at supply-constrained prices (Ure, 1994). However, the high-priced cellular terminals and tariff policy must be changed if the MPT and its local operators want to attract more users into their networks and to increase cellular call traffic.
The decision to allow diffusion of mobile communication on a local level also reflects a policy-making feature of today’s China, that is, let the local try any new ideas, objects, models, practices, or technologies. In this way, the policy makers can learn experiences or lessons from the local trials. If the trials are successful, the 136
authority concerned as a change agent will diffuse the experiences to other places for
innovation adoption. If the trials failed, the diffusion will be stopped and may lead to
a temporary innovation rejection so it will not cause large-size loss. The basic attitude
of leaming-from-doing-then-wait-and-see, leads the Chinese policy makers to prefer
practical experience to theoretical prediction when they evaluate the impacts of a new
idea or objects. When more Chinese mobile communications users appear in the positive diffusion process, a policy regarding public interests like access, equality, and privacy probably will be made. These public issues now are not stressed but they will draw the attention of Chinese policy makers when diffusion increases.
The involvement of foreign companies in China's telecommunication services is always a sensitive issue and the implications to policy are subtle. In a forceful public reaction to an attempt by Champion Technology, a Hong Kong company to provide paging and cellular services, the MPT reiterated its position three time in 1993 that "China will not allow any individuals, organizations or companies outside the mainland to manage its public and private networks, wire or wireless communications services" (China Daily, May 10, 1993). Large-scale involvement of multinationals in
China's service sector is still uncertain, but opportunities for limited involvement in mobile and other new, value-added services at a local level, may exist (Tan, 1994), Hong Kong business people know better how to do business in China and deal with the inter-ministry politics because of their flexibility and familiarity with the Chinese way of doing business. The small upstart Hong Kong paging companies such as
Champion Technology and Star Paging have snagged deals with the Army to expand their business into the Chinese mobile communications market, by using their personal connections in high places of the Army and multinationals' pro-MPT position. 137
Policy Analysts
Basically, there are two policy options for further diffusion of mobile communications in China: (1) promoting mobile communications as a technology alternative to modernize China's inadequate telecommunication networks by market forces and (2) both improving wired networks and developing wireless ones with careful plans by state institutions.
The first option is based on many Western telecommunications professionals' viewpoints: mobile communications can be a faster and cheaper way to achieve a universal access to telephone for the Chinese; and competition in a open market will be an efficient way to provide more, better services with less cost to ordinary consumers.
These viewpoints sound reasonable and can be proved by many practical cases and a basic economic theory. But the question is whether these rationales suit completely China's national conditions.
If China can manufacture most of its mobile communications equipment in the scale of economy, the process of Chinese accessing universe telephone service would be faster than the one through installing wired networks. However, this is not China's reality. According to the findings and discussions above, cellular phones are much more expensive for Chinese public to use than a wired home phone which has been the upper limit of most urban Chinese spending for telephonic communication needs. Will the emerging domestic competition in China's telecommunications sector lower the cost in near future? The answer is no because most wireless communication equipment does not come from the "competing" manufactures in China but from imports which requires spending China’s rare foreign reserves. The depreciation of
Chinese currency to the hard currencies in the world also increases the prices of the 138 imports. Besides, a real competition in China now is questionable and needs time to introduce because there is no an effective legal framework as a guarantee of it, especially when many Chinese business only want to make quick money easily.
Therefore, the preconditions of this rational policy option are "made in China" equipment and a sound legal framework. The former can ultimately reduce costs to achieve mass affordability. The latter can create a fair competition environment for the effective operation of a market. In short, the West-favored policy option is quite rational but difficult to implement soon in today's China.
The second policy option is that both improving wired networks and developing wireless ones with careful plans by state institutions. It sounds more realistic from MPTs perspective. Mobile communications need to be developed in
China, but cannot substitute the wired ones. Rather, the function completion of pagers and CT-2 need advanced wired networks to support. In China, the rapid diffusion of mobile communications occurs in the areas with the most wired phone penetration rather than in the areas with poorly wired infrastructure. So a balanced development plan is necessary. But the difficulty of the policy option is whether China can invest enough to both wireless and wire networks at the same time, and how to coordinate the state institutions concerned to make this plan and make it work.
In my opinion, the key for further diffusion of mobile communications is still first that most of the mobile communications equipment should be made in China to make the equipment affordable for most Chinese. As suggestions, China should rationalize more than KX) manufacturers into a handful of giants, modernize manufacturing through new joint ventures with select foreign multinationals, and create an advanced wireless components industry with foreign technology and 139
investment to finally cut down on imports. At the same time, a sound legal framework
should be created. Only when China has a solid manufacturing foundation and the
legal framework, a real competition on the operation market will be possible and work
well. Otherwise, a competition probably becomes chaos for speculation and
profiteering from the imports that are not benefit the majority of Chinese. In other
words, an appropriate industry policy is a prerequisite for later large-scale diffusion of
mobile communication in China. However, the policy-making is tied into China’s
national economic reform process and in speed, depth, and scope largely depends on the extent of progress and the degree of success in China's national structural reform taking place in 1994 and beyond. CHAPTER V SUMMARY AND CONCLUSION
Summary The purpose of this research was to describe the environmental changes that
have taken place in mobile communications (MC) in China, especially those changes
that resulted in the explosive diffusion of cellular phones and pagers in recent years.
Information was gathered in the following ways:
1. Personal interviews in Beijing with 24 Chinese who were directly or
indirectly involved in the diffusion of mobile communications.
2. Document analysis in Beijing by collecting various printed materials such as
the most current official symposium proceeding and media reports regarding the
diffusion of mobile communications in China.
3. On-line computer database and e-mail news tracing at The Ohio State
University (OSU) from LEXIS/NEXIS and China News Digest (CND) daily reports.
In addition, traditional library research was used at OSU to gather academic
and industrial information about mobile communications in China.
Information analysis was organized in the basic conceptual framework of
technology assessment (TA) to define the problem, describe and forecast mobile communication technology in China and the Chinese society, and discuss consequences of the diffusion impacts on the society. A section of policy environment
140 141 and institutional change was added into the TA methodology format to provide the current context for the diffusion of mobile communications in China.
Using these data, I sought to portray mobile communications with Chinese characteristics and to discuss the relationship between the general political, social, economic, technological, and cultural needs for diffusion of mobile communications, and its consequences to each of these aspects in the unique context of China. When the diffusion was spread in a three-track path, one led by the MPTs national monopoly control from its institutional regulatory power, another led by the various market competition from local financing strength, and the third one led by foreign multinationals' involvement from high technology advances, it invoked a number of questions that prompted this research. Answers to each question are summarized below:
Research Question 1: What is China’s current situation in mobile communications? How did it evolve from the past? Why has mobile communications become popular in China? And, what criteria have guided the choice of mobile communications innovation that is being diffused?
China’s current situation in mobile communications are marked by dichotomy: coexistence of technology leapfrog and technology dependence; coexistence of market potential and market disorder, and coexistence of policy making and policy vagueness.
These coexistence are an epitome of social life and economic activities of today's
China in a mobile communications. After years of introduction of new technologies from the developed countries, a number of new communications technologies have been adopted in China's developed areas, but few of them innovated or re-invented by
China; Due to its population and size, China's market is rather huge but very irregular 142 so that various lopsided phenomena appeared; Because of more application uncertainties in new technological innovations, correspondent policy making is urgent but slow. Maybe this is an inevitable situation for today's China, a large, changing, developing country. This contradictory situation could be difficult to be fully understood or explained in Western views and in theoretical framework.
China's diffusion of mobile communications was evolved on the way from technology catch-up to socioeconomic needs to public welfare. In other words, it went from pure military R&D to self-reliant private applications to large-scale imports for public communication demands. China's technology catch-up desire has been a long tradition in innovation stage, coming from national pride and representing the
State's will. The backwardness and mechanism of China in technological applications has made the decision makers more interested in technology leapfrog and more realistic to consider socioeconomic needs. When the appropriate innovations are implemented and the price of devices and service charge are lowered, the massive access to the new communications services would make these services a real public welfare.
Research Question 2: Which stakeholders influence how mobile communications are being diffused to the Chinese adopters and who controls the communication channels by which the innovations are diffused? What are the main concerns regarding the rapid diffusion of mobile communications in China for the stakeholders?
Both State power and market force decided which communications innovation should be diffused to Chinese adopters. The communication channels for spreading the new ideas and objects of mobile communications are not purposely controlled by any authority but limited with Chinese telecommunications professionals. 143
multinationals, smugglers, and the early Chinese adopters. The emerging competition
in China's telecommunications sector will speed up the diffusion rate because more
competitors means more change agents, which in turn means more communication
channels to the public for adoption of mobile communications.
The State via the MPT undertakes macro-control through standard setting,
frequency management, and operation/trial licensing. However, mobile
communications are very young sector and continue to add more new innovations,
compared with the conventional PSTN. So, small-size technology-market trials have
to be allowed in order to obtain adoption experience or lesson. As a result, the
regional demands and financial capability drive the local authorities to install their own
networks through various imports from the foreign suppliers. This coexistence of central control intention and local implementation reflects the social trend of decentralization in China.
Selecting appropriate technologies suitable to China’s national conditions and close to international standards, cultivating a mature market, and making an appropriate policy framework are the three main concerns regarding the explosive diffusion of mobile communications in China for the official ’’stakeholders" to conduct an appropriate development strategy. So far, none of them has been reached an agreement and are still discussed only on paper. For the Chinese users, the most concerns are regarding the afford ability of mobile communications products and the quality of wireless services.
Research Question 3: What is the nature of the Chinese social structure, and to what extent and in what ways do social factors in China influence the diffusion process of mobile communications? 144
The very basic nature of the Chinese social structure is a mix of immature
market economy and authoritarian politics. The social trend of doing business
increases many urban people's mobility and the needs for timely information exchange, thus it generates the market demand for mobile communications. The positive attitude towards high-technology and the preference to things foreign among the new rich also contribute to the diffusion of mobile communications by imports.
The technology determinism and dependence, the market demand and imbalance, and the regulation need and lagging, influence the individual Chinese innovation-decision as well as government policy making. However, China's planners have not considered the indirect, undesired, or unanticipated consequences of the diffusion of mobile communications, such as loss of government control in communications and the privacy and health issue. Research Question 4: How will the diffusion of mobile telephony impact
Chinese society? Have mobile communications widened or narrowed socioeconomic gaps among the Chinese people?
The diffusion of mobile communications will impact Chinese society by:
(1) changing the way the Chinese work, live, and communicate; (2) increasing economic activities and decreasing China’s cost to modernize its communication networks; (3) increasing social contacts and causing intrusion; (4) promoting competition and reform in China’s telecommunications infrastructure and policy environment: (5) both strengthening and loosening government's social control;
(6) either leading to more technology dependence on the multinationals or stimulating the efforts to improve performance of the domestic suppliers; and (7) drawing Chinese policy makers' attention to the negative consequences such as intrusion and fraud. 145
To date* socioeconomic inequities reflected in China's social structure are
getting worse, leading to sharp economic disparities among geographic regions and
social classes, although power, wealth, and information are spread in more hands than
the past because of 15-year-long reforms and opening to the outside world. The
unbalance diffusion of mobile communications in China is a perfect example to show
the increasing socioeconomic inequities at present point of time. It will take time for the Chinese decision makers as change agents to become more fully aware of consequences and the issues of widening gaps and increasing inequalities, and to
develop effective diffusion strategy for creating greater equality among the members of
the Chinese social system.
Relation to Diffusion Literature Innovation: China does not contribute to the generation of technological development of MC innovations. As a nation, China can be seen as one adopter located in the early majority in the world rather than an inventor in the innovation- development process or an innovator in the diffusion process of mobile communications technology. The generation of mobile communications innovations is totally originated from and must be credited to the wireless pioneers in the developed countries, through their need recognition, basic and applied research, development, commercialization, diffusion, and policy making over time. The practices in technologies, business, and regulation of the Western innovators and early adopters are the original sources of the MC innovation diffusion in China.
Communication channel: There are mainly two communication channels to spread mobile communications innovations to two groups of Chinese adopters. 146
One channel is institutional-based. It includes mass media that broadcast the existence of the wireless innovations and create general awareness-knowledge to Chinese public, and various domestic official intelligence institutions and multinationals that communicate information about the developing MC to the technical professionals and the decision makers. Most of these information receivers are technocrats who then become a group of change agents in the diffusion process. Another channel is interpersonal-based by personal exposure to Hong Kong or other overseas Chinese business people that communicate the objects and images of mobile communications to the Chinese business people and the common public. Awareness of MC innovations of mobile communications comes first through the institutional channel directly into the knowledge stage for the Chinese change agents. Needs of the innovations comes first through the interpersonal channel into the knowledge stage of the Chinese users.
Time: Hong Kong and Taiwan increasingly act as gateways or intermediaries for many technology diffusions and business training between China and the world in the past years. So, high-technology innovations like mobile communications are always diffused later in China than in the overseas Chinese societies such as Hong Kong, Singapore, and Taiwan because of China’s less open import policy and its large size. The diffusion time-order can be geographically showed in this model: the developed West—then the new industrialized overseas Chinese areas—finally the opening mainland China. Technologically, the time-order sequence of the diffusion process in China is determined by the evolving wireless technology trend, from two- way radio and paging to digital cellular. Historically, the time-order of the diffusion process with Chinese characteristics was dated from the military adoption stage during the 1950s and 1960s, then to the limited private applications during the 1970s, to the 147
public communication networks since 1980s. Expected a bright prospect by most of the Chinese information sources, the mobile communications innovations will ultimately be diffused to more Chinese.
Members of social system: China's current adopters of mobile communications are still a small portion (about 0.8% of population) among all members of the Chinese society, though the users of cellular phones and pagers have increased dramatically in the past two years. The Chinese cellular phone adopters can be categorized into two groups: the state-fed users who have or claim MC needs without paying for the devices and services because of their power; and the business- related subscribers who have the same function needs of the "free users'" but pay by themselves because of their wealth. The cellular have-nots also can be categorized into two groups: the urban people and farmers living in the developed countryside who could often observe cellular uses by the haves. They will be the next adopters who have relatively less needs but have desires to access cellular which now still are limited by their low power or wealth status. The other non-adopters live in the remote, poor areas have almost never seen or heard cellular phones even pagers so they have no desires or need to adopt them. The discussed cultural/psychological conflict between the haves and the have-nots in China reflects the implications of the socioeconomic gap among the Chinese: the diffusion of cellular phones in China, has increased the visibility of socioeconomic inequality.
In several important ways, some characteristics of the diffusion of mobile communications in China differs from diffusion literature. In part contrast to two of
Rogers' generalizations about the innovation-decision process (Rogers, 1983), many of the Chinese MC users as a part of earlier knowers of pagers and cellular phones 148
have less education and lower social status than many later knowers. For instance, the Chinese smugglers and many private business people knew pagers and cellular
phone earlier than many government official users and non-users did because of their
needs to make money. The factors leading to knowing and adoption among these
early Chinese MC users are their needs and wealth, rather than their educational level and social status.
Also, there is no sign in China's MC diffusion to show the dominant
characteristics and values difference as Rogers' categorized between the innovators who are venturesome to new technological innovations and the later majority who are
skeptical to them. It is purchasing power and life need that allow the Chinese MC
adopters to try the new technologies earlier or later other than venturesomeness and
cautiousness. In addition, the present conflict between the Chinese haves and the
have-nots is a cultural/psychological one, which reflects social impact of cellular use
rather than attitudes towards the new technological innovations themselves.
Limitations
There are three key limitations in this study: (1) the snowball and opportunistic
samplings through personal networking were slow so they limited time-use efficiency.
If I had had more time I might have interviewed several individuals I learned of at the end of my stay in Beijing; (2) the translation from my Chinese raw data to English
field notes was a time-consuming pain and limited some accurate interpretation of data meaning because of culture disparity and my limited English . As a result, some expressions in my findings and analyses might be difficult to be understood by
English-speaking readers; (3) Time, cost, and China’s inefficient environment limited my fieldwork to Beijing so my study may hide regional distinctions. 149
Directions for Future Research
New field research on the diffusion of MC in China should be conducted in
Guangdong Province which accounts for 40% of total Chinese cellular users and has made an ambitious development plan for MC. The researcher had better be a fluent
Cantonese speaker to easily observe the adoption phenomena in the unique province and interview the local adopters/change agents, focusing on communication channel of the MC innovations from Houg Kong and the special diffusion model of Guangdong.
The second direction for future research is to conduct a series of comparative studies. These studies could be a diffusi'’;i r comparison at international level between China and certain developed ( o n;n s *he US, Japan, and Europe, or between China and certain develcpi >u!!Ln>. !u,. India, Brazil, and Mexico. They could also include the comparative studies ; ;v > rincial level between certain provinces of China, such as between Sichuan and Shandong or between Guangdong and Taiwan. The comparative studies at metropolitan level between Shanghai and
Hong Kong or Beijing and Singapore would also help provide interesting references to understand the diffusion patterns with Chinese and overseas Chinese characteristics.
Quantitative methods for diffusion process research should also be applied, though random sampling, questionnaire wording, and participant cooperation for a large-scale survey could be difficult in China. The quantitative researchers should establish relations in advance with the State Development Center and China Academy of Social Science. In this institutional way, the researchers would not only be able to collect more data, but also be able to obtain trained Chinese assistants for surveys or experiments and to access computing facilities for statistical analysis. The quantitative studies would provide more objective result and appropriate generalization. 150
C on clusion
Mobile communications have been diffused rapidly in the developed countries and have been diffusing into China since the mid-1980s. This impetus is called the
Wireless Revolution by the West, driven by continuing wireless innovations and led by market demands for MC. The time from the 1980s to 2000 is seen by many telecommunications experts as a key time to show the impact of the Revolution on the way people work, live and communicate.
The time from 1980 to 2000 is also seen by the Chinese leaders as a key time to show the consequences of China's socioeconomic transition. China has become in many respects a leading player in the world economy and is eager to join the
Information Age. China’s increasing socioeconomic activities and still-inadequate communications/transportation capabilities are generating a need for diffusing wireless innovations and a huge market potential for adopting mobile communications.
The coincidence of timings is propitious to study the diffusion process of mobile communications in this unique developing country. The increasing importance of the Wireless Revolution to communications and of China to the world adds values to this study. Theoretically, the study helps examine the appropriateness of the diffusion theory to China. Practically, the study is an attempt to provide, from a
Chinese perspective, understanding of how MC innovations were introduced into the changing society for people who are interested in wireless technology, China's market, and its telecommunication sector.
In conclusion, the diffusion of MC in China depended on foreign technology transfer, was driven by domestic market mechanisms and unique social/cultural factors, and has led to changes in China’s communications infrastructure and policy. APPENDIX A
PROFILE OF MAINLAND CHINA
Note: Data in Appendix A is largely compiled from the Chinese media reports, conference papers and the Business China, and from the current E-Mail news.
Population: 1.2 billion; comprises almost one fourth of world population.
Size: The third largest country in the world, slightly larger than the US. Divided into 27 Provinces & three Central Cities: Beijing, Shanghai, & Tianjin. There are more than 400 cities, 2,200 counties, and 54,000 townships. GDP: US$ 500 billion in 1993. Economic growth rates: 13.4% in 1993, 12.8% in 1992; Average annual rate since 1979: 9 %. Planned average annual rate between 1994-2000: 8-9%. Key provinces and cities (Share of 1992 GNP): Guangdong; Jiangsu; Shandong; Liaoning; Shanghai; Heilongjiang; Fujian; Beijing; and Tianjin. Regional purchasing power (1991 rank): Guangdong; Greater Shanghai; Greater Beijing; Southwest; Northeast; Northwest; and Central provinces.
Number of millionaire in China: one million by end of 1992. Trade rank in 1993: the 11th largest in the world with $195.8 billion. Largest trade partners (ranked in order, 1993): Japan; Hong Kong; the US; Taiwan; Germany; Russia; S. Korea; and Singapore
China intention of spending on imports during 1 9 9 3-9 5 : $2 (X) billion
Foreign direct investment in 1993; US$ 15.2 billion.
Largest investors (ranked in order, 1993): Hong Kong & Macao; Taiwan; the US; Japan; Singapore; Britain, Thailand; Canada, Germany, and Australia
151 APPENDIX B
PROFILE OF CHINA'S TELECOMMUNICATIONS
Note: Data in Appendix B is largely compiled from the Chinese media reports, conference papers, the Business China, and from the current E-Mail news.
Total telephone exchange capacity: 42 millions (as of the end of 1993) Telephone penetration rate: 2,15% (as of the end of 1993) Rate of long-distance phone via prog ram-control exchange: 99% (as of the end of 1993) Mobile telephone users: around 784,000 (as of the end of March 1994) Radio pager users: around eight million in both public and private networks (as of the end of March 1994) CT-2 systems: first in Shenzhen in August 1992; a dozen cities set up it as tech- market trials Imported US telecommunications equipment: $460 million worth (1987-91) China's three-tiered administrative hierarchy in public telecommunications networks:
Top —Ministry of Post & Telecommunications (MPT) dictates network standards, sets interconnection policies, influences the country's telecommunications development policies, and approves major business deals with foreigners.
M iddle —province telecommunications bureaus (PTBs) are in charge of developing and operating the networks within their province territories, and approve small deals with foreigners;
Bottom —county and local telecommunications bureaus, handle telecommunications service and maintenance in town and rural areas.
152 153
China's goal for mobile communications by end of 1995: 1.5 million cellular phone users and 15 million radio paging users; interconnection of the 3-4 most developed regions* cellular networks; free roaming between all provinces and the four key cities (Beijing, Shanghai, Tianjin, and Guangzhou). China's plan to modernize its telecommunications by 2000: (1) increasing switching capacity to 140 million lines from current 42 million; (2) increasing number of phones to 100 million lines; (3) installing 16 long-distance fiber trunks to cover all provincial capitals, linking 300 cities; (4) installing 2,000 satellite earth stations; and (5) adding 3 million cellular phone customers. MPT's planned telecommunications investment between 1996-2000: $42 billion (but the West estimated at least $70 billion needed if China can really reaches its goal of 140 million phone exchange capacity in 2(XX))) Private telecommunications networks owners and non-MPT dedicated systems customers: military, police, ministries of railway, transportation, energy industry, coal, water resources, and forests. World Bank is preparing its first loan for China's telecommunications sector: a $200 million loan for both network expansion and institutional reform in 1994. Major wireless/mobile communication equipment suppliers in China: Swedish Ericsson, US Motorola, and Japanese NEC and Mitsubishi.
Foreign telecommunications market access strategies: direct sales, product exhibits, system trials, establish in-China production facilities like JVs to position market share, and technical and managerial training.
China's three "Golden Infrastructure Projects": (1) building China's version of American National Information Infrastructure; (2) development of foreign trade information network; and (3) improvement of electronic banking system. APPENDIX C
MULTINATIONALS IN CHINA’S TELECOM MARKET
Note: Data in Appendix C is largely compiled from the Chinese media reports, conference papers, the Business China, and current E-Mail news.
Alcatel: The No.l supplier in China’s public switching equipment market through its various subsidiaries commands 31.2% market share in 1993. Its Shanghai Bel) is one among the best-operating joint ventures in China. It held a 50% share of China's digital switching market and 25.7% market share in stored-prograni- control (SPC) exchanges; and had its networks in 27 provinces in 1992.
AT&T: Has set up China's first AMPS-800 analog cellular networks in five western provinces. It announced a sweeping agreement with China running into one billion dollars and may reap billions in revenues over the next decade. Ericsson: One of the two leaders in China's cellular phone market holds a 60% share and has manufacturing operations. Set up the first GSM cellular network in Shenzhen, Ericsson sees China its main market and has a couple of GSM trials in China. The second leader in switching equipment market has a 23.6% share in China in 1993.
NEC: had 23.3% market share in line capacity and three manufacturing JVs by early 1992; about 20% share in cellular networks in Northeastern China in 1991. North Telecommunications: The third leader in China’s switching equipment market holds 19.1% share in 1993. It held 17-20% of the market for PBX switches and 8-9% of the central switch market in 1992; has two JVs.
Siemens: One of the main suppliers for line and switch manufacturing in their JVs with China. In March 1993, Siemens Shanghai Mobile Communication Ltd. has received two orders for the supply of turn-key mobile telephone networks in Shenzhen and Shanghai in one year, which work according to the European digital cellular phone standard (GSM). Motorola: Another leader in China’s cellular mobile phone and pager market, sharing the burgeoning market for mobile telephony with Ericsson and NEC. It occupies 40% of market share in China's mobile communications and has manufactures in the cities of Tianjin and Hangzhou. It has been thought as the most successful US company in China and its brand has popular user acceptance; has established a few CT-2 networks in China.
154 APPENDIX D LIST OF THE CHINESE OFFICIAL INTERVIEWEES
Chen, Taiyi - Professor & retired Chief Engineer, Communication Department of the People's Liberation Army of China
Dong, Aiguo - Business Manager, AT&T Network Systems, AT&T China, Inc.
Huang, Zhijiang - Business Manager, Beijing CATCH Communication Group Co.
Huang, Zuping - Deputy Division Chief, Department of Technical Transformation of State Economic & Trade Commission of China
Huo, Jerry - Senior Marketing Planner, Beijing Branch of Land Mobile Products System, Motorola (China) Electronics Ltd.
Jiang, Shan - Project Manager, Division of Technology, China National Posts & Telecommunications Industry Corporation
Lai, Guozhu - Vice Chairman & Chief Secretary of Communication Society of Chinese Institute of Electronics
Li, Chengshu - Professor, Director of Modern Communication Research Institute at Northern Jiaotong University
Li, Mofang - Master Engineer, The Research Institute of Telecommunications Transmission, China’s Ministry of Posts & Telecommunications
Li, Zhigang * Section Chief, The Policy & Regulation Department of China’s Ministry of Posts & Telecommunications Lu. Ming - Senior Editor of China Information Exchange Center.
Ma, Xiaoyi - Editor, Guang-Ming Daily (The official Chinese daily covering education, science & technology, and culture)
Qie, George - Marketing Executive, International Cellular Infrastructure Division, Beijing Branch of Motorola (China) Electronics Ltd.
155 156
Sun, Jiang - Editor, China Electronics News and The 1993 Proceeding on Development & Prospect of China's Mobile Communications
Sun, Lin - Director for China Technical Marketing, Asia-Pacific Office of ComStream Ph.D. in Telecommunication from Michigan State University.
Sun, Xiaoli - Specialist, Stryker's Far East Ltd.
Wang, Yingchun - Professor, former Senior Engineer of Inner-Mongolia Telecommunications Bureau.
Wang, Yue - Engineer, the Research Center for Development of Economy & Technology at the Ministry of Posts and Telecommunications
Yang, Shoucang - Manager & Engineer, Beijing Hongfei Communications Technology Ltd., China National Posts & Telecommunications Industry Corporation
Zhai, Xiangqian - Senior Editor of People's Daily Overseas Edition.
Zhang, Xingsheng - Manager for Business Development, Beijing Representative Office, LM Ericsson International AB APPENDIX E QUESTIONS ASKED IN BEIJING
Name & Title of Interviewee: Sex & Age: Date: & Time: Occupation: Place & Phone #: Mobile Phone User:
I QUESTIONS FOR THE CHINESE PROFESSIONALS (Chinese officials and experts)
Q1. TELL ME YOUR GENERAL IMPRESSION ABOUT CURRENT SITUATIONS OF MOBILE COMMUNICATIONS IN CHINA.
PROBE 1. What kinds of wireless communications systems are diffused or planned to introduce in China?
PROBE 2. Who are the main users of mobile communications?
PROBE 3. Which institutions involve in development of mobile communications in China?
PROBE 4. Please give me some statistic data to show the development of mobile communications in China? And tell me the current costs for personal devices and service charge.
PROBE 5. What are the unique features of China in the diffusion?
PROBE 6. What is MPT's present policy or attitude toward development of mobile communications?
Q2. HOW DID MOBILE COMMUNICATION EVOLVE FROM THE PAST?
PROBE 1. What was the origin of China’s mobile communications? PROBE 2. What were the key time points in the diffusion of mobile communications in China?
157 158
PROBE 3. What factors have driven the explosive diffusion since 1992?
PROBE 4. What are the roles of non-MPT ministries in the diffusion ?
PROBE 5. What criteria guided the choice of the mobile communications?
Q3. DO YOU THINK CHINA SHOULD FAVOR DEVELOPMENT OF MOBILE TELEPHONY TO SPEED UP MASSIVE ACCESS TO TELEPHONE SERVICES? AND WHY?
PROBE L What are the advantages of building mobile communications system in China?
PROBE 2. Do you know any adoption practices of mobile communications in Hong Kong, Taiwan, and Singapore? What are the useful ideas drawn from their experiences?
PROBE 3. How do you think about the opinions from the West that mobile communications will be a fast, economically efficient alternatives to enhance massive access to' modem phone services?
PROBE 4. In your opinion, under what conditions, the Chinese can access to mobile telephony services on a massive level? Elaborate them.
PROBE 5. What are your personal concerns about development of mobile communications in China?
Q4. HOW IS THE RADIO SPECTRUM MANAGED IN CHINA?
PROBE 1. Who is in charge of China’s radio spectrum allocation? And which institutions can control frequencies?
PROBE 2. Is it possible that certain spectrum could be yielded by military to civil applications?
PROBE 3. What were the reasons and implications of the new radio management regulation issued in October, 1993?
PROBE 4. What problems does China face in spectrum management for mobile communications? How does China plan to solve them? 159
Q5. WHAT IS YOUR OPINION FOR STANDARDIZATION OF CHINA'S MOBILE TELEPHONY NETWORKS?
PROBE 1. Which digital cellular standard should China choose, Europe's GSM, US's TDMA, CDMA, or Japan s JDC? and why?
PROBE 2. How will China integrate the local cellular networks that were established in different standards?
PROBE 3 Who decides which standard should be chosen? And how do the Chinese know which standard or wireless technology should be diffused?
Q6. WHAT IS YOUR VIEW ABOUT STRATEGY OF DEVELOPING MOBILE COMMUNICATIONS IN CHINA?
PROBE 1. Is there any investment priority for mobile communications in near future? Or is there other balance of wire and wireless networks in financial arrangement?
PROBE 2. If no, what are the main concerns for institutions involved?
PROBE 3. How can the China's domestic industries concerned meet the challenge and step out the low ebb when China’s market is flooded with foreign mobile communications products?
PROBE 4. What kind of technology transfer is appropriate or desired for China developing mobile communications industry?
Q7. WHY DOES CHINA S MPT REAFFIRM RECENTLY THAT IT WON’T ALLOW FOREIGNERS TO MANAGE OR RUN ITS TELECOMMUNICATION BASIC SERVICES?
PROBE 1. Does the "foreigners" also include those Hong Kong or Taiwan business?
PROBE 2. Which kind of mobile communications is thought as basic service or value-added service?
PROBE 3, Are there any intentions or actions from both the foreign telecom multinationals or domestic institutions to favor the foreign operation of mobile telephony systems. If any, who have been involved? 160
PROBE 4. What are the concerns about foreign operations? State sovereignty? National security? Profit drain? and/or development unbalance of urban and rural phone services?
PROBE 5. What’s your personal opinion toward this policy? Is it possible to change in near future? If not, why not?
PROBE 6. How does it affect the foreign telecom multinationals' initiatives for more investment, technology transfer, and expertise training in China?
Q8. NOW LETS FOCUS ON THE CRITERION OR PRIORITIES OF SELECTING CERTAIN FOREIGN TELECOMMUNICATIONS MULTINATIONALS TO INTRODUCE OR IMPROVE MOBILE COMMUNICATIONS IN CHINA.
PROBE 1. Which of the foreign telecom multinationals in China are the most active in mobile communications market? Why?
PROBE 2. Which of them have good reputations in China? Why?
PROBE 3. Which of them do you think will be the best cooperation partners? Why?
PROBE 4. Are there any political considerations to select certain foreign partners? What are they?
PROBE 5. How do you know the strengths and weaknesses of the foreign telecom multinationals? How do you assess them?
Q9. IN YOUR OPINION OR IMAGINATION, WHAT ARE THE CONSEQUENCES OF THE DIFFUSION OF MOBILE COMMUNICATION ON THE CHINESE SOCIETY?
PROBE 1. How does China trace policy making, and social consequences of mobile communications in other countries?
PROBE 2. Are there comparative research or technology assessments done in adoption strategies of mobile communication in China? If no, why not?
PROBE 3. Any considerations about various implications of mobile communications to the China’s society? 161
II QUESTIONS TO LOCAL MANAGERS OF MULTINATIONALS
Ql. HOW DO YOU EXPLAIN THE EXPLOSIVE DIFFUSION OF MOBILE COMMUNICATIONS IN CHINA SINCE 1992?
PROBE 1. Market size, competition condition, and user's demands.
PROBE 2. Policy/regulation context.
PROBE 3. Level of technology and capacity of domestic production.
PROBE 4. Business communication and customer culture.
PROBE 5. The unique features of China in adoption of mobile communications
Q2. WHAT IS YOUR OPINION ABOUT THE PROSPECT OF MOBILE COMMUNICATIONS IN CHINA?
PROBE 1. Market potential and market share.
PROBE 2. Policy changes.
PROBE 3. Standard selection and technology imports.
PROBE 4. Needed pre-conditions for the massive access to mobile communications.
Q3. WHAT ARE YOUR CONCERNS AND SUGGESTIONS FOR FURTHERING THE DIFFUSION OF MOBILE COMMUNICATIONS IN CHINA?
PROBE 1. Relations with the central authority and provincial/city authorities.
PROBE 2. styles of cooperation in capital investment and technology transfer. PROBE 3. Social, political, and cultural issues. 162
III QUESTIONS TO THE AVERAGE CHINESE USERS (no formal format in random interviews)
1. Do you like to use this phone/pager? Why? In what situation do you normally use your mobile phone? Can you describe situations where the mobile phone has been useful for you? What is your opinion for the handset price and monthly service charge, or other relevant cost? Do you, or your relatives or friends have mobile phones? From when and where did you first hear of the term "mobile phones", "pagers", and "mobile communications"? How did you see them first? And why did you buy or use it.
2. What's the brand of your mobile phone (or pager)? Why did you buy it rather than other brands? Do you know which company make your phone and how do you know its reputation? Are there any comparisons, made by you or heard from others, about those companies' images of products/services, either between the foreign companies or between the foreign companies and the domestic companies?
3. Have you heard that the frequent using of cellular phone may cause brain cancer? What is you opinion about the issue? Do you have some concern about personal privacy, e.g., the government monitoring or eavesdroppers scanning your conversations? Any suggestions for adding or taking away some functions in the mobile communication devices to avoid the intrusion of anytime-anywhere communications?
4. [f most of Chinese use mobile communications devices, can you list some impacts to China’s society or social life according to your experience or imagination? What are the positive consequences and negative ones for popularizing mobile communications use in China? For instance, imagine almost all Chinese have a pocket-size, multi-function, durable battery personal phone to communicate frequently in "anytime and anywhere" mode, what do you enjoy and hate to use it? What’s your opinion to the social opinions to the Chinese mobile phone (or pager) users' manner in public locations? LIST OF REFERENCES
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