Last week there was a flurry of stories about China’s 3G plans after Jonathan Dharmapalan of Ernest & Young was quoted as saying he expected it to take 12 to 24 months from the start of China’s commercial TD-SCDMA trials, i.e. from now, until 3G licenses were issued. But there was little analysis or comment on what’s really happening.

3G licenses are a formality. They delay the deployment of 3GSM & CDMA 2000 which could otherwise happen rapidly—just plug new cards into existing radios and offer established handsets (already being manufactured, in China, for the world market).

Chinamobilelogo China 3G is happening, without licenses. China Mobile Group already has deployment-scale TD-SCDMA radio networks on assigned, but not “licensed” frequencies, in eight cities. The bottleneck is TD-SCDMA handset silicon. Commercial trials were finally enabled by the recent delivery of an initial batch of 60K handsets. This also allows China to meet, at least technically, their pledge to have 3G service in time for the Olympics.

Dharmapalan is speculating that it will take 12-18 months of commercial trials to get the bugs out and the system to scale. That’s plausible. If so, it will be 12-24 months before “licenses” are granted, i.e. before 3GSM and CDMA 2000 deployments are allowed to proceed in parallel with TD-SCDMA.

The problem is China’s patent position. The core patents for 3G and for 4G are already held by the likes of Ericsson, Nokia, and Qualcomm. TD-SCDMA provided a way for China to obtain patents on a specific 3G implementation and the size of China’s market makes that implementation interesting to Ericsson, etc. Since China missed the boat on core patents for both 3G and 4G, expect TD-SCDMA and it’s 4G successor to exist on a parallel path for the next 10-20 years.

The good new is commercial TD-SCDMA deployments have finally started.

I’m most interested in 3G applications. China has a vibrant market in value-added services for 2G. As more and better TD-SCDMA handsets get deployed, we should see some really interesting innovation coming out of China—innovation that will be applicable to any 3G technology, anywhere in the world.