An article last week by India’s Economic Times newspaper claimed that the Indian telecoms authorities are set to reserve chunks of 2G and 3G spectrum to be exclusively used to develop indigenous telecoms technology. This is the same model used by China to encourage the development of the TD-SCDMA 3G technology currently used by China Mobile.

Superficially, this looks like a benign move by the Indian government. Actually, it’s possible to see it as a positive development that India is following China in supporting its own technical innovation. It could be seen as a sign of economic maturity that India is now backing its own telecoms industry. So who might follow the Indian lead in the future? Maybe Russia or Brazil? Surely, the more national governments who back innovation the better for the telecoms industry. The sum total of investment in new technology is bound to increase. It could even be argued that having leading non-western economies such as India investing in telecoms is positive because it acts as a counterbalance to the west’s historic dominance of the industry, from Ericsson to Nokia to Apple. For a country like India, having its own technology might lessen its dependence on foreign imports. Who knows, we might see an Indian equivalent of Huawei and ZTE emerge. Initially such a contender might pursue a low-cost model to break into global markets. This would be to the benefit of mobile operators everywhere, by pushing down equipment prices.

The next step for vendors moving beyond the low-cost model is to accrue their own intellectual property. For instance, ZTE and Huawei control 7 percent and 8 percent, respectively, of LTE essential patents as declared on the IPR database of standards body Etsi (figures from end-November 2010). It should be noted that the volume of LTE patents does not necessarily equate to quality but, still, it is impressive that the two Chinese vendors are neck and neck with rivals Ericsson, Nokia and Samsung, and only slightly behind patent leaders InterDigital and Qualcomm.

Nearly a year ago, an opinion piece in the Economic Times argued in favour of “a new state-owned enterprise (SOE) to make telecom network equipment”. The country should have its own manufacturing capability for “long-term comparative advantage and to protect national security”, the newspaper said. It went on: “Modern telecom equipment is basically software. Even the hardware is a lot of software preprogrammed into microchips. India is supposed to be good at software”. But none of the country’s software giants such as Wipro, HCL, Shyam, Himachal Futuristics or TechMahindra have shown an interest in telecoms equipment. “Indian industry has chosen to abdicate this vital sector to foreign companies,” it concludes. Hence, the Indian state has decided to step in. But has it been wise?

Finding the next ZTE might be one outcome of government support for the telecoms industry. Or that could be a far too optimistic view. The alternative is wasted time and money working on a technology that will have little traction in foreign markets (think TD-SCDMA). Worse, if a government like India’s did succeed in persuading other countries to adopt its new technology (through generous vendor finance, for instance), the telecoms market would have to deal with a lack of interoperability, and the threat of fragmentation. Maybe governments should resist their nationalist urges and stick to working via established bodies. Or rather express new-found self-confidence by becoming a force on standards organisations and exerting an influence that way. It’s a more cost-effective option too.

Richard Handford

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members