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Friday, April 02, 2004 9:47:55 AM
After smoldering for months, the dispute over China’s new mandatory Wi-Fi security protocol has suddenly flared into the most serious Sino-American tech trade issue since the long tussle over CDMA.
At this rate, it is heading before a WTO tribunal. But Inside Line predicts that won’t happen. This issue is more about China testing its strength by making a run at global vendors than about real encryption or technology issues.
The Standardization Administration, an agency under the State Council, and the State Encryption Management Commission, which are driving the issue, announced the new standard, the WLAN authentication and privacy infrastructure (WAPI), last May, to be implemented by December 1, though they have pushed back the deadline six months to June 1.
Under the rules, foreign vendors must work with one of 24 nominated domestic vendors, such as Legend or Huawei, to develop products for the market.
They say the new standard is required for security purposes.
China has not ratified the security protocols set down by IEEE for the 802.11a, b and g family of standards. But international vendors have, including chip leader Intel, which is the most vocal in opposition.
Intel has spent the past three years pushing its Centrino chipset, which it hopes to embed in nearly every laptop in the world. Obviously, if WAPI goes ahead, that’s not going to happen.
An Intel spokesperson told Inside Line that despite the impasse, Intel is working with other players and the Chinese authorities to try to come to an agreement on a standard, but can’t see how it can solve the technical and interoperability issues.
That’s what the parties are saying on the record.
The US vendors and their government really see it as shakedown – a protectionist scam in which foreign players are forced to share their expertise with domestic vendors.
Hypocritical
What’s interesting is China’s reading of the market. They have decided the vendors need China more than China needs the vendors. As a divide-and-rule strategy, it could be a masterstroke; US-based Texas Instruments and Atheros Communications, and Taiwanese developers D-Link and CyberTan all reportedly support WAPI.
But when set against China’s black-letter WTO commitments and its espousal of the “open policy,” it is frankly disappointing if not downright hypocritical. Other major markets, such as Europe or Japan, could make the same arguments in favor of their own standard, but choose not to.
Lining up with Intel is chipmaker Broadcom and industry bodies like the Semiconductor Industry Association (SIA) and the US Information Technology Industry Council. Cisco is, for the time being, sitting this one out.
But WAPI is also on Washington’s radar – a sign that the US sees it as a dangerous precedent. A letter from Secretary of State Colin Powell, Commerce Secretary Donald Evans and US Trade Representative Robert Zoellick went to Beijing in March rightly describing the new measure as a trade barrier and urging a compromise.
The Chinese position was aired by Jiang Qiping, secretary-general of the Information Research Institute of the Chinese Academy of Social Sciences. He told China Business Weekly: “It makes no sense for a country to have its core information technology controlled by others while the domestic market is wide open to foreign players.”
One would have thought that a liberalized market by its nature was open to domination by players foreign or local.
In their defense, the Chinese could point to their unhappy experience with CDMA – technology foisted on them as an equally cynical condition of their entry to the WTO. Unicom, as the fall guy, has spent $2 billion on CDMA network equipment and continues to bleed money.
The MII has played off foreign vendors quite astutely over the past 24 years, creating from a blank slate one of the world’s biggest communications industries, with its own champions.
It also picked up early work done by Siemens and Alcatel and proposed the technology as an alternative 3G standard, known as TD-SCDMA. It can now use that as a lever to push down the price of W-CDMA and cdma-1x license fees.
Their gameplan on Wi-Fi is sharp on tactics but short on strategy. It also doesn’t do much for domestic consumers, denying them access to the best technology at the best market prices.
At the National People’s Congress in early March Premier Wen Jiabao announced a new “people first” economic and development strategy. The WAPI requirement treats the WTO, foreign vendors and Chinese consumers with equal measures of contempt.
Robert Clark is former group editor of Telecom Asia and director of independent consultancy Protocol Research rclark@protocolresearch.com
http://www.telecomasia.net/telecomasia/article/articleDetail.jsp?id=89901
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