A telecommunication regulator's job seems a thankless task. In Hong Kong the problem is issuing too many third generation (3G) licences, in the mainland it's too few. The State Council is considering handing out only two 3G licences, despite earlier promises that none of the country's four main telecommunications companies would be left empty-handed. For industry decision makers, 3G licensing is a minefield of competing interests. The decision to ration licences is in part a question of affordability. Building just one 3G network across a country the size of China could cost as much as US$80 billion. And this sort of investment is not easily justified at a time when electricity is being rationed because of power shortages. Another recurring consideration is the potential for burdensome royalty payments. Qualcomm, the creator of CDMA2000, charges royalties of 5 per cent to 6 per cent on handset sales. If South Korea paid US$296 million in intellectual property rights to the United States firm last year, the mainland's annual foreign exchange remittances could potentially run into the billions. Ironically, however, the only standard guaranteed a mainland roll-out is CDMA2000. Despite the royalties, its big advantage is existing networks that can be upgraded cheaply using only new software and handsets. Using its own 3G technology standard would, of course, lessen China's dependence on Qualcomm. But then China's TD-SCDMA technology is a minnow next to WCDMA, which is being introduced across Europe. If only two licences are being considered, WCDMA could nevertheless lose out given a recent increase in political support for the homegrown standard. TD-SCDMA and WCDMA require new networks, so from a cost perspective there is less to separate them. TD-SCDMA proponents could conceivably strengthen their hand by playing up the teething problems initially encountered by Hutchison's WCDMA-based 3 networks. A delay in licensing, as is now expected, should also help the domestic standard, and even a relatively small-scale TD-SCDMA launch could conceivably give it critical mass and export potential. Beijing is undoubtedly aware that as the largest mobile phone market in the world with 300 million users, its decision on 3G technologies will send ripples across the world. As it negotiates royalty fees with western firms, its ambiguous stance is only likely to strengthen its hand.