There are many vexing problems being pondered in Beijing's corridors of power, and high among them is the future direction of the telecommunications sector. In the past few years, it is hard to find another industrial restructuring that has so many unexpected twists and turns. Now, the streamlining of major operators and awarding of third-generation (3G) mobile system licences are among the most hotly debated issues at the central government, among industry officials and in the official media. The stakes are enormous. Three 3G licences are expected to be issued and up to 600 billion yuan spent on setting up 3G networks nationwide. This is probably the last fat pie left for salivating international and domestic telecommunications makers and operators. However, seats at the dinner table are limited, explaining why waves of intense speculation have persisted since last year over when the licences will be issued and which operator will get what kind of licence. The saga is most likely to continue well into next year as the leadership struggles to make a decision, torn by ferocious lobbying by various powerful interest groups representing all the major European and United States giants and the mainland telecommunications operators. Putting aside the lobbying distractions and making a decision best for the country's telecommunications development will sorely test Beijing's leadership skills and political wisdom. So far, there has been little sign of either. Like almost all other major policy decisions, the push to introduce 3G is politically driven as Beijing has committed to providing the services in 2008, in time for the Summer Olympics Games to be held in the capital. This means the central government must issue the 3G licences soon to enable the operators to build the networks over the next two or three years, in time for 2008. While mainland officials remain coy, the industry consensus is that three national 3G licences will be divided among the four major operators - China Mobile, China Telecom, China Unicom and China Netcom. The other two smaller operators, China Tietong and China Satcom, are most likely to be merged into the larger operators. To make matters more complicated, the three 3G licences will carry three different standards - the European-based WCDMA, US Qualcomm-based CDMA 2000 and the home-grown TD-SCDMA. However, industry analysts said there were several major sticking points that prevented the government from releasing the licences quickly. One involves restructuring the four big operators, given that there are likely to be just three licences. A possible splitting up of Unicom, the weakest of the four, has been the subject of intense media speculation all year. But officials from the company have reportedly put up strong resistance to any attempt to break it up. Another sticking point involves the technological readiness of TD-SCDMA. The home-grown standard, if adopted, could become a symbol of China's technological advances and help avoid royalty payments to the European and US developers of the other standards. The Chinese technology has had some teething problems and performed poorly in a recent test run, giving the government a difficult time persuading operators to adopt the standard. More importantly, many officials and analysts have begun questioning the wisdom and necessity and the scale of the ambitious plan to launch three 3G networks nationwide. Each fully fledged network would cost up to 200 billion yuan to establish. Judging from the experiences of the sector in Europe and Hong Kong, consumers have had mixed reaction to 3G services and operators are likely to have to wait many years before seeing any profit. Analysts have said the leadership appeared to have confused its short-term and long-term needs. The political grandstanding of providing 3G services for the 2008 Olympics does not justify three fully fledged 3G networks nationwide. The central government could issue one limited licence to enable the running of a regional 3G network to service the greater Beijing area for the Olympics. This would have many benefits. It would meet China's immediate needs and become a benchmark test of the reliability and stability of the technologies and services for expansion nationwide.