Licensing requirements at the heart of a Chinese standard for wireless LANs (WLANs) threaten to disrupt the ability of networking equipment vendors to do business in China, according to a U.S. technology trade group.
The requirement deepens a controversy over the recently implemented Chinese WLAN standard that could undermine efforts to create a global standard for wireless networks.
The Chinese WLAN standard, called GB15629.11-2003, is very similar to the Institute of Electrical and Electronics Engineers Inc.'s (IEEE's) 802.11 standard, commonly known as Wireless Fidelity or Wi-Fi, but it uses a different security protocol, called WLAN Authentication and Privacy Infrastructure (WAPI).
The Chinese standard for WLANs was approved by the Standardization Administration of China (SAC) in May and came into effect on Dec. 1, although a transition period has been granted that extends the compliance deadline for some WLAN products until June 1, 2004.
Equipment vendors that want to sell WLAN gear in China are required to offer products based on the Chinese standard.
To conform to this standard, foreign equipment vendors must license WAPI through a manufacturing agreement with one of 11 Chinese companies designated by the Chinese government, including Legend Group Ltd. and Huawei Technologies Co. Ltd., according to Anne Stevenson-Yang, managing director of the U.S. Information Technology Office (USITO) in Beijing.
The Chinese companies -- many of which compete against foreign equipment vendors -- are not under any obligation to license WAPI to foreign companies, who could find themselves locked out of China's WLAN market if they cannot reach an agreement with a local partner, Stevenson-Yang said.
"It's very threatening to foreign vendors," she said.
In addition to market access, the licensing move raises other issues. Chinese companies that license WAPI may demand detailed access to foreign companies' products and technologies, raising concerns about the protection of intellectual property rights, Stevenson-Yang said.
A Legend spokeswoman in Hong Kong declined to comment, saying the company had not been informed of the issue.
Seen as a whole, the implementation of the Chinese WLAN standard and the licensing requirements have fundamentally changed a market that had previously been open to foreign equipment vendors by creating a new barrier to trade, Stevenson-Yang said.
"Now it appears that the market is not open," she said, noting that USITO continues to discuss the standards issue with Chinese authorities.
Concerns related to WAPI have also been raised by IEEE, which is worried that the implementation of the Chinese WLAN standard will undermine standardization efforts and split the global market for wireless networking products in two: one based on the Chinese standard and one based on 802.11.
"We are concerned that mandatory use of the standard would prohibit the use of 802.11 standard products and thereby limit choice and increase costs to users," wrote Paul Nikovich, chairman of the IEEE 802 Local and Metropolitan Area Network Standards Committee, in a Nov. 23 letter to SAC Chairman Li Zhonghai and Wang Xudong, China's minister of information industry.
While Nikovich and IEEE have signalled a willingness to engage Chinese authorities on the question of WLAN standards, Stevenson-Yang questioned how much room is left for negotiation.
"We already have a published national standard and the standard has already gone into effect," she said. "Where's the flexibility?"
As talks between USITO and Chinese authorities continue, Stevenson-Yang hopes a way can be found to resolve the impasse over WLAN standards without resorting to a trade war over access to China's WLAN market.
"We're looking for ways we can remain in this market without creating a trade battle because nobody wins when that happens," she said.