Chapter 24: Shouldering the Burden of Righteousness

Eating hot pot in May is hardly a wise choice. Before long, all three of them were drenched in sweat. Yet, for those exhausted by a long day, perhaps there is a genuine need to release the fatigue pent up inside through such a vigorous, heart-pumping meal.

Quan Shunyu took a sip of ice-cold beer, cleared his thoughts, and then laid it all out for Gu Cheng: "As for the second matter... I'm just asking casually. You’re considered a prominent figure in the Chinese internet scene now, so I was wondering, what are your relations like with the network operators?"

Gu Cheng was frank: "Not great. I don’t play the game of official-commercial collusion. Those massive state-owned enterprises with hundreds of billions in capital—why would they look twice at a small company like ours with only a few hundred million?"

Quan Shunyu was slightly surprised; this was a response he hadn't anticipated. He had been projecting his own mindset onto Gu Cheng, assuming that someone achieving so much at such a young age must have climbed the ladder through political patronage. Especially given Gu Cheng’s performance during their previous collaborations, the deception was quite convincing.

"I see... then there really isn’t much you can do to help with this."

Gu Cheng slapped Quan Shunyu on the shoulder. "Don't dither. Whether I can help or not, just tell me about it first."

Quan Shunyu deliberated before speaking: "It’s a brokerage business, and I’m not sure if you’d be interested. Of course, there isn't much money in it, but the key is to do someone a favor. China Unicom is currently in talks with SK Telecom and Samsung to introduce the CDMA network standard. Samsung and SK Telecom want to go all-in, selling the complete version of CDMA, but the people at China Unicom aren't interested. They’ve been pushing to lower the price and only buy a 'castrated' version—pure voice communication services—without the full data-access capabilities of CDMA. So, they’re looking for intermediaries through various channels to mediate."

The matter was quite technical. Fortunately, Gu Cheng had some common sense regarding the history of mobile internet development from his previous life. After a few minutes of repeated confirmation, he finally understood what Quan Shunyu was talking about.

Historically, in 2002, China Unicom aimed to "gain an opportunity to reverse its competitive disadvantage against China Mobile by upgrading to a new generation network standard." While mobile was still sticking to the 2G GSM network, Unicom was the first to introduce the 2.5G CDMA. When Unicom first entered the CDMA era, almost all the handsets on the market were from Samsung, showing that the Easterners were the primary movers behind this network upgrade. In reality, the deal involved more than just Samsung; while Samsung sold the handsets, the biggest beneficiary of the network-side base station equipment sales was a subsidiary of SK Telecom. SK is one of the five major conglomerates in the East, slightly smaller than Samsung and Hyundai, but stronger than LG and Lotte.

To be fair, when the Easterners were pushing CDMA technology to China Unicom in 2002, the price was quite reasonable—a rare low-ball offer. However, there was a hidden motive: during the negotiations, SK Telecom and two other telecom operators had received strict orders from the Eastern Ministry of Foreign Affairs and the Ministry of Culture and Tourism. To coincide with the World Cup, the three major operators had to upgrade their networks to the 3G era before the tournament began in June. In other words, SK Telecom, which used the CDMA standard, had to upgrade its network to EVDO (CDMA2000). Once upgraded to EVDO, CDMA technology would gradually be phased out domestically, so SK Telecom and Samsung were desperate to dump this burden onto China Unicom.

However, from China Unicom’s perspective, CDMA was indeed half a generation ahead of what they were currently using. As for being six years behind the Easterners, strictly speaking, that wasn't necessarily a bad thing; it might have even better suited the national conditions of China. Historically, SK Telecom had been operating a CDMA network since 1996; by dumping it on China Unicom in 2002, Unicom was exactly six years behind. Six years later, in 2008, the CDMA network, which had been transferred to China Telecom, finally started upgrading to EVDO—again, exactly six years behind SK Telecom. Before the 4G era, China’s mobile internet was consistently six years behind the "barbarians." The executives at Unicom and Telecom thought this was perfectly normal and saw no issue with it.

Currently, the 2002 World Cup was only a month away. The preparations for the network upgrade in the East were already complete, waiting only for the official announcement of the new packages in June. Meanwhile, China Unicom was still embroiled in internal infighting over how to introduce CDMA. Could the Easterners not be anxious?

Although this deal benefited the Easterners, Gu Cheng was eager for Unicom to accelerate the introduction of CDMA. After all, this would trigger a new wave of network upgrade wars among domestic operators, which would benefit all internet companies. He was currently being hindered by lag when trying to use YY’s zero-delay voice chat groups! This situation was akin to having built a Malacca-class supertanker, only to be told by the port authority that there were no berths large enough, or having built an A380, only to be told the airport lacked a runway longer than two kilometers. Gu Cheng wouldn't let any opportunity to whip infrastructure into shape slip by.

So, he pressed for details: "Why is Unicom unwilling to go all the way and upgrade to the full version of CDMA, preferring to pay a bit less for a castrated version instead?"

Gu Cheng couldn't fathom this.

Quan Shunyu replied helplessly: "According to reports from the negotiations, word is that Unicom believes the internet winter will last a long time, so they think there’s no market for the data-access portion of CDMA. They only have their eyes on the voice quality and low radiation of CDMA, wanting to use that to lure users away from Mobile."

Even within the 2.5G CDMA network, there were many versions, just like how in the 3G era, mobile internet speeds were split into HSDPA, HSUPA, HSPA, and a dozen other sub-versions. The original "castrated" version of CDMA offered better voice quality and lower radiation than 2G GSM, but the data speed improvement was negligible. Only the final "complete" version could reach speeds of 153KB per second, about eight times faster than GPRS’s 20KB. Historically, Unicom did eventually introduce the 153KB/s version and launched internet-enabled phones and USB modems, but that was in 2004—one year after the internet winter ended.

In 2002, unsure of when the winter would end, Unicom’s cautious state-owned enterprise mentality led them to spend a little less on the castrated version rather than doing it right the first time. This move later led to a series of redundant construction and waste; what could have been done once had to be split into two laborious rounds, as the 2002 base stations quickly became obsolete, forcing another hardware upgrade in 2004. Even worse, this behavior created a negative precedent, showing China Mobile that "it is possible to squeeze the people twice by doing things in two steps instead of one."

When China Mobile decided it needed to upgrade its mobile internet in 2006, despite the availability of mature 3G technology worldwide, they insisted on using the "2.75G" EDGE for a year and a half. Only when they realized the public wouldn't bite—people refused to use EDGE and wouldn't let Mobile fleece them—did the state-owned giants reluctantly announce their entry into 3G in 2008. The detours taken by CDMA and EDGE wasted at least 30 billion RMB in redundant construction costs. (Given that total national network construction expenditure in the 3G era exceeded 700 billion, this waste accounted for about 5%.) Actually, with China’s communication technology reserves at the time, they could have entered 3G as early as 2006.

Now that Gu Cheng had stumbled upon this, he couldn't stand by. Unicom, though small, was a lever; the deployment of CDMA data services would make fixed-broadband operators like Telecom and Netcom feel the crisis, sparking speculations of "Will China Mobile follow suit?" and triggering an "arms race" among all broadband operators. Any dog-eat-dog scenario between state-owned enterprises is beneficial to the people. Of course, Gu Cheng wasn't doing this for the Easterners, but purely for himself and the country—because regardless of whether he intervened, Unicom would eventually buy the full CDMA version from SK Telecom, just not in 2002, but delayed until 2004.

"It seems the key now is to find a way to lobby the Unicom executives, to make them believe that 'the internet winter will soon pass, and upgrading to the full CDMA version now to provide everyone with 153KB/s mobile internet is just right.' Only then can the rest be discussed." Gu Cheng pondered.

State-owned enterprise management is cautious; they aren't as willing to gamble their lives like private entrepreneurs. Simply relying on empty words and economic forecasts wouldn't sway them; he needed concrete evidence and a landmark event to prove his point. It was such a headache.

That night, he chatted with Quan Shunyu further, obtained all the detailed materials from the negotiations between SK and China Unicom, and spent the entire night reading through them. Two days later, after finishing his work in Hanseong for the concert preparations, Gu Cheng flew back to China.

He first sought out the lead negotiator for Unicom, a vice president surnamed Chen. Thanks to his status in the domestic internet circle, the executive reluctantly granted him an audience. Gu Cheng laid out his vision, even risking disclosure of the YY development project, promising that "if Unicom dares to launch the full CDMA data service, I, Gu Cheng, am willing to port YY to the new phones and contract for 1 million mobile YY voice chat group packages."

The condition was immediately rejected by Vice President Chen. The way the man looked at him was as if he were an alien: "Are you kidding? If people can use mobile data for voice chat, what happens to the decline in voice call revenue? Are you here to build a platform or tear one down?"

Gu Cheng realized his ideas were too ahead of their time, a bit naive. His direct contact with Unicom ended in failure, and he could only look for another way to save the country through indirect means. He returned to Qiantang, feeling temporarily at a loss.