Xiaolingtong, the popular alternative to mobile phones, is seemingly facing a gloomy future under the government's negative attitude towards it.

However, producers and telecom carriers are desperately trying to keep Xiaolingtong alive.

The Ministry of Information Industry (MII) recently issued a document saying the country's radio frequency resource will soon be freed up to make preparation for the coming third generation telecommunications.

The popular Xiaolingtong is widely regarded by industry insiders as a major target for the frequency clear-up.

Officials with the Radio Management Bureau of the MII confirmed that the government is trying to use policy guidance to wipe off Xiaolingtong.

"The government could not order telecom carriers and equipment vendors to stop that business but we will use policies to phase them out," said an official with the bureau.

This is a strong hint that, although Xiaolingtong's radio frequency range is not included in the clear-up range this time, it might not be so lucky next time.

The major companies involved, plus China Telecom's many provincial branches and UTStarcom - the major equipment producer - are using every device to persuade the MII to change its mind.

The technology of Xiaolingtong, originally named personal hand phone system (PHS), was introduced to China in the late 1990s from Japan, and soon got a warm market welcome due to the convenience of its usage and low costs.

Xiaolingtong looks like a mobile phone and shares the same number overshadow with a fixed-line telephone. Therefore, the user can use it as a mobile phone within the city range.

In many small cities, Xiaolingtong has become a very strong competitor to the mobile phone market, as it has most functions of mobile phones, and charging as a fixed-line phone.

The MII has shown negative attitude from the very beginning of Xiaolingtong's development, claiming it is a relatively outdated technology and not good for cities' outlook.

The base station of Xiaolingtong can support very few users. In a densely populated city, there has to be many Xiaolingtong base stations to support people's simultaneous use. Overcrowded base stations are also said to hurt the city's outlook.

And Xiaolingtong's base station has a lower power output than mobile phone providers, making it extremely difficult for users to make phone calls in a building or on a fast-moving vehicle.

However, cheap charging still attracts many customers, with increasingly more telecom carriers regarding Xiaolingtong as their new revenue pool.

The rapid development of Xiaolingtong actually shows China Telecom's strong demand for mobile telecom business.

The growth rate of this dominant fixed-line carrier has been significantly overshadowed by those of the mobile telecom carriers, China Mobile and China Unicom. To change the low growth situation, together with the market saturation for the fixed-line telephone, China Telecom is strongly vying for a mobile licence, yet the government turned it down to avoid monopoly.

Xiaolingtong, which does not need such a licence, has, therefore, become a development priority for many local branches of China Telecom.

Sichuan Telecom, China Telecom's branch company in Southwest China's Sichuan Province, said in its yearly development plan that Xiaolingtong will become its development focus.

China Railcom, the country's second biggest fixed-line carrier, also signed a contract with UTStarcom recently to adopt Xiaolingtong as a new revenue contributor.

Xiaolingtong has attracted more than 3.4 million users, of which more than 2 million are customers of UTStarcom, according to the company.

"Xiaolingtong will continue to exist as long as fixed-line telephones are still in use," a company spokesman said. "It plays a supplementary role for the fixed-line phone and will not hurt the rapid development of the mobile telecom industry."

Xiaolingtong will soon start to provide value-added services, including short message service, wireless e-mail, Internet access and MP3 downloading.

Supported by more interesting usage, Xiaolingtong's competitive edge is likely to sharpen and may grab more potential users from China Mobile and China Unicom.