37 posts tagged “handset”
3G value-added services will be cheap, but not so cheap as you have expected.
[+] The pricing of video phone service
As a result of the fierce battle for subscribers between operators, 3G value-added services eventually become a secondary role. In the long-term, however, mobile subscribers will gradually accept the services and use them more than they did in the 2G time. In fact, subscribers first switch to 3G because of attractive voice fee rates. Then they begin to use more value-added services because of faster Internet access speed.
Generally speaking, the most talked-about 3G services include video phone and streaming media. With video phone, you will be able to see the one you are calling. Of course, you can also dial a number to watch a live broadcasting program. Streaming media, on the other hand, enables users to watch audio/video programs via the Internet, mostly by logging onto portals of operators with handsets.
Voice service, video phone and streaming media, how should the three services be appropriately priced? First, as video phone consumes 4 times of bandwidth than general voice calls do, should it be 4 times as expensive? The answer is no, because 4 times is pretty scaring. Most operators offer rates ranging between 1.2 to 1.5 times.
Due to privacy and courtesy concerns, video phone is rarely used. Some people argue that operators should offer lower rates to increase use of video phone services. The fact is, however, low price is probably not sufficient to eliminate the privacy concern. Operators even believe there are reasons you have to use video phone (e.g., your wife requires you to). Is there any other chance of earning such easy money?
[+] The pricing for streaming media
Streaming media service, which enables mobile TV and movies, has been in a dilemma of whether to charge by traffic volume (e.g., RMB X for watching Y mega bytes per month) or by service time (e.g., RMB X for Y hours per month). Eventually, all operators chose service time-based fee rate models.
As most users are still not accustomed to traffic based models, while charging by service time also seems weird (nobody pays TV bills by minutes), the best solution would be monthly packages without time or traffic volume limit. Fearing that users might turn on their handsets 24 hours a day, which would result in considerable waste of wireless network resources, most operators dare not choose the solution.
If they choose to charge by service time, how much per minute would be appropriate? Streaming media service usually consumes twice bandwidth as much as video call does. Nevertheless, I suggest its fee rate be set similar to, or even lower than that of general voice calls. As streaming media service is delivered through IP-based packet-switched network, it could use network resources more effectively than video phone, allowing larger bandwidth for users.
That billing model encourages the use of streaming media to improve the efficiency of the network resources of operators. A challenge for operators is that they have to collect payments for content providers, which would increase the total cost of users. However, that seems to be a problem without solution, because content providers need to be paid, too.
[+] WAP monthly package and the pricing for mobile Internet access
In my view, WAP, the service that has been available since the 2G time is more profitable than mobile TV, which is wildly betted on because of the Olympic Games. Some operators have already offered WAP monthly packages without traffic volume limit. With the advent of 3G, they now face a problem: whether to raise or lower the package rates?
As the costs of operators are based on traffic volumes and 3G, with higher speed, will generate far larger WAP volumes than 2G, maintaining the monthly packages does not seem to be a good deal. However, in order to encourage 3G subscribers to use WAP services, it makes no sense to raise the price. But operators do not want to cut price. Eventually, the fee rates are usually kept at the same level of the 2G services.
As to the monthly mobile Internet access packages (via computers) for current China Unicom's CDMA network, no substantial change is expected because the speed of 3G service remains low (384k for WCDMA). However, as 3G has just been launched in mainland China, it would be well equivalent to the level of 3.5G (HSDPA) right from the beginning. As a result, the fee charging model would change.
For example, there might be packages of RMB X/month for the speed of 128k and RMB Y/month for 256k. Such a pricing model is similar to that of ADSL. Theoretically, the peak rate of HSDPA could be up to 14.4M (it is reported that 3.6M Internet access services would be available soon in Taiwan). Therefore, it is possible to introduce different fee rates for different speed.
[+] The fee rate of value-added services is not the key to attract subscribers
Why operators are so reluctant to cut fee rates of 3G value-added services? Because in the fight for subscribers, they have already cut prices of general voice calls. How do they compensate the loss? Through the above value-added services, of course. Will the value-added service fee rate level affect their subscriber base? Basically not. Then why not setting the fee rates a little bit higher?
Many consumers would consider switching to operators who offer lower voice rates, not the one who offer lower value-added service fee rates. The pricing of value-added service is not the key for operators to attract subscribers. With this user experience and such a mindset of operators, 3G value-added services will be cheap, but not so cheap as you have expected.
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Prev : New Landscape in China's Telecom Market (6) Insight into 3G Price War in Taiwan
Next : New Landscape in China's Telecom Market (8) WAP Sector Is Slowing Down
- Today in History
New Landscape in China's Telecom Market (7) The Pricing of 3G Value-added Services - 2008/07/27
New Landscape in China's Telecom Market (6) Insight into 3G Price War in Taiwan - 2008/07/20
From Idea to Business (2) How to Estimate Your Income and Cost? - 2007/07/22
New Era of Online Advertising (2) from Exposure to Deal - 2006/07/23
Ultimate Mobile Device (5) Universal User Experience - 2005/07/24
Operators always seek to avoid direct discount.
[+] The 3G war in Taiwan started 5 years ago.
In the previous sessions, I envisioned the post-restructuring 3G fee rate war in mainland China, and provided suggestions on the offensive and defensive strategies for operators. However, as those are just general discussions, it is hard for ordinary people to understand the remarkable aspects of the strategies. Now let's forget about New China Telecom, New China Mobile and New China Unicom, and take a look at the 3G price war that has been ongoing in Taiwan for 5 years.
Taiwan is a place with a GSM penetration rate higher than 100%. In other words, it has more GSM phone numbers than its entire population. Thanks to white hot competitions in the market, the public has been well educated about the "on-net" and "off-net" fee rates. Calls between subscribers of the same operator are entitled to 50% off "on-net fee rates".
Just take a look at the fee rate lists of operators in Taiwan, and you will see this is an inherent logic of their billing practice. As a result, the larger an operator is, the more powerful its ability to attract new and retain existing subscribers. The public knows that, for example, being a subscriber of Chunghwa Telecom, you have better chance of calling somebody who happens to be a subscriber of the same operator and being entitled to preferential (on-net) fee rates.
At the beginning, emerging operators were not able to take a bite from the existing subscriber bases of the "Big 3", i.e., Chunghwa Telecom, Far Eastone Telecom and Taiwan Mobile. The first attack was launched by Taiwan's first 3G operator: Asia Pacific Broadband Wireless Communications Inc. (APBW) In July 2003, APBW launched its value-added brand QMA and two expensive 3G handset models, believing that the first 3G subscribers would arrive soon for its rich portfolio of applications.
[+] Free calls for on-net subscribers
It was not long before APBW found that its 3G vision was a beautiful mistake. Unable to achieve its sales target with expensive handsets and value-added services, the operator soon started its phase-II operation. With free handsets and a stunning offer of "free calls between on-net subscribers", it triggered a price war. Free on-net calls meant that calls between any two 3G subscribers of APBW were free of charge.
The bloody price war did not trap the Big 3, which, as public companies, could not stand the consequent ugly finance statements. In addition, with strong brands, they did not feel the need of an immediate response. Many lovers and students joined the subscriber base of APBW in couple for the free on-net calls. They turned out to be the first subscribers of APBW.
The Big 3 seemed to be so confident that they waited until the end of 2005 to launch their own 3G services. Their strategies were simple: just regarding 3G as a value-added service of 2G. They offered similar fee rates for 3G, except for the mobile Internet service. Up until then, there had not been an all-out 3G price war, as existing operators had been defensive, instead of offensive in the 3G market.
In December 2005, a new 3G operator, VIBO Telecom launched its business operation. Like APBW, VIBO Telecom tried to build its subscribe base from scratch. With lessons learned from APBW, VIBO Telecom did not expect too much from value-added 3G services. Instead, it posed for a price war right from the beginning by offering a package "Everybody On-net".
[+] Same fee rates for on-net and off-net calls
"Everybody On-net" was just the opposite of free on-net calls. The following are a few examples of the differences:
General 3G: NTD X/second for off-net calls and NTD 0.5X/second for on-net calls (like the case of 2G);
APBW: NTD X/second for off-net calls, free of charge for on-net calls
VIBO Telecom: NTD 0.5X/second for off-net calls, NTD 0.5X/second for on-net calls (the same price for on-net and off-net calls, "uniform rates")
As mobile subscribers in Taiwan tended to believe that using services of major operators means better chance of enjoying the 50% discount on-net rates, "Everybody On-net" was actually an attempt to tell consumers that, with VIBO Telecom, they could have 50% discount rates for both on-net and off-net calls. As a matter of fact, VIBO Telecom's price war was to offer 50% discount for off-net fee rates.
"Everybody On-net" led to the counterattack from the Big 3. The first to respond was Taiwan Mobile, which offered a "Local Life" package, dividing Taiwan into 5 regions. Calls within each region were entitled to uniform fee rates similar to those of VIBO Telecom. However, out of the selected region, the cost of communication would rise sharply.
It was really a smart action. It squeezed VIBO Telecom out of the spot light of "uniform rates" without too much compromise in actual fee rates. The region-specific preferential rate package was not as lethal as the 50% discount of VIBO Telecom. However, the strong brand of Taiwan Mobile helped to prevent its subscribers from switching to VIBO Telecom.
[+] Big brands sat tight
For Taiwan Mobile, it was a successful defense. For APBW, however, it was an alert. It followed suit immediately by launching the brand new "Wonder 4" package, ,which, like that of Taiwan Mobile, divided Taiwan into just 4 regions, and offered lower rates than "Local Life". In this package, on-net calls were no longer free. It gave APBW a chance to get rid of the double-edged sword of free on-net calls.
By far the 3G price war really begun, only Far Eastone Telecom and Chunghwa Telecom still sat tight. Instead of introducing new 3G packages, Far Eastone Telecom offered "get one free minute for each minute of on-net calls" promotion for the its existing package. In other words, it was another 50% off based on the existing 50% discount rate.
Far Eastone Telecom promotion: NTD X/second for off-net calls, NTD 0.25X/second (roughly) for on-net calls.
In face of deep cuts in off-net fee rates by rivals, Far Eastone Telecom chose to increase discount for its on-net rates to consolidate its subscriber base. Chunghwa Telecom launched an intensive TV advertising campaign for its F2 (Friend and Family) package, which offered ultra-low rates for calls between each group of 10 mobile subscribers and 6 local fixed line subscribers. Leveraging its advantages in the local phone market, Chunghwa Telecom consolidated its subscriber base, while responding to the 3G price war in a roundabout way.
It is not until lately that Chunghwa Telecom eventually joins the price war by introducing "uniform fee rates for on-net and off-net calls". Yet it has been 3 years since VIBO Telecom triggered the price war, it is true that market leaders are hurt by the proposition of VIBO Telecom. However, with strong brands, they can afford to be the last ones to join the price war.
[+] Being cheap is just an excuse
Aren't we talking about 3G? How comes that price war takes the place of value-added services as the prime role? As I have said, regarding value-added services as the prime role of 3G is a beautiful mistake. The fact is value-added services are only an excuse for operators to avoid price wars. Whether in Taiwan or in mainland China, 3G price wars are inevitable, so long as price killers exist in the market.
In addition, operators are always seeking ways to avoid direct discounts. For them, the best solution is to make consumers feel an offering is cheap, which is actually not. "Being cheap is just an excuse". This is what I have learned from my experience in designing the "Everybody On-net" package at VIBO Telecom and the consequent price war. Consumers will never know the real planning of the operators behind the fee rates.
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Prev : New Landscape in China's Telecom Market (5) Fee Rates of 3G Services
- Today in History
New Landscape in China's Telecom Market (6) Insight into 3G Price War in Taiwan - 2008/07/20
From Idea to Business (2) How to Estimate Your Income and Cost? - 2007/07/22
New Era of Online Advertising (2) from Exposure to Deal - 2006/07/23
Ultimate Mobile Device (5) Universal User Experience - 2005/07/24
The key of the attack and defense between operators is the fee rate.
[+] Fee rates reflect the mindsets of operators
Telecom services are basic services. The prime goods involved are "fee rates" (and "terminals" too). Selling communication services is like selling bottled water. It is difficult to target at the right market segment. Why do consumers have brand preference even when they cannot tell the difference between the tastes of bottled water? Since any operator can ensure uninterrupted communication, why do consumers prefer specific brands?
Players offering homogeneous products would be trapped into an endless price war, which would eventually erode the profit margin of everybody, if they do not differentiate their brands and fee rates. So far, few researches on the telecom restructuring mention the price competition strategy. Fortunately, I have the experience of working at a 3G mobile operator as the one in charge of service package pricing. Therefore, I do have something to share with my readers.
The first challenge in the post-restructuring 3G market is to attract subscribers of others while ensuring successful migration of the existing customer base. The key is the fee rate. As is shown in the following chart, operators adopting strategy D tend to have strong brands. Therefore, their 3G fee rates would be at the same level of 2G and no discount is expected.
Such operators would choose to gradually migrate their 2G subscribers to the 3G network. With the same voice fee rates for both 3G and 2G services, the migration will not reduce their revenue. However, why should consumers switch to 3G if there's no discount? Do you really believe that the "rich portfolio of value-added 3G services" is the cause?
[+] No price cut v.s. deep price cut
In fact, only a small number of people would switch to 3G for value-added services. For the vast majority, they neither know nor care about what 3G is. But they will consider anything "that's cheaper". "Price cut" is capable of boosting sales without having to explain to the customer what 3G is.
Operators adopting strategy D have enough confidence that their subscribers will not betray them for lower rates. Therefore, they are patient enough to sell 3G as value-added services of 2G. Nevertheless, they will need to give the subscribers something real. So they begin to cut the prices for mobile Internet services deeply to cater for those who have switched to 3G really for value-added services.
It seems that only New China Mobile has the ability to adopt such a strategy. However, New China Unicom and New China Telecom are waiting to launch a price war. For them, strategy B is milder and worth trying. However, the real price killer is strategy A. Low 3G rate packages plus simple, affordable handsets, seem to be ready to sweep across the market.
Anyone who triggers a price war would get hurt, too. At least with its own 2G subscribers flooding into 3G, its revenue would decrease. However, with its CDMA, New China Telecom doesn't have to worry, for its existing PHS service is cheap enough. If New China Telecom's 3G fee rates could be as low as that of PHS, it would be powerful enough to drive all rivals out of the market.
[+] Ways to cut price
Direct discount, e.g., the offering of a 3G rate based on the discount of a 2G rate, is the least desirable way for a price cut. Powerful as it is, there's no tactics to say. Imagine this: how about 50% off for calls between 3G users of New China Unicom? As communication between subscribers of the same operator consumes only internal resources and does not involve settlement with other operators. This would be a useful and low-cost way.
It would enable New China Unicom to maintain 2G fee rates for 3G services, while offering 50% off for communication between its 3G subscribers. In addition, it would attract consumers in couples or in groups. For example, lovers or family members would switch to the service together to benefit from the 50% off discount. It enables operators to build up their customer bases fast.
You might want to ask: "aren't lovers' or family packages very common in today's market?" The fact is most packages available in the market require the payment of an additional fee monthly. What I mean, however, is automatic availability without the need to pay for an additional package. The practice, which offers different fee rates for "on-net" and "off-net" calls and favorable rates for the former, has been popular around the world for years. But it has never appeared in China. For example:
A 2G subscriber of New China Unicom calls a 2G subscriber of New China Mobile (off-net): RMB X/second;
A 2G subscriber of New China Unicom calls a 3G subscriber of New China Mobile (off-net): RMB X/second;
A 3G subscriber of New China Unicom calls a 2G subscriber of New China Mobile (off-net): RMB X/second;
A 3G subscriber of New China Unicom calls a 3G subscriber of New China Mobile (off-net): RMB X/second;
A 3G subscriber of New China Unicom calls another 3G subscriber of New China Unicom (on-net): RMB 0.5X/second;
A 3G subscriber of New China Unicom calls a 2G subscriber of New China Unicom (on-net): RMB 0.5X/second;
The above fee rates would have a number of results. 1) It would attract groups of subscribers of other operators to use the 3G services of New China Unicom to benefit from its favorable rates; 2) existing 2G subscribers of New China Unicom will speed up their migration to 3G for the favorable rates, without causing substantial loss to the revenue of the operator. In fact, if it is New China Mobile that adopts the above practice, the result would be even more stunning, as it has a formidable customer base. The problem is New China Mobile might think it is an unnecessary act.
Maybe you would ask: "why 50% off instead of 20% off?" Mainly because 50% off is more impressive.
What if New China Unicom and New China Telecom both use the same weapon? How would New China Mobile respond? It could simply offer 50% off for calls between its 3G and 2G subscribers, while maintaining the rates for other services. It would enable faster migration of existing 2G subscribers to 3G, and allow the operator to respond calmly to the price war waged by rivals.
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Prev : New Landscape in China's Telecom Market (4) Dealing with Existing Subscribers is Key Next : New Landscape in China's Telecom Market (6) Insight into 3G Price War in Taiwan
- Today in History
New Landscape in China's Telecom Market (5) Fee Rates of 3G Services - 2008/07/13
From Idea to Business (1) How to Estimate Your User Number? - 2007/07/15
New Era of Online Advertising (1) from Media to Channels - 2006/07/16
Ultimate Mobile Device (4) Email Service Anywhere Anytime - 2005/07/10
As a matter of fact, each of these operators has more than 100 million subscribers to deal with.
[+] Are there bystanders in the 3G market?
One interesting question: is it possible that, having obtained their 3G licenses, the 3 new operators, i.e., New China Mobile, New China Telecom and New China Unicom all choose to postpone the launch of their 3G services, and wait for the response of the market? After all, migrating existing GSM or CDMA or PHS subscribers to 3G proves to be a huge workload, and might trigger a price war if not dealt properly.
In April 2007, I analyzed 4 possible market accessing strategies of 3G operators with a chart titled "Market Strategies of 3G Operators". As a matter of fact, each of these 4 strategies has been used by telecom operators around the world. Which is the best depends on the competition situation among local telecom operators, as well as standards they adopt.
Most operators planning to postpone the launch of 3G services would adopt strategy C, i.e., starting by providing internet access service only. With base stations mostly located in cities, these operators primarily sell PC data cards to business people to enable Internet accessing for notebooks.In suburb regions, where 3G signal is not available, services will automatically roam to the original GSM network. So the operators will not provide 3G mobile phone and voice services in the initial stage.
Operators adopting this strategy have a number of common identities: 1) they are market leaders with strong brands, and not afraid of rival operators trying to snap market shares away from them with 3G services. 2) Their 3G infrastructure development tends to be slow, with signals capable of covering only urban areas at the beginning. Business people do have requirements for mobile internet, but they care even more about the quality of voice communication. Therefore, the limit signal coverage for the voice service in the initial stage would offend them.
[+] Maybe everybody is a bystander
The one that's most likely to adopt the above tactics is New China Mobile. In view of the heavy workload of migrating hundreds of millions of subscribers to TD-SCDMA, and the possibility of revenue decline, it pays to be careful. Anyway, nobody has experience in TD-SCDMA. With confidence in the brand, many subscribers would rather wait for New China Mobile's 3G services than switch to other operators.
Therefore, New China Mobile might well be a bystander at the initial stage. Although 3G is a more advanced technology, it is hard for ordinary consumers to tell the difference from 2G (I have a 3G phone myself, but I use it only to make phone calls and send/receive short messages). Therefore, it would be hard to persuade them to switch to 3G in the initial stage.
Should other operators take the advantage of the time window in the 3G voice market left by New China Mobile to introduce their own services? Should they launch attacks with 3G systems and infrastructures that are more mature and easier to deploy, as well as 3G handsets and more affordable fee rates? Or should they join New China Mobile to adopt strategy C and be a bystander in the initial stage too?
There's one factor they must consider when selecting their competition strategies: where will their 3G subscribers come from? In our view, the 3G subscribers will come from: 1) their own 2G customer base; 2) the 2G customer bases of other operators; and 3) people who have never used a handset. The experience of 3G operators in Japan indicates that, for any 3G operator, most of the 3G subscribers would come from its own 2G customer base, with only a small portion from rival operators.
[+] The speed and the fee rates are the key
If operators do intend to migrate their 2G customer bases to 3G, there would be a peaceful market in the initial stage. As each operator is engaged in migrating its own 2G subscribers to 3G, no one would bother to launch an attack before it has had a strong foothold in the market.
As a matter of fact, each of these operators has more than 100 million subscribers to deal with. The one who completes all this first would take the lead in launching an attack. Therefore, the key to success would be speed, nothing else. Despite the strong brand of New China Mobile, which allows it the luxury of more waiting time, subscribers are realistic and impatient. They would switch to any other operator that offers the most favorable terms.
To retain existing subscribes and launch an attack toward other operators, the fee rate packages for voice services would be a powerful weapon. The advent of 3G has led to the emergence of a number of call modes: including 3G-to-3G and 3G-to-2G. As there are 3 different systems for both 3G and 2G, the situation could become more complicated. For example, a 3G subscriber of New China Telecom would call a 2G subscriber of New China Unicom.
With such a complexity, a compelling fee rate package would be helpful to retain and migrate existing subscribers while attracting new subscribers from other operators. As to whether it would reduce the revenue of the operator, there's no guarantee. Anyway, 3G is not something intended to help operators earn more.
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Prev : New Landscape in China's Telecom Market (3) Who's Gonna Be the Price Killer? Next : New Landscape in China's Telecom Market (5) Fee Rates of 3G Services
- Today in History
New Landscape in China's Telecom Market (4) Dealing with Existing Subscribers is Key - 2008/07/06
Ultimate Mobile Device (3) Video, Storage, Copyright Management - 2005/07/03
There is only one price killer in the market.
[+] New China Unicom has had a good start
Through the restructuring, China Unicom finally is able to get rid of its long-time burden, the CDMA network. With both the GSM network and the CDMA network, it has had troubles in operating costs and branding. Even its dual-mode phones, which boasts "duel network standby" arouses skeptics among the consumers. If one network is good enough, why should I have two networks?
In fact, for operators, upgrading either CDMA or GSM to 3G would be easier and more cost-effective than building a TD-SCDMA network from scratch. Particularly, operators of the first two modes around the world have mature experience in business operations, the key is to make oneself focused on one thing. In terms of the extent of easiness for upgrading to 3G, getting rid of either the GSM network or the CDMA network would be an intelligent choice.
According to the latest data, as of June, 2008, China Unicom had 120 million GSM subscribers, and a much smaller CDMA user base: only 40 million. For the post-restructuring New China Unicom, which is posed for the 3G market, getting rid of the CDMA network is not a big loss anyway. If it were the GSM network that's split off, New China Unicom would have big trouble in attracting new subscribers in the future.
New China Unicom could easily upgrade existing GSM to WCDMA. In addition, there are numerous handset models available around the world for the standard. What's more, today, WCDMA has stepped into 3.5G, i.e., HSDPA, which enables download speed several times faster than the original target of 384k.In Taiwan, operators have even launched HSUPA, which offers faster uploading speed to enable the uploading and sharing of images and videos.
[+] The hot potato of New China Telecom
In spite of a much smaller customer base, the above technical infrastructures and the 120 million GSM subscribers make New China Unicom a respectful rival of New China Mobile, so long as it could develop and execute correct strategies in the 3G time. With TD-SCDMA, New China Mobile would carry the burden for a while, which might be an opportunity for other operators.
New China Telecom, the operator based on the existing China Telecom and part of China Unicom, would have two major assets, i.e., the 40 million CDMA customer base and the 50 million PHS customer base. However, it is a well-known fact that the PHS customer base has been shrinking each year. Incapable of upgrading directly to CDMA, PHS is feeling the pressure of market competition.
In addition, with its original market position as mobile local phone service, PHS has been offered at a low fee rate since its introduction. To persuade existing PHS subscribers to switch to CDMA, New China Telecom will have to compromise its fee rates. In addition, there's the problem of changing PHS phones with more expensive CDMA handsets. Therefore, the compromise would involve not only the fee rates, but also the entire handset packages.
The key is to migrate existing PHS subscribers to CDMA. The problem is: will the discount rate package be available to the existing 40 million CDMA subscribers? If not, won't they be hurt? If yes, doesn't that mean a decrease of revenue from the existing CDMA subscribers? That's the dilemma.
[+] Vying to be the price killer
If New China Telecom hasn't made up its mind and continues to depend on landline-bound packages for building its CDMA customer base, the result won't be surprising, in which case, price cut would be inevitable. In addition, any price killer would have only one chance. If it cannot be a hit in the market in the first time, any follow-on price cut would be useless.
If New China Telecom doesn't use the weapon of "price cut", it will be used by New China Unicom. By then, there would be no way out for New China Telecom, for there could be only one price killer in the market. Maybe we want to ask: "why should both operators use price cut in market competition? Why can't they target at high-end business people instead?"
It depends on a few factors. First, how fast could New China Mobile launch its TD-SCDMA services? With the leading-edge brand of New China Mobile in services targeted at business people, it is not easy for the other two operators to compete. The only chance for them would be to build their own networks fast enough to seize the business people market before the launch of TD-SCDMA by New China Mobile.
Second, it is impossible to beat New China Mobile's brand among the business people in a short period of time. Sooner or later, TD-SCDMA would catch up. Therefore, for New China Telecom and New China Unicom, price cut is only a matter of time. Particularly, if New China Telecom falls behind New China Unicom in offering a price cut, it would be difficult to launch follow-on marketing programs. Since a price cut is inevitable, why not taking it up earlier as a weapon?
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Prev : New Landscape in China's Telecom Market (2) Opportunities and Burdens for New China Mobile
- Today in History
New Landscape in China's Telecom Market (3) Who's Gonna Be the Price Killer? - 2008/06/29
New Landscape in China's Telecom Market (2) Opportunities and Burdens for New China Mobile - 2008/06/22
Web 2.0 Think Again (5) Unearth the Value of "People" - 2007/06/24
Ultimate Mobile Device (2) Competition of Handheld Game Console - 2005/06/26
Nokia must turn itself into a platform, which must be more open than existing ones.
[+] Handset operating systems are getting increasingly unimportant.
In the mobile communication industry, Nokia is a legend of invincibility. According to the data released at the end of January, Nokia sold 134 million handsets in the 4th quarter of last year, with a market share as large as 40%, way ahead the 15% of Samsung, the closest follower.
If you were the CEO of Nokia, you would think: "can I further do something with these users?" when you see the data. Lucrative as the handset business is, isn't it better to squeeze something more out of the users? Internet becomes a target.
For years, Nokia has been dedicated to the development of its handset operating system Symbian and a series of smart phones to battle with Microsoft - with eye-catching sales. Worldwide, 60% of the smart phones are driven by Symbian. Only 11% use Windows Mobile.
What's clear is, however, amid the tide of wireless Internet, handset operating systems are getting increasingly unimportant. It is not that players on the stage will give up operating systems, but they have found that the ability to provide services is even more important.
If, as described in the previous section, Yahoo! introduces Yahoo! Go to enable service delivery across operating systems on the wireless Internet, and Google's operating system becomes available to handset developers for free. Where is the value of those different operating systems? The users would care nothing else but the services available.
Apple iPhone is an amazing product. But the central topic is not the operating system iPhone uses. In terms of sales, it would have a long way to go before becoming a threat to the market leader Nokia. However, iPhone's ability to drive sales with its music service is something that Nokia cannot afford to ignore.
[+] Nokia moves into the Internet market.
According to data released by Google internally in January 2008, during the 2007 Christmas season, page views of Google through iPhone was next only to that through the Symbian smart phones. iPhone's share of the smart phone market was as low as 2%, while that of Symbian was 63%.
What's the reflection it would give Nokia? Obviously, iPhone offers better Internet experience than Nokia - easier to use, more user-friendly browser functions. Maybe Apple is better able to attract users with high demand for Internet accessing to buy its smart phones.
To Nokia, both the improvements to the interface and the selling model of handsets bound with Internet services are shockingly new. A player that has been traditionally regarded a computer manufacturer is now one step into the telecom industry after a successful transformation into an Internet service provider and a consumer electronic product manufacturer.
What will be the right move for Nokia to infiltrate into the territories of its rivals? The first idea would be to provide proprietary contents, which could be obtained through M&A or through partnerships. Fortunately, many Internet players are interested in getting their services available on Nokia phones.
Therefore, Nokia introduced a series of services, including Nokia Search, Nokia Maps and Nokia Music. Most of the services, however, require download of special software into handsets in prior, and are not compatible with all Nokia handset models. Therefore, pre-installation of the software becomes a necessary means to sell handsets.
Nokia Search is a service offered jointly with search engines such as Google, while Nokia Music is a fee-based online music store through partnerships with leading labels - something similar to the iTunes music store of Apple. To Internet players, Nokia is both a partner and a rival.
Nokia service list: http://europe.nokia.com/A4496273
[+] WidSets: an open platform that pulls together the Internet world
It takes time to build such services. To establish itself in the Internet world as soon as possible, Nokia will have to pull the entire Internet over to its side. Don't forget that the Internet is a huge eco-system that needs a common leader to open the gate to the world of wireless Internet.
Nokia must turn itself into a platform, which must be more open than existing ones, to enable the upload of any service, regardless of the handset operating system - Symbian, or whatever else. If the handset operating system is no longer important, sticking onto Symbian would become Achilles' heel.
To Internet players that Nokia wants to pull over to its side, the prospect of handset-based Internet services available on any handset is a deadly attraction. Perhaps it was based on this idea that Nokia introduced its open platform WidSets.
For handsets, this open platform is a small Java program. Any handset that supports Java can run the software. Theoretically, Internet players would be able to provide services to all Java-enabling handsets, so long as the services are developed on the basis of the small program.
In terms of operation logics, what WidSets offers is similar to that Yahoo! Go does. Internet service providers could ignore the specifications of various handsets and make their services available on the wireless Internet through simple programs, so long as the receiving handsets have WidSets.
Currently, a number of leading Internet players, such as Wikipedia, Blogger and Flickr, as well as news media including Routers and BBC have started to develop applications on the Widsets platform. In addition, many amateur players are developing small games on it for downloading by users. Obviously, application development has become an easy thing.
Download WidSets at: https://www.widsets.com/widgets
[+] Can handsets be free?
Theoretically, Nokia's WidSets can be installed into a GPhone, or an iPhone, so long as it supports Java. In this regard, what operating system a handset uses is really unimportant. Why then is Google still sticking on the development of its own handset operating system?
What's really in the mind of Google, perhaps, is to extend its advantages in online advertising. By knitting Google services closer with handset functions, it would be able to continue its leadership in the handset-based advertising market as the wireless Internet population grows, or even use the income to offer cheaper or free handsets.
Of course, Nokia and other handset manufacturers would hate the idea. Instead of selling products, they would have to depend on advertising to make money. Will this wild dream of Google become true? First of all, handsets will never really be free. They are just paid by somebody else.
Telecom operators were once bill payers that made handsets free through bound service contracts with consumers, who were thereby requested to pay subscriptions, which they had no way to cancel for a given period of time. With the subsidies of telecom operators and Google, it is indeed possible to further drive down the prices of handsets.
If the appearance of GPhone means that telecom operators would pay less subsidy, that's absolutely good news for them. The problem is it will have to be paid, either by telecom operators, or by Google, because handset manufacturers such as Nokia will not sell handsets at prices below costs.
If Google pays the subsidy to make handsets free, it will have to earn the money back from follow-on handset-based ads. To spend the money before there's an income, is this a good deal? Google will have a huge amount of cash to give away as subsidy. It seems exactly what powerful telecom operators did in the previous years.
Compared with those of Yahoo! and Nokia, Google's wireless Internet plan seems more like a big bet.
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Prev : Great Changes in Wireless Internet Industry (2) Yahoo!'s Strategy
Next : Great Changes in Wireless Internet Industry (4) Apple's Strategy
- Today in History
Great Changes in Wireless Internet Industry (3) Nokia's Strategy - 2008/03/23
Predictions on China Internet Market (5) Search Engines - 2006/03/26
Media, Community, and Blog (4) Production-Marketing Relations - 2005/03/27
Media, Community, and Blog (3) Deconstruct Blog - 2005/03/20
Stop Internet Marketing (3) All Determination; No Distribution - 2004/03/21
3G Time Comes (3) SMS, Email and MMS - 2003/03/23
What's the difference between Yahoo! MDP and Google Android?
[+] Isolated and multi-standard industrial environment
If you have developed a PC-based website, what you are most concerned about would be how to attract users, instead of whether your web pages fit the sizes of your users' screens. With regard to browser brands, you only need to consider a few versions for the program you use to build your website.
You don't have to bother about what operating systems your users use, or whether your users access the Internet through ADSL or Cable, or via which telecom operators. However, with a mobile Internet environment, all these are issues you have to think about.
Providing value-added mobile Internet services via handsets is extremely painful. For example, Yahoo! has a searching box on an operator's WAP portal. It wasn't launched until passing telecom network test, value-added platform test, billing platform test and handset compatibility test.
If it wants to cooperate with another telecom operator, it will have to do these tests all over again, as each operator has its own telecom network and platforms. Just consider how many telecom operators there are in the world? Such a service deployment speed makes it almost impossible to duplicate the Internet revolution on handsets.
In the world of mobile communication, each industrial leader wants to develop its own standard. Leaving alone the various platforms of telecom operators, is it possible to have a uniform software development environment in the first place to make it easier for the developers to support a wide range of handsets?
Now we have a crowded market. In addition to Symbian and Windows Mobile, there are the reverend Java and Qualcomm Brew, joined by new comers like Adobe Flash Lite. Even Yahoo! has introduced Yahoo! Mobile Developer Platform.
If you are a handset service developer, what would you feel at the sight of so many standards you have to support?
[+] Handset operating systems are getting increasingly unimportant
These development platforms have everything from operating systems to software deployment environments. Now that none of the handset operating systems could monopolize the market, all will have to seek survival in the long run. What consumers care most about are only services, not operating systems. It would be increasingly unimportant to fight for market shares of handset operating systems.
In my view, therefore, the key to the success of platform development is not the operating system, but the software deployment environment. As a matter of fact, Java, which is best positioned to build a terminal-independent development environment, has not been able to achieve its vision of "write once, run anywhere".
Flash Lite, a product of Flash that holds an admirable share in the computer-based Internet market, is another development environment irrelevant to operating systems. Theoretically, any handset, regardless of its operating system, could use the environment so long as it supports Flash.
If it could really enable "write once, run anywhere", the development platform will be embraced by developers. Yahoo!'s Mobile Developer Platform (MDP) could be regarded as a development platform similar to Flash Lite but more irrelevant with operating systems.
Simply speaking, website operators that write Widget in accordance with the development specifications (simple scripting, instead of binary codes) will be able to deliver existing services of their websites to handsets, so long as these handsets have installed Yahoo!Go.
The goal of Yahoo! is to get Yahoo! Go into every handset, so that more and more websites would support MDP and join Yahoo! This, of course, would include Google's phone - if GPhone has built-in Yahoo! Go.
[+] The Mobile Internet needs a common leader
Any Internet player that plans to provide handset-based service will have to face a variety of handset operating systems, the special functions of different brands, the different browser brands in the handsets and the different telecom operator platforms.
Such a complicated environment would often be a headache for small Internet companies. Investing resources to solve all the problems is, obviously, not in line with their economic interests. Large Internet companies could make such investments and get economic benefits, but then they will have to fight a battle all by themselves.
Computer-based Internet is a large eco-system. Unless there is a platform that enables all Internet companies to deliver their services to handsets, the entire eco-system would not be able to bargain with telecom operators, who control user resources.
So there appears the mainstream requirement for an open platform different from existing software development platforms such as Java or Flash. The former is a development tool customized for small Internet companies to address the compatibility of different handsets.
In addition to compatibility, the platform should be supported by an industrial leader powerful enough to deal with telecom operators or handset manufacturers. In other words, the mobile internet needs a common leader with a sufficiently large user group.
The key is who the leader will be? Yahoo! and Google, both with large user basis, have chosen different approaches. Ignoring other standards, Google chooses to develop its own platform. Yahoo! chooses to co-exist with other standards.
[+] What's the difference between Yahoo! and Google?
What's the difference between Yahoo! MDP and Google Android? Simply speaking, Android is a platform that includes everything - from the operating system to the software deployment environment and even the browser. Leaning more toward handsets and developers, it hopes to build a brand new underlying technical platform in the mobile Internet industry.
Google does not care what operating system is used on a handset, or what impact the browser has on the presentation of web pages, because it has prepared its own. It wishes to persuade handset manufacturers, Internet companies and software developers to use its standards and get rid of all others.
Yahoo!, on the other hand, focuses more on the provision of a front-end environment to enable existing website operators to deliver their services into handsets easily, regardless of underlying technologies. To achieve this goal, however, Yahoo! has to overcome compatibility problems itself.
To be applicable in every handset, Yahoo!Go must be compatible with all handset operating systems (including, of course, the operating system of Google). It has to adapt to handsets or browsers of different manufacturers to ensure normal functionality and display quality.
With all these pains-taking efforts of Yahoo!, medium and small Internet companies will be able to provide handset versions of their services on their websites easily. No more fuss about standards, just follow the leader.
Both players are trying to become the leader, although with different approaches. Who's got the better chance? As of this point of time, we can only say that Google is taking a bigger bet. It will have a big success or a big failure. Both, however, have chosen the approaches best fit themselves. We can hardly imagine Yahoo! to develop a platform like Android.
However, they are not the only ones aiming at the leadership. Nokia has noticed the trend, too.
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Prev : Great Changes in Wireless Internet Industry (1) Google's Strategy
Next : Great Changes in Wireless Internet Industry (3) Nokia's Strategy
- Today in History
Great Changes in Wireless Internet Industry (2) Yahoo!'s Strategy - 2008/03/09
Great Changes in Wireless Internet Industry (1) Google's Strategy - 2008/03/02
Predictions on China Internet Market (2) Subscriber Number Is King - 2006/03/05
Media, Community, and Blog (1) The Beginning of the Story - 2005/03/06
Stop Internet Marketing (1) All Market; No Marketing - 2004/03/07
3G Time Comes (1) What Is 3G? - 2003/03/09
Success or not, Google has made a smart move to bid for the license.
[+] The conflict of mindsets of two industries
Rumors about Google's introduction of GPhone have been flowing around for quite a long time, but never confirmed. Nobody had any idea about how ambitious Google's blueprint was until it announced to bid for FCC 700MHz spectrum and to launch the Android mobile platform.
Mobile operators are in a fortress that Internet players have been unable to conquer so far - largely due to the gap between the basic business modes of the two industries. In the mind of telecom operators, there's nothing to be offered free. Once launched on a telecom platform, any service would entail a cost and should generate an income.
Therefore, when the ringtone download service is released on WAP portal, telecom operators charge the users two types of fees, one for data transmission and the other for use of the content. While the former is most likely to be integrated into monthly packages, the latter is actually collected for content providers.
For a long time, telecom operators have no idea about how to deal with Yahoo! or Google search boxes at WAP portals. Unlike ringtone download, this is a service that you cannot charge users for. If the search boxes are put up by Internet players for marketing purpose, should they pay telecom operators for that?
So when the webpage you get using Google on your cell phone shows an ad, your telecom operator will share a portion from the advertising income. This cooperation model turns Internet companies into a secondary role. What else can they do since the telecom operators control the Internet access?
There are two ways to force telecom operators to recognize their status: either from the upper stream or the lower stream of the industry. One case for the former is Google's bid for wireless spectrum to assume the role of a telecom operator; and that of the latter is Apple's introduction of iPhone - bound music to reach into the pocket of consumers.
[+] Google's overall deployment
Google' s bid for FCC 700MHz wireless spectrum is far more important than its launch of Android mobile platform. Previously, Google had urged FCC to accept a yardstick that "all bidders for the spectrum should offer open access."
The request got the support of FCC. Essentially, it demands that the winner of the bid should have the ability to provide access to any terminal device connecting to networks of the spectrum. Instead of discrimination, the operators should treat all terminal devices equally.
FCC is a neutral party. Its mission is to facilitate the development and effective competition of the communication industry. To open the industry wider to more players is, obviously, in conformity with this mission. As Google stood out with the proposal, telecom operators, who had been accustomed to stand-alone business operation, were at a loss for even not knowing how to rebut it.
However, how could it be possible to allow so many different terminal devices free access to the Internet? So Google, along with the 34 founding members of Open Handset Alliance, introduced Android, a device-independent handset software development platform..
Why were the 34 companies, including heavy-weight players such as Motorola and Qualcomm, and even telecom operator T-Mobile involved from the very beginning? Had Google not announced to bid for the license and urged FCC to accept the Open Access standard, they wouldn't be there so fast!
Google made a smart move. The result of the bidding is yet to be announced, and the open handset platform would have to stand up to existing rivals such as Symbian and Windows Mobile. Nevertheless, it is a good beginning. Nobody could afford to ignore the power of Google.
[+] The license bid is critical
The next step of Google might depend on the result of the license bid. In the first place, if Google wins the bid and becomes a new telecom operator, it would be able to integrate the entire industrial chain, from the upper stream to the lower stream, with the assistance of Open Handset Alliance. The most optimistic prospect would be a performance multiplier.
Google will be able to foster the basic customers for its own handset platform, while its allies would target client groups for their handsets and services, and terminals introduce closer-knitted services with Google. With economies of scale, more investments can be made for R&D to eventually build a healthy cycle.
Of course, it will take Google a lot of money and time to learn about the trade. Telecom is a century-old industry and won't be so easy for Google to understand in a short time. Head hunting might be a good option, but conflict with Google's existing business culture would be possible.
If the learning curve is too long, Google might be mired in the new business. Telecom is a capital-intensive business that takes a lot of initial investments. Google's financial statements would not look so pretty by the time.
More troublesome, in this industry, successful business modes cannot be duplicated. Google might be able to get the wireless spectrum of the United States, but it has no way to get those of all countries in the world. Telecom is a highly localized industry, which means that Google is unlikely to duplicate or export business modes to other parts of the world.
The only viable way is M&A, or financial takeover of local telecom operators just like other transnational telecom giants have been doing. This, however, won't happen before Google's telecom business becomes profitable. How can a money-losing business sell its business mode? Where does it get the money needed?
[+] The Android platform turns out to be a headache of developers
In my view, it would be better for Google not to get the wireless spectrum license. It would be too much to raise cows just for drinking milk. Even if Google doesn't get the license, Open Handset Alliance and its Android platform would still be valuable assets.
As Open Access has been accepted by FCC as a requirement for all players, Google could use the alliance and the platform as its chips to cooperate with the telecom operators that win the license. By abandoning the quest for a telecom operator, Google would be less as a threat to other operators, which would be helpful for cooperation.
By taking the highland to show its determination for the license bid, to create a powerful pressure and facilitate the establishment of Open Handset Alliance, Google has made a really smart move, regardless of the result of the bid.
Of course, there will be challenges. For Google, the biggest is how to attract more telecom operators into the alliance and to boost the enthusiasm of handset manufacturers to develop GPhone. Its rivals will include the formidable Symbian and Windows Mobile.
Handset manufacturers and software/application developers, in the meantime, are frowning at the platform. On the open Internet, Google is undoubtedly the leader. In the field of handset development platform, however, it is just one of the options.
What the developers are concerned about is, if the Google platform is not powerful enough to take the loin's share of the handset market, it would turn out to be one more standard that the developers would have to support. For them, the existing platforms are enough to be painful about. And here comes another.
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Prev : Web 2.0 Finale (3) Finally blended in Web 1.0
Next : Great Changes in Wireless Internet Industry (2) Yahoo!'s Strategy
- Today in History
Great Changes in Wireless Internet Industry (2) Yahoo!'s Strategy - 2008/03/09
Great Changes in Wireless Internet Industry (1) Google's Strategy - 2008/03/02
Predictions on China Internet Market (2) Subscriber Number Is King - 2006/03/05
Media, Community, and Blog (1) The Beginning of the Story - 2005/03/06
Stop Internet Marketing (1) All Market; No Marketing - 2004/03/07
3G Time Comes (1) What Is 3G? - 2003/03/09
If so, telecom operators would be shut out of the mobile TV market.
[+] The past experience of cell phone manufacturers
From the tide of WAP-based Internet accessing in 2000 to the crazy bid for 3G licenses, and then to the bet on MMS for promoting sales of camera phones and music phones that enable music downloading, and finally to 3G phones with audio/video services, cell phone manufacturers have had thrilling experiences over the years.
The world cell phone market started to show signs of saturation in 2000. To maintain their growth, manufacturers had to motivate consumers to replace their phones with newer products. All of the thrilling experiences in the past 7 years seem to be a quest for what really are the selling points. Fortunately, the result so far has been satisfactory.
In summary, there are a few observations:
1)Mobile Internet is a hard-to-handle concept. The key is consumers tend to compare their expectation for mobile Internet with their PC-based Internet experience, which, in most cases, ends up in disappointment, as cell phones are not so easy to handle as PCs. Mobile Internet has been successful in Japan, only because of the low PC penetration rate there.
2)Telecom operators wish that new cell phones be bound with particular services, so that they could benefit from their sales, instead of being un-paid sales reps of the manufacturers. However, it turns out that consumers buy camera phone only because they can use it to take pictures, and anyone seldom uses MMS service.
3) There's no concern for the shortage of content accessing channels. Despite the hot sale of music phones bound with download service offered by telecom operators, most users choose to transmit music from their computers to cell phones, instead of downloading them from the WAP portal provided by telecom operators. Although it is more troublesome, but it is free.
4)3G audio/video services, including IP-based audio/video streaming and video phone, have not brought satisfactory user experience. It is a very simple concept to allow both parties of a phone call to see each other. However, due to privacy concerns, it has not been able to become a killer application.
[+] Telecom operators might be ignored
With the above experience, cell phone manufacturers finally realized that their business is to make and sell handsets. The simpler their products are the better. There's nothing simpler than the concept of mobile TV.
Consumers no longer have to bother whether the TV programs are downloaded from the Internet, nor cell phone manufacturers to care about whether their phones are bound with particular services offered by telecom operators, so long as they free themselves from the troublesome 3G audio/video experience.
In fact, a hi-tech company in mainland China has developed a sort of chip, which can be built in cell phones to receive traditional analog TV signals. In other words, with such a chip, you will be able to watch wireless channel with your cell phone, regardless of its specification or standard.
The only shortcomings are the mobility and fidelity. As analog TV signals are not intended for mobile environments, the fidelity cannot be compared with that of digital programs of mobile TV. However, it would be good for some people, if the programs are played on small-screen cell phones.
In most cases, however, people watch mobile TV on static environments, e.g., bus or subway stations, or in offices. It explains a fact that cell phone manufacturers will be able to sell their products without binding themselves with telecom operators.
The only thing that those manufacturers have to worry about is where programs would be, once new standard-based mobile TV is launched? Will telecom operators become content aggregators as we discussed in the previous section? If not, they'd better establish connections with content providers right away.
[+] Charging or not, it's a matter about the structure of the industry
The high production costs of movie/TV programs turn out to be a big obstacle for traditional value-added service providers to produce contents themselves. Imaginably, a big part of contents for mobile TV will come from traditional TV stations.
An interesting cooperation mode is that after consumers buy a mobile TV-enabling cell phone, they will get a set of passwords from TV program providers. Upon activation, the cell phone will be bound with the passwords to enable watching programs. The fee is charged each month through the phone bill from telecom operators.
That mode is designed for charging fees. If mobile TV programs are offered for free, and program providers depend on ads for their incomes, the passwords and the additional lines in the phone bills of telecom operators would be unnecessary. If so, telecom operators would be shut out of the mobile TV market.
With regard to the mobile TV services, the only way for telecom operators to gain the favor of cell phone manufacturers is to persuade content providers to charge fees, in which case, they would become the largest content aggregators and channels for charging fees. Otherwise, they would be easily abandoned in the game.
In addition to traditional TV stations, will website operators (e.g. Yahoo! and Google), which are gaining influence in the mobile Internet sector be able to get a share in the market? Those players do not have program-producing ability themselves. However, through audio/video content sharing, they will have some opportunities.
Audio/video content sharing sites, such as YouTube, has a lot of interesting programs. In spite of the low fidelity (as most programs are produced by non-professionals, after all), such programs might be good enough for cell phone-sized screens.
Currently, the mobile TV market is still a virgin land for a lot of players, including telecom operators, cell phone manufacturers, traditional TV media and emerging Internet media. The future will be interesting and full of expectations. Eventually the biggest winner will be consumers. The distribution of audio/video contents will be fast and convenient as never seen before.
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Prev : Mobile TV Market (2) the Subtle Role of Telecom Operators
- Today in History
Mobile TV Market (3) Terminal Manufacturers & Content Providers - 2007/12/02
Great Future of Wireless Broadband (4) WiMax, 3G and 4G - 2006/12/03
Internet and Books (1) Dilemma of Online Publishing - 2005/12/04
VoIP (2) Who Depends on Whom - 2004/12/05
VoIP Gives out the First Cry - 2003/12/07
It's not wise for telecom operators to sell 3G only to the elite who are extremely small groups of the billion populations.
[+] The first stage of 3G in China
The previous articles by me are not to look down upon 3G value added services or to support the voice service. Instead, I am trying to point out that telecom operators are industrial leaders, what kind of strategies they will take on 3G decides in what kind of strategic thinking value added services will be placed.
An SP (Value Added Service Provider) probably can live on 3G with only millions of value added service users. However, for a telecom operator, it is far from enough if the number of subscribers attracted from value added services (which are the primary selling points of 3G) is just the same. The two points of view are different.
However, it is the general atmosphere to hold high expectations on value added services in China's 3G market. Including telecom operators, there is a stir of emotions in related industries including SP, CP (Content Provider), and even the Internet industry.
The common opinion is, in such a big market, not only can we define system standards, but telecom operators are also able to define mobile phone specifications. According to the successful 3G development experience in Japan and Korea, customized mobile phones can increase telecom operators' revenue by optimizing the user experience with value added services.
Therefore, at the first stage of China's 3G market, we will see a lot of TV ads promoting value added services, telling you that you can watch movies, listen to music, play games and access the Internet anytime anywhere via 3G.
With TV commercials, you will see the elite image of a middle-aged man in a nice suit that has a successful career holding a 3G phone; the cool image of young people watching movies or listening to music on 3G phones; or the touching image of family members seeing each other from the video phone.
[+] The second stage: use the voice service as the bait
The four telecom operators who will have obtained 3G licenses will boost value added services to a considerable height. As previously stated, operators who obtain WCDMA and CDMA licenses are based on the best interests of their own. While the operators with the TD-SCDMA license do so just because they do not want to believe their doomed fate.
With multi-functional and high-price mobile phones (probably the customized mobile phones provided by telecom operators), low-price data service rate plan (the voice service rate remains the same with 2G) and the TV ads promotion, 3G service will immediately attract a group of customers through its eye-catching value added services.
These users are just like the characters in the TV ads - business people and young white-collars. However, the number of that user group is limited and increases slowly. When the stacked mobile phones and value added services can't win more 3G subscribers, the loss from the price reduction of handset together with the telecom equipment amortization charges will drive operators mad.
Shortly after, the price war of voice service rates plans and mobile phones will start. The reality will stop us from dreaming. Do not forget that there are hundreds of millions of mobile phone users in China. Most of them are not elite or young white-collars. They don't want to understand 3G. What they want are immediate benefits.
But have 3G value added services been sentenced to death? No! The fact is that those 3G users attracted by the low voice service calling rates use value added services a lot! I conclude the 3G telecom operators' actual operating experience in the past four years as below:
- It's much faster to attract 3G users by offering low voice service rates plans than promoting value added services.
- To make up for the revenue loss from the voice service, operators have to highly invest on value added services.
- Even those 3G users attracted by low voice service rate plans will use value added services a lot.
- The premise is that user experience with value added services must be made good. Some degree of handset customization is inevitable.
[+] The outlook of China's 3G market
China's 3G market will show several features:
1) The 3G mobile phones with simple functions. Fully functional 3G phones may mean higher prices, especially for the TD-SCDMA system. To be simplest, a mobile phone that can make phone calls and support WAP is enough. Other functions such as camera, video, etc. can be left out at the initial stage.
2) Promote packages of low-price mobile phones and cheaper voice service rates plans (of course, WAP service rate is the key point as well), leading to a situation of rapid sales at cheap prices. It was difficult to do so several years ago, because the cost of 3G phones was still high and price reduction meant that telecom operators had to pay a lot of subsidy.
But when China's 3G market starts, the cost of WCDMA and CDMA 3G phones will be largely reduced. Bulk purchases by telecom operators will make the price even lower. With the help of smuggled mobile phones in this market, it is not difficult to buy cheap WCDMA and CDMA 3G phones.
3) Rapid sales at low prices means that 3G users will quickly turn to low-end customers, who are different from the elite or young white-collars in our imagination. Users of 3G value added services at this stage will be workers in big cities in addition to residents (primarily students) in second-tier cities.
Those people's standard of living is relatively low, so they can not afford high-end entertainment. They spend a lot of time in Internet cafes because that is the entertainment they can afford. Those who don't go to Internet cafes will use mobile phone WAP. They are willing to pay for value added services because a single mobile phone can meet their demands for communication and entertainment at the same time.
They are the primary users of 3G value added services, even though they adopt 3G services just because of the cheaper voice service rate plan! This is the outlook of China's 3G market in my expectation. It is not wise for telecom operators to sell 3G only to the elite who are extremely small groups of the billion populations.
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Prev : The Mist of 3G in China (2) TD-SCDMA is a Hot Potato Next : The Mist of 3G in China (4) The Way to Survival for SP
- Today in History
The Mist of 3G in China (3) Low-End Customers Are King - 2007/04/15
Predictions on China Internet Market (7) Web 2.0 Economy - 2006/04/16
How to Sell an Apple: A Classic Case of High-tech Marketing - 2005/04/10
3G Time Comes (5) Content - Killer App of Video Phone - 2003/04/13
