China's Wireless Internet Future
By Lotte Pang
March 5, 2001
HONG KONG -- "If we had been here a year ago I would have talked about the hype and all the cool things you can do with wireless," began David Almstrom, vice president, business strategies of Ericsson China. "All I'm going to do today is tell you exactly what's happening in China."
Fortunately for Almstrom, speaking at IandI Asia in Hong Kong last week, even the hype-free version of what's happening in China's mobile sector was pretty racy stuff.
"You're looking at a market that's going to be far bigger than you can ever imagine," he said. In 1999 there were 24 million mobile users. By 2000 the figure had catapulted to 85 million, exceeding forecasts that ranged between 30 million and the projection of Ericsson and rival Nokia, 50 million. "These aren't dream figures," insisted Almstrom. "They might look like dream figures, but they're not. By 2004 we're breaking the 300 million mark."
China's PC Internet market looks sluggish by comparison, with a mere 22 million existing users and a predicted 50 million by 2004. "The future of the Internet in China is going to be wireless," concluded Almstrom.
"There's nothing that suggests it's not going to keep going," he claimed. But why was he so sure? asked an audience member. First, he replied, "the market is still growing enormously well in China." Penetration rates show there is still room for astronomical growth. While Shenzhen has more than 50 percent penetration, major cities such as Beijing and Shanghai have 30 percent. "The urban areas we're expecting to keep growing to 75-80 percent penetration. Rural areas may only grow to 20 percent but that's still a market of more than 600 million users."
Second, growing competition between operators such as China Mobile and China Unicom and phone manufacturers will bring costs down and fuel mobile phone use.
Already there are 11 local phone manufacturers competing against foreign rivals from Japan, Korea and particularly Europe that have invested millions in China and need to start seeing some returns. This has driven mobile phone prices down from HK$2,000 (US$260) last year to as low as HK$600 (US$77). "We're estimating a further 30 percent price drop this year in China," said Almstrom, noting that it still takes months to get a fixed-line phone in the country.
Clearly China has made progress toward its wireless future. But what will that future look like? Almstrom offered some glimpses:
"Voice is still going to be the main driver in Asia for the next 10 years at least. It now creates all the value for the operator. But voice communication is changing to total communication."
In Scandinavia and Japan, it was teenage girls that first caught the wireless wave. "We're seeing this in China as well," said Almstrom. The people using SMS services are the young people."
The advent of 3G and GPRS would mean always online services, a major step forward. Mobile Internet services are going be extremely transaction-oriented and time-sensitive, he said. There'll be a trend to merge phones with PDAs offering the user the advantage of character recognition.
Technological advances will mean greater processing capacity. There'll be an integration of voice and data processing so you can read and reply to e-mails by voice or in writing. High-powered networking will mean that many functions and applications can be stored on the network rather than the phone and downloaded as and when they're needed.
"One of the key features will be to make [mobile Internet] easier to use," continued Almstrom. An MMS (multimedia messaging system) will allow a grandmother in Qongqing with her 3G phone to receive high-resolution color pictures of her granddaughter traveling around the world. "She's going to like it. She's going to use these messaging features without knowing she's using mobile Internet features."
Attention to consumers' needs will be crucial. "A lot of the operators are doing the wrong thing in China and in Asia," cautioned Almstrom. "They're assuming that one day, you'll wake up and say: ‘Hey, I want streaming video on my mobile phone.' That's not going to happen." Another mistake is to assume that consumers are going to buy a technology for its own sake. "That's not what you want. You want a service that's benefiting you in your daily life."
Mobile operators will largely determine the speed and direction of change. "China is on the same level as most of the European operators. They're lagging a bit in marketing and business models, but in terms of technology they're on a par with everyone else."
On the battle between standards, Alstrom believes that wideband-CDMA is going to be the only true global standard. "Worldwide we're definitely moving to CDMA because of the design perfection you already have." Japan's DoCoMo will launch a W-CDMA service commercially this year. The rival GPRS service that is a step up from GSM will be launched in May.
Alstrom believes W-CDMA is the standard that will be adopted in China, even though the majority of users there currently operate on GSM. China Unicom has made public its commitment to it and Almstrom revealed that China Mobile is going to start investing in CDMA networks.
By comparison, TD-SCDMA, the standard being developed for the mainland market by a government research institute and Siemens, was slow out of the starting blocks, has received less investment and won't be mature until 2004. "China can't afford to wait if they want to stay competitive with the rest of the world," he warned. "[China Mobile] has looked into TD-SCDMA, but at the moment it's all on paper, there's nothing real. If it comes out, and it works, then it would have a place in China."
For Almstrom, what makes the reality of mobile Internet in China so exciting is that all these changes are happening at the same time. "The mobile market is booming."
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