December 8, 2000	atimes.com

Special Reports China swaWAPping old for new By Tony Allison 1. Vast potential 2. The fixed and mobile telephone market 3. New mobile technology 4. Internet and mobile Internet use 5. WAP environment 6. Other technology 7. What Is WAP? 8. China's IT revenue 1. Vast potential Amid much anticipation and several months ahead of schedule, China in March saw the introduction of wireless application protocol (WAP) technology, which allows Internet access via mobile devices such as cellular phones. With an estimated 17 million Internet users at present, the government-owned China Daily has boldly predicted that by the end of 2001 4 million Chinese would be able to access the Web via their WAP-enhanced mobile phones. This would be a more than 500 percent increase from the end of 2000 when the number of people going online via their mobile phones will be only 800,000. By September 2000, 1 million WAP-enabled phones had been sold on the mainland, which sells between 1 million and 2 million ordinary mobile phones every month. The world's leading vendors, including Nokia, Motorola, Ericsson, Siemens and Alcatel, have entered the market to provide WAP-enhanced mobile handsets as well as network infrastructure and support to China's two mobile carriers. The two carriers are the China Mobile Communications Corp, the carrier for 90 percent of China's mobile customers, which has launched WAP services in Beijing, Tianjin, Shanghai, Shenzhen and Hangzhou, and China United Telecommunications Corp (Ucom), which has opened WAP networks in Shanghai, Beijing, Guangzhou, Shenzhen, Hangzhou and Tianjin. In the face of steep competition, the vendors have forged alliances with popular domestic Internet Content Providers (ICPs) - the actual Web sites - as well as the carriers, the regional Internet Service Providers (ISPs). An example includes the March 1 memorandum released by Nokia, in conjunction with popular portal Sohu and Beijing Mobile Communications Company (BMCC). Sohu agreed to provide content for Nokia WAP phones connecting through BMCC's ISP. Similarly, Ericsson has formed a partnership with GWcom Inc, a wireless information and Internet technology firm from the United States, to provide financial information from the Internet on mobile phone handsets. GWcom is the only firm whose wireless data network is presently approved by the Chinese government. Ultimately, end-users will be serviced through complex alliances. For example, a mobile surfer in Shanghai could use a Nokia phone to access Web content through a China Unicom ISP/network supported by a Siemens WAP platform. The way forward: Vendors of handsets and WAP applications have taken a lead position in the control of ICPs during the first phase of WAP in China. Content providers have been keen to link with vendors who promise to give their sites premier or pre-loaded status on WAP phones. Content providers have also formed vendor alliances to enable them to adapt content to the various specifications of the vendor's hardware, such as screen size and command buttons. These alliances have given regional carriers added incentive to rapidly initiate WAP services. (A web site has to be specially adapted so that it can be accessed by a WAP-enhanced mobile phone). The second stage of China's WAP development is likely therefore to witness the rise of the carriers and inter-regional alliances between them, driven by the suppliers of WAP technology and support. However, beyond the present status new opportunities exist: Vendors are generally more interested in selling hardware and not in becoming involved in content. Carriers specialize in setting up networks and maintaining connections, while ICPs lack the in-house technology to effectively channel information into handsets. Consequently, a new class of player might emerge, such as companies that can combine the skills of providing both the content and the technology to embrace the WAP age. 2. The fixed and mobile telephone market The current overall rate of growth in the mainland telecom market is 20 percent a year. Between 1979-1992, fixed and cellular lines grew from 2 million to 10 million. Presently there are about 136 million fixed line subscribers and as of June 2000 there were approximately 83 million mobile telephone subscribers. According to Ericsson, China will have about 250 million mobile phone subscribers by 2004, and most will be using an Internet-enabled phone. Current telecoms penetration rates on the mainland are 17.5 percent for fixed lines, with 35 percent coverage in urban regions, while cellphone coverage is 5.5 percent. China Telecom, China's largest fixed-line operator, is planning what could be the biggest overseas share sale ever of any Chinese company. In order to raise money to maintain its dominant position in the telecoms industry it could list overseas next year, raising as much as $10 billion. The company is likely to spend the money on upgrading its technology in areas such as broadband networks. China Unicom raised $5.6 billion overseas earlier this year. 3. New mobile technology China will decide by March next year which technology its high-speed mobile phones will use in the next decade, the Information Industry Ministry said in early December. The ministry sets rules and awards phone licenses. The ministry will ask telecom equipment suppliers to test systems that will run the so-called third generation mobile phones which will be able to receive signals 200 times faster and access the Internet at least 40 times faster than presently. One will become the standard for the nation. Almost 98 percent of China's mobile phones run on the Global System of Mobile Communication, or GSM, standard. Only Great Wall Telecom, a China Unicom unit, runs a mobile network using Qualcomm's CDMA standard. It serves about 1 million customers in four cities. Three technologies are competing: the time-division synchronous code-division multiple-access, or TD-SCDMA, of Siemens, Wideband-CDMA and US-based Qualcomm's CDMA2000 all will challenge in hopes of securing the leading role in a booming market. Siemens AG's China unit will present its TD-SCDMA standard, which it is developing with state-run operators especially for the China market. TD-SCDMA will also allow operators such as China Mobile and China Unicom, the nation's No1 and No2 phone companies, to offer Internet connections through their mobile phone systems without having to make major equipment changes. 4. Internet and mobile Internet use There are currently 17 million Internet users on the mainland and the vast majority of them access the Internet via their computers, which typically cost 6,000 renminbi ($723) for cheap, domestically produced models. This is much higher than the $126 dollars for a regular mobile phone and $327 dollars for the cheapest WAP-enabled phone. Nokia's 7110 model was the first WAP-enabled phone commercially available in China. Motorola has announced that all its mobile phones will have access to the Internet. Other WAP brands available include Motorola A6188, L2000; Nokia 6210, 6250, 9110; Ericsson R320, R380; Siemens C35, S35; Alcatel OneTouch Series. In October, China Mobile set charges for Internet access through WAP-enabled mobile phones after a seven-month free service offer. Its WAP-enabled mobile phone subscribers, whether roaming or not, pay 0.15 renminbi (1.8 US cents) per minute for the Internet access fees, while the normal telephone fees are not be charged. The rates are effective until May 20, 2001. A cap of 30 renminbi will be charged if the total service time through WAP-enabled mobile phones per month lasts less than 500 minutes; beyond 500 minutes, the extra service time will be charged at 0.15 renminbi as usual. WAP subscribers with international roaming services in China pay 2.88 yuan per minute. 5. WAP environment China's WAP trial period was due to begin in May, but took place in March. Internet access charges were due to be waived for three months, but this was extended following a slow start. The leading portal Sohu claims only 30,000 page views a day on its Beijing WAP site, compared with 16.3 million page views on its regular site. Various factors have been advanced for the slow start, and for reason for optimism in the future. Against There is a long way to go before Chinese can use their mobile phones to transfer money between bank accounts or go shopping in cyberspace. The range of services open are currently restricted to weather forecasts, ticket booking and stock quotes. Low speed is a problem as connection and downloading takes up to six times longer on WAP phones than via ordinary phone lines. Download speeds are only 9.6 kilobits per second, or around one fifth the rate of the average desktop PC. With new, third-generation mobile technology, download speeds will rise to 115 kilobits per second. Popular skepticism that the technology really works, given that regular cellphone users in China already experience problems with calls. As most potential WAP users haven't even tried surfing the Internet with a computer, there's also a learning barrier to cross. The small display size on handsets (typically 3-4 lines, 30-40 Chinese characters) makes reading long text impractical. The lack of a full keyboard hinders input. Simple e-mail messages can be received and read on a cell phone, but typing extensive responses is time-consuming. On mobile phones, navigation and selection are typically achieved using up-down buttons. Net surfing is limited to WAP-enabled sites. For Getting a land line installed is more expensive than buying a cell phone and usually takes weeks. Competition between China Telecom and China Unicom has driven down the price of wireless services. Status element. Because of the absence of a long legacy of PC and credit card use, China could leapfrog into the next generation of wireless Internet. WAP-enabled cell phones are highly mobile and applications can be localized. 6. Other technology Before third generation telephones are introduced, an interim mobile phone technology called General Packet Radio Service, or GPRS will be available. It will increase WAP download speeds by up to 100 times, allow charges to be calculated on the amount of data transmitted, and make WAP a much better proposition, especially for web site owners, who will get a yet-to-be-decided percentage of revenue for the amount of data downloaded from their sites. Ericsson (China) was reported in September as saying that both China Mobile Communications and China Unicom would begin importing its GPRS system. i-mode: One real mobile Internet success is in Japan, where NTT DoCoMo launched its i-mode service in February last year and which now has more than 8 million subscribers. Unlike WAP, which is an open standard, i-mode is proprietary, and is currently available only in Japan - although there are plans for the Netherlands and other parts of Europe that could challenge WAP. China may be the next frontier if i-mode takes off in Europe as it did in Japan. The other immediate competition to WAP is from personal digital assistants, like Palm Pilots, which can now connect to the Web for wireless data transmission. Like WAP phones, PDAs also have been slow to take off in China because of problems with data entry in Chinese characters. But that is changing with new data entry methods. 7. What Is WAP? In June 1997, Ericsson, Nokia, Motorola and Unwired Planet (now Phone.com), conceived the WAP concept. The plan began with the simple idea of defining a common, global protocol, not restricted to any particular cellular standard. It was to be optimized for narrow band bearers and work with current network technology. A major objective was to integrate telephone system services with microbrowsing, opening the market for new types of combined services known collectively as WTA. In December 1997, the four companies formed the consortium WAP Forum Ltd. The forum controls and manages continued development of WAP. There are more than 300 member companies from around the world, all striving for a fully mobile Internet. Because mobile phones lack high-speed processors and memory storage capability, and can accommodate only small display screens, a special "language" is required to reduce the size and number of packets travelling over the network and limit display to text only. A web server channels HyperText Mark-up Language or HTML-coded information to a WAP proxy on the wireless network that filters the information down into WML (Wireless Mark-up Language) and then channels it to the mobile handset. WML responses from the mobile handset are, in turn, passed back through the WAP proxy and sent onto the web server as HTML. As WAP is an open protocol, there are literally thousands of developers currently designing a wide array of services especially for WAP. An operator with a mobile network simply needs to install a WAP Gateway/Proxy in order to allow their old and new subscribers to access WAP content and services. 8. China's IT revenue 2000: The IT industry recorded $67.2 billion in sales from January to October 2000, leading the energy industry, China's second biggest industrial sector, by $3.88 billion, according to figures released in early December by the National Bureau of Statistics. IT accounts for 8.5 percent of China's total sales of industrial products. The average annual output of the IT industry grew 32.1 percent from 1990 through 1999, far ahead of the 14.2 percent average growth rate of China's entire industrial sector during the same period, the bureau reported. The IT sector registered the fastest growth rate among the country's 40 industrial sectors. Its contribution to the national industrial growth rate rose to 21.4 percent from January to October, boosting China's industrial growth by 2.5 percentage points. China's IT sector earned $3.71 billion in net profits last year, surpassing the power industry for the first time to become the most profitable industry in the country. Guangdong, Shanghai, Beijing, Tianjin and Fujian led the country in IT industry growth. Currently, the 10 largest makers of IT products in China include Senzhen Konka Group Co, Senzhen Huawei Technologies Co, Huizhou TCL Holding Co, Jiangsu Nanjing Ericsson Communication Co, Shanghai Bell Co, Peking University Founder Group Co, Legend (Beijing) Holding, Tianjin Motorola Electronics (China), Sichuan Changhong Group and Shangdong's Hisense Group. 1999: China's information industry recorded total sales of $20.8 billion in 1999, a 16.2 percent rise over 1998, the Ministry of Information Industry reported. Domestic computer hardware sales totaled $15.8 billion, a 13 percent increase over 1998. Hardware sales accounted for 75.9 percent of 1999's sales for the domestic computer industry. A total of 4.9 million PCs were sold, a 20.4 percent increase over 1998. Sales of software and information services products reached $5 billion, a 27.5 percent increase over 1998. These products accounted for 24.1 percent of 1999's sales for the domestic computer industry. Sales of domestic telecommunications products reached about $12.1 billion in 1999, changing little from 1998. Investors' choice: The manufacturing of electronic and telecommunications equipment is the biggest sector of overseas investment in China in terms of output, capital and assets. According to the National Bureau of Statistics, the sector saw a gross industrial output value of $48.51 billion in 1999, nearly tripling that of the second largest foreign-funded sector of transport equipment and the third largest sector of electric equipment and machinery. Overseas investors hold $10.71 billion in total capital in the electric and telecommunications equipment companies, which had total assets to the value of $41.42 billion at the end of 1999. Opening the door: US telecommunications giant AT&T this week signed a deal to launch the Shanghai Symphony Telecommunications Co with Shanghai Telecom (STC) and Shanghai Information Investment Inc (SII). Shanghai Symphony will provide broadband Internet Protocol services in Shanghai's Pudong financial district. The $25 million project could open the way for more Sino-foreign joint venture telecoms service providers but Chinese regulators will likely restrict foreigners to minority investments and small operating areas. AT&T only has a 25 percent stake in Shanghai Symphony and is limited to providing services in the city's Pudong district. Chinese officials held out hope that foreign firms will eventually get access to a greater slice of China's growing telecommunications market. More than 40 Sino-foreign telecoms joint ventures were set up in China in the 1990s but authorities introduced a ban on investments in 1998 and forced them to unwind. The AT&T deal is one of the first telecoms joint ventures announced since Beijing opened the doors to limited foreign investment in the sector under agreements to join the World Trade Organization. (Special to Asia Times Online)

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