The Mist of 3G in China (4) The Way to Survival for SP

Sunday, April 22, 2007

The Mist of 3G in China (4) The Way to Survival for SP

Many telecom practitioners believe that mobile phone will become the "fifth media" in the age of 3G. But that won't come true without telecom practitioners' intended guiding.

[+] Looking for killer application

Is there any kind of service that can attract large group of existing 2G customers to upgrade to 3G? If this is the so called killer application, it barely exists for telecom operators, because no application can help them to rapidly attract a lot of 3G subscribers.

Many killer application services of this kind have been tried by 3G operators all over the world. For example, the European Hutchison Telecom who started to operate 3G many years ago mainly promoting video phone and mobile email services at the beginning. However, the growth of subscriber number was extremely slow.

In short, from the perspective of telecom operators, the only killer application to rapidly obtain 3G subscribers might only be the "lower voice service calling rate". For consumers, that is a simple and clear reason for using 3G. Once they use 3G phone numbers, they will start to use its value added services.

I joined one of large 3G operators five years ago and started to do 3G market planning. I used to hold high expectations on value added services. However, as time went by, I found out that there was no big difference between 3G and 2G (especially GPRS) value added services.

MMS and WAP have already been realized on 2G, not to mention SMS. Even the hot Instant Messenger (IM) service can also be realized without 3G. Those won't become the reasons for consumers to upgrade to 3G services.

The advantage of 3G is its speed that is faster than CDMA and much faster than GPRS. However, it is not enough to
bring an essential difference, because consumers can hardly feel any speed difference when browsing WAP on the small screen of mobile phones.

[+] The possibility of the fifth media

There is an embarrassing situation for sales people. Imagine that if you are a sales person of a telecom operator, when you try to persuade a 2G customer to upgrade to 3G, you fail to answer the customer's question when asked "what's the major difference between the two services?"

The reason why 3G fails to attract a large number of subscribers through its value added services is that there is no major difference from 2G. The only difference: speed, however, is hard to be felt by consumers immediately. After purchase, customers usually will have only a slight feeling after some time. How can we sell this kind of product?

Eventually, our hope inevitably falls on several services that show evidently the speed of 3G: video telephone, streaming media and download. Applications including mobile TV, video on demand, music download, which consume large bandwidth can reflect the difference of 3G more evidently.

However, will consumers upgrade to 3G just by telling them that they can watch TV and listen to the music on 3G phones? Yes, they will. Some technology manic or first adopters will be tempted to upgrade to 3G. But those people only hold a very small market share. Most people will tell you that it seems to be never used to watch TV on the mobile phone.

Especially when they find out that the price plan of watching TV on the mobile phone is calculated by time, they will resist more apparently. The billing model that is quite natural for telecom operators (for example, billing in seconds) drastically violates the general payment habit for TV services: free or paying monthly.

Many telecom practitioners believe that the mobile phone will become the "fifth media" in the age of 3G. But that won't come true without telecom practitioners' intended guiding, especially with regard to the price plan. Monthly unlimited mobile phone TV service itself will arouse drastic arguments inside telecom operators.

[+] The way to survival for free WAP sites

It has been spread for a long time that telecom operators will act against free WAP sites. Each time telecom operators carry out a new policy, this topic is heated up again. Especially recently it is said that telecom operators plan to set the rates of their own WAP sites to be different from those of external WAP sites.

It is the common practice for telecom operators all over the world to "design and enrich their own WAP sites, keep users in their own walled garden, and make content providers bend their knees". Although free WAP sites are very hot, they fail to keep from telecom operators' threat.

To be honest, there is no relation between that market situation and 3G. I don't understand why some people think that such obstacles will disappear after China's entry into 3G. Telecom operators always keep their leader's attitude and control over subscribers and content providers regardless of 2G or 3G, don't they?

However, there is probably a market breakthrough point here. Never forget that China has a self-developed standard
TD-SCDMA. Telecom operators who have obtained this license are relatively less aggressive (or will become so after suffering from market stagnation). It is possible for free WAP to collaborate with them.

Telecom operators' practice on WAP is called "The Walled Garden" in the industry. Users can enjoy enriched content services within the garden, but they can never go outside. The more powerful telecom operators are, the more they want to do so. Cooperation can only start from relatively weak operators.

The next phase of development is quite obvious for SP (Value Added Service Provider) or CP (Content Provider) and free WAP site operators. For example, videophone dating, mobile phone movies on demand or download, live music or download, etc. The content is becoming more and more important. As a result, many SP have started to integrate resources from the media.

[+] Conclusion: It's true that telecom operators will beg consumers to use 3G

My insights of 3G telecom services in the past four years can be concluded into one sentence: it is true that telecom operators will beg consumers to use 3G. Because there is no obvious difference between 3G and 2G, while the major difference can not be experienced immediately, the sales of 3G are very difficult.

The difference can only be experienced after a period of usage. However, sales people can barely wait users to gradually find out the difference, because they can not bear the slow sales progress. Thus, they are forced to attract users to upgrade to 3G with lower voice service calling rates first.

But users are more accustomed to use value added services on 3G than on 2G. Therefore, the fifth media is expectative. The point is whether telecom operators invest resources on user experience and services, and whether the design of rate plans fits in with users' expectations.

Finally, the key user group of 3G is labor workers in big cities in addition to residents (primarily students) in second-tier cities in China. Those people will bring large amount of WAP and streaming media usage. Of course, the elite people are the sales target, too. But the total amount of elite users can barely meet the demand of telecom operators. ( 2007/04/22 - By Digitalwall.com - Way to China Internet/Telecom )