China Mobile began charging for wireless Internet services beginning 21 October after twice delaying the date due to slack demand for the services, particularly by many industry professionals.
However, Frost & Sullivan believes wireless Internet is exactly what the Chinese people are looking for, and China will become the largest Wireless Application Protocol (WAP) market in the world in three years. The drivers for this market are strong.
The number of mobile-phone users in China is exploding. During the last five years, the number of mobile-handset users in China has increased more than 10 times, from about 5 million to about 65 million currently. The increase in mobile-phone use is much higher than the increase in fixed-line telephones.
Yet, given a population of more than 1 billion people, the country’s wireless penetration is only about 5 percent. The percentage is still very low compared with the 46-percent wireless penetration in Hong Kong and 30 percent in the United States. Frost & Sullivan predicts that by 2003, China will surpass the United States to become the largest market for wireless communications, with more than 160 million subscribers.
The low personal computer (PC) penetration rate makes wireless Internet the future of Internet growth in China. China’s burgeoning Internet market is reaching 20 million users, but it has found itself confronted by a major constraint-the low PC penetration rate. By the end of August 2000, the installed base of PCs in China was 24 million, with the corporate market representing 58 percent of the total market and the consumer market , comprising 42 percent.
Less than 3 percent of homes in China have a computer. Therefore, mobile phones, with 65 million users, could become the best devices for many Chinese people to embrace the Internet.
Multinational telecom vendors are pushing the wireless Internet to justify their investments in the market. Earlier this year, Alcatel became the first Fortune 500 company to move its Asia-Pacific headquarters to China. Almost at the same time, Nokia and Motorola promised to invest US$1.2 billion each in the Chinese market in the coming several years. These moves demonstrate the companies’ confidence in the potential of the market.
Telecom carriers are competing to better position themselves for future growth. Although competition is new to the Chinese wireless Internet market, it is by no means less intense than in other markets. Since May, China Mobile and China Unicom have launched wireless Internet services. China Mobile is introducing mobile-phone banking and stock trading with WAP services in the cities of Shenzhen, Zhuhai and Tianjin. China Unicom is also upgrading its WAP services in cities such as Beijing, Shanghai, Tianjin and Chongqing.
Although China Telecom is still struggling to get a third mobile operating license from the Ministry of Information Industry (MII), it has already begun to provide wireless Internet content by launching a WAP portal at www.169wap.net.
The small number of Chinese WAP users today only indicates the dissatisfaction of the market with current WAP services, which are characterized by slow connection speeds and limited applications. It does not mean the Chinese people do not want wireless Internet.
As General Packet Radio Service (GPRS) networks are put into operation in more cities, more Internet services will become available. Frost & Sullivan estimates in October there were about 600,000 wireless Internet users in China. The number is expected to reach 30 million within three years, and China will become the largest wireless Internet market in the world.
Jim Lin, is chief telecom analyst with Frost & Sullivan China in Beijing. E-mail: jim_lin@frost.com.
