The Mobile Centric Internet Country :China Project for COM546 By Simon Chen

Agenda The Mobile Service Market in Mainland China The Mobile Service Market in Mainland China The Diffusion Pattern of Mobile Service The Diffusion Pattern of Mobile Service The Mobile Value-added Service (MVAS) The Mobile Value-added Service (MVAS) Internet Industry & Mobile industry Internet Industry & Mobile industry

The Mobile Service Market in Mainland China

Factors Driving the Growth of Mobile Phone Diffusion in Mainland China Global Economic Developments Global Economic Developments Before be admitted to WTO, China committed to permit foreign organizations to provide a wide range of telecommunication service through join-ventures. According the regulation of join venture in China, for most type of service, the foreign investors can hold up to 49% of co-ventured company (USTR, 2004). But more importantly for mobile handset diffusion, customs tariff for IT product were deduced to allow cheaper components to manufacture mobile with better price. Instead of been imported directly, the price of handset make in China will be cheaper for average Chinese consumers (Groombirdge, 2000). Cheap mobile phone produced by domestic manufacturers have increased the level of competition in mobile phone market, and the lower price handset encouraging end users to purchase mobile phone (Ramstad, 2003). Before be admitted to WTO, China committed to permit foreign organizations to provide a wide range of telecommunication service through join-ventures. According the regulation of join venture in China, for most type of service, the foreign investors can hold up to 49% of co-ventured company (USTR, 2004). But more importantly for mobile handset diffusion, customs tariff for IT product were deduced to allow cheaper components to manufacture mobile with better price. Instead of been imported directly, the price of handset make in China will be cheaper for average Chinese consumers (Groombirdge, 2000). Cheap mobile phone produced by domestic manufacturers have increased the level of competition in mobile phone market, and the lower price handset encouraging end users to purchase mobile phone (Ramstad, 2003).

Factors Driving the Growth of Mobile Phone Diffusion in Mainland China Domestic Market Regulation Domestic Market Regulation Until the mid 90s, The Chinese telecommunications industry was under the monopoly of the state and was managed by the former Ministry of Posts and Telecommunications (MPT). Until the mid 90s, The Chinese telecommunications industry was under the monopoly of the state and was managed by the former Ministry of Posts and Telecommunications (MPT). From 1995, reorganization introduced four new companies, each with a focused objective but still a diverse mix of fixed, transport and wireless or satellite networks : China Unicom, China Telecom, China Mobile, China Network Telecom (China Netcom), and China Satellite; and a proposed China Railway Telecom (China Railcom) in the near future From 1995, reorganization introduced four new companies, each with a focused objective but still a diverse mix of fixed, transport and wireless or satellite networks : China Unicom, China Telecom, China Mobile, China Network Telecom (China Netcom), and China Satellite; and a proposed China Railway Telecom (China Railcom) in the near future

Factors Driving the Growth of Mobile Phone Diffusion in Mainland China The Evolution of Market Structure: The Evolution of Market Structure:

Factors Driving the Growth of Mobile Phone Diffusion in Mainland China Prepayment Price Model Prepayment Price Model The mobile communications market in China favors prepaid price model because of its market characteristics. This model accounts to about 90% of all price strategies according to GSM Association data presented at GSM World New subscribers are increasingly from low income and low usage market segment, and yield lower levels of average revenue per user (ARPU), though minutes of usage have increased over the years but still slower than the price erosion. For example, according to China Mobile the ARPU has declined from RMB431 (US$52) in 1997 to RMB90 (US$11) in September 2004 (chinamobilehk.com).This is attributed to the substantial growth in low-use subscribers. The mobile communications market in China favors prepaid price model because of its market characteristics. This model accounts to about 90% of all price strategies according to GSM Association data presented at GSM World New subscribers are increasingly from low income and low usage market segment, and yield lower levels of average revenue per user (ARPU), though minutes of usage have increased over the years but still slower than the price erosion. For example, according to China Mobile the ARPU has declined from RMB431 (US$52) in 1997 to RMB90 (US$11) in September 2004 (chinamobilehk.com).This is attributed to the substantial growth in low-use subscribers.

The diffusion pattern of mobile phone in mainland China

The Innovator The Innovator In 1987 MPT lunched two analogue mobile switch systems based on TACS technology. One the switch center is located in Beidaihe, the resort and convention center for high level officials of China central government. Obviously, this switch center is used for commercial purpose. The second switch center was located in Guangzhou, the capital the Guangdong Province, also the center of Southern China. November 1987, Mr. Feng Xu, a young guy was in his late twenties at that time, purchased the first mobile phone in China, at the same time, he is the one of the first one hundred innovators in China. In 1987, MPT Guangdong division decided to promote the first batch of analogue mobile phone According to their plan; one hundred mobile phones had been sold. In 1987 MPT lunched two analogue mobile switch systems based on TACS technology. One the switch center is located in Beidaihe, the resort and convention center for high level officials of China central government. Obviously, this switch center is used for commercial purpose. The second switch center was located in Guangzhou, the capital the Guangdong Province, also the center of Southern China. November 1987, Mr. Feng Xu, a young guy was in his late twenties at that time, purchased the first mobile phone in China, at the same time, he is the one of the first one hundred innovators in China. In 1987, MPT Guangdong division decided to promote the first batch of analogue mobile phone According to their plan; one hundred mobile phones had been sold. The price for Feng’s mobile phone was RMB 20,000(US$ 2,485). In the early 1988, the average price for an activated mobile phone in the private/ black market was RMB 60,000 (US$ 7,454). The average balance show on phone bill was up to RMB 10,000 (US$ 1,242) per month. (Zhang, 2005) The price for Feng’s mobile phone was RMB 20,000(US$ 2,485). In the early 1988, the average price for an activated mobile phone in the private/ black market was RMB 60,000 (US$ 7,454). The average balance show on phone bill was up to RMB 10,000 (US$ 1,242) per month. (Zhang, 2005) According to Roger’s theory, the first 2.5% adopters are the innovators. Along with the first one hundred mobile phone users, until 1996, the 6,853,000 mobile subscribers can be named the innovator of mobile phone in mainland China, even though, GSM service had been promoted in Most of the innovators are high level official, private firm owner, people in special profession (police, fireman etc.). According to Roger’s theory, the first 2.5% adopters are the innovators. Along with the first one hundred mobile phone users, until 1996, the 6,853,000 mobile subscribers can be named the innovator of mobile phone in mainland China, even though, GSM service had been promoted in Most of the innovators are high level official, private firm owner, people in special profession (police, fireman etc.).

The diffusion pattern of mobile phone in mainland China The Early adopters The Early adopters Until 1999, the number of mobile service subscriber in mainland China was 43,300,000, approximately 20% of user number in 2002(207,000,000). 17.6% of 207,000,000 that is 36,150,000 “ new ” subscribers have appeared during the period. Actually, the 3,6150,000 are the Early adopters. The handset price and the service fee drop down are the primary reasons contributed to the appearance and formation of early adopter group. Until 1999, the number of mobile service subscriber in mainland China was 43,300,000, approximately 20% of user number in 2002(207,000,000). 17.6% of 207,000,000 that is 36,150,000 “ new ” subscribers have appeared during the period. Actually, the 3,6150,000 are the Early adopters. The handset price and the service fee drop down are the primary reasons contributed to the appearance and formation of early adopter group.

The diffusion pattern of mobile phone in mainland China The Early Majority and Late Majority The Early Majority and Late Majority From year 1999 to 2002, the number of increased mobile service subscriber is 164,000,000. Besides the price drop down of mobile handset and mobile service fee, the differentiation of service plan and lagged off of toll phone system the triggers for potential customer adoption after the innovators group and early adopters group (Zhang, 2004), also the early majority and late majority. From year 1999 to 2002, the number of increased mobile service subscriber is 164,000,000. Besides the price drop down of mobile handset and mobile service fee, the differentiation of service plan and lagged off of toll phone system the triggers for potential customer adoption after the innovators group and early adopters group (Zhang, 2004), also the early majority and late majority. After year 1999, Chinese people began to hear the mobile handset ring bell in the public transportation: bus, train and the taxi. It used to be heard only in airport and hotel lobby. The average Chinese people began to tell their customers or friend “ call my cell phone when you want count on me ”. After year 1999, Chinese people began to hear the mobile handset ring bell in the public transportation: bus, train and the taxi. It used to be heard only in airport and hotel lobby. The average Chinese people began to tell their customers or friend “ call my cell phone when you want count on me ”.

The Mobile Value-added Service (MVAS)

Internet Industry & Mobile industry