3G Launches-At Last--on Three Carriers and Three Platforms

3G Will Introduce Serious Competition to China's Mobile Phone Industry, Helping Consumers and Advertisers

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China has launched 3G services
China has launched 3G services Credit: Normandy Madden

BEIJING (AdAgeChina.com) -- After years of anticipation, Chinese consumers will have the opportunity to try out third generation, or 3G, mobile services. On Jan. 7, 2009, China's Ministry of Industry and Information Technology awarded 3G licenses to three major local telecommunications companies--China Mobile Communications Corp., China Telecom Corp. and China Unicom.

The new technology enables network operators to offer advanced services, such as video calls and wireless broadband access. It supersedes 2.5G technology, which provides some of the benefits of 3G, albeit at slower speeds. Perhaps more importantly, the launch of 3G in China will usher in an era of competition never seen in China's mobile industry.

To date, mobile phone users looking for comprehensive services favored one operator, China Mobile, the world's largest mobile phone service provider based on subscriber figures. China Mobile had 450 million subscribers at the end of November 2008, out of 633.84 million total mobile subscribers. About 47% of China's population have signed up for mobile services.

China Mobile was founded in 1997, when it was spun off from China Telecom, a leading supplier of fixed-line and broadband internet services. Last June, China Telecom moved into mobile phone operations by purchasing China Unicom's nationwide CDMA business and assets, giving it 43 million mobile subscribers.

Government levels playing field
China Mobile says it will invest $8.6 billion this year to build about 60,000 third-generation base stations covering 238 cities to maintain its dominant position. But there's a hitch, the government is trying to level the playing field.

China Mobile can offer 3G services based on TD-SCDMA, a made-in-China telecommunications standard never tested outside China. That standard is considered less reliable than the WCDMA and CDMA2000 technologies awarded to China Unicom and China Telecom, respectively. WCDMA is based on European technology, while CDMA2000 was developed by U.S.-based Qualcomm.

China's most sophisticated cities, Beijing and Shanghai, will be the leaders in both network coverage and handset ownership, said Benjamin Joffe, CEO of Plus Eight Star, a Beijing-based consultancy focused on mobile and internet media in China, Japan and South Korea.

China Mobile became the first of the three companies to launch 3G services last week. By Jan. 13, 200,000 Beijing residents had signed up, accounting for about half of the nation's total 3G subscribers at that point, according to People's Daily, China's state-run national newspaper.

China Telecom says it will launch 3G services late next month in major Chinese cities such as Shanghai. China Unicom is expected to roll out its 3G services in May in at least eight cities including Shenzhen, Shanghai, Foshan and Liuzhou.

Marketers are not likely to build mobile campaigns around 3G until the technology is in use by at least 10% of mobile phone users, which will take about 12 months, said Joshua Maa, CEO of the Beijing-based mobile ad network Madhouse.

For now, Mr. Maa said, the main benefit of the 3G launch is increased competition. "Having three carriers in China is the key. It will allow better pricing and better services, give consumers and advertisers better terms and create more opportunities. Mobile payment systems will also become more mature and become more user-friendly."

3G ads won't take off for 2-3 years
Mr. Joffe believes it will take "two or three years before 3G provides a satisfactory experience," based on the time it took for similar technologies to gain traction in Japan and Europe. "Network coverage, 3G handset ownership, those barriers are the same happening in each country that goes 3G."
Benjamin Joffe
Benjamin Joffe
Most Chinese consumers can't afford 3G services yet, he said. "Most people using mobile services (WAP users) are mid- to low-end customers. But the long-term future is great, as figures for Japan show."

In 2007, advertisers pumped $700 million into mobile phone marketing in Japan, more than half of China's total online ad market that year.

The launch of 3G services will also boost sales of premium hand sets, particularly for Motorola, one of the first mobile phone makers to introduce a TD-SCDMA format 3G handset last summer. The ailing American company is counting on China, one of its strongest overseas markets, to offset heavy losses in the U.S.

Other foreign firms like Ericsson, Samsung Electronics, Siemens and Nokia are also eagerly introducing 3G handsets and seeking other opportunities to provide infrastructure and equipment to the three license carriers.

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