Up to Speed - 3rd generation mobile phones in China
As all three of China’s mobile phone operators unleash their third generation (3G) networks and let users access the worldwide web on the go, now is a good opportunity to review the implementation of high speed mobile internet access in the United States and look at implications for Chinese operators, users and content providers as China ramps up its 3G networks.
Growing pains
In the United States, the launch of 3G services was not without its troubles. As the exclusive carrier of Apple, Inc.’s popular iPhone, AT&T did not anticipate the surge of simultaneous users that clogged bandwidth and led to network bottlenecks. Although an iPhone does not use an inordinate amount of bandwidth for basic functions such as telephone calls and text messaging, thousands of available programs rely on internet access for tasks such as ordering food, finding a public restroom and accessing social networking sites. Only after a public outcry over delayed messages, dropped calls and slow access did AT&T promise to upgrade its network infrastructure.
As users in China have already shown a strong interest in mobile internet access, the 3G providers will still need to ensure that their networks are equipped to sustain heavy bandwidth requirements.
Different standards in China
China Unicom, which won the right to be the exclusive supplier of Apple’s iPhone in China and recently began accepting pre-orders, is betting the phone will entice the masses to sign up for its 3G service. This is despite the fact that the iPhone has been hugely popular in China for a few years through illegal imports, although without the high speed access that Unicom promises to provide.
In contrast, China Mobile, the largest mobile operator by number of users, has decided to make the Lenovo-produced OPhone its flagship handset. The OPhone will have a customized version of the open source Android operating system introduced by Google and is being manufactured to support China Mobile’s home-grown TD-SCMA 3G standard. China Unicom’s 3G network and phones will use the WCDMA standard, which is common with the rest of the world.
Big impact of small apps
It is fair to say that the iPhone, with its slick user interface and the ability to run many programs that utilize the internet, is the beacon of a paradigm shift in the world of mobile communication. Much of the functionality of a PC has been squeezed into a small, handheld device and users are beginning to expect mobile devices to work as fast as their broadband-enabled PC at home. If AT&T’s iPhone experience is any guide, then Chinese users will also want to download all kinds of different programs to their smart phones. China Mobile recognized this and preparations are underway for an online application store similar to Apple’s App Store on iTunes.
Essentially, the iPhone has converted the venerable mobile handset into a mobile PC with mass appeal. Making calls is also possible but it is not necessarily the most important, most fun, or most often used function of smart phones. This is underscored by the fact the App Store now offers 85,000 applications and there have been more than two billion downloads since the store’s launch.
New business opportunities
The potential of internet-connected smart phones for creating new business opportunities, especially in China, is significant. China currently has more than 710 million mobile phone users; even if just half of these users switch to smart phones in the next few years, they would outnumber the total number of mobile phone users in the United States.
Many companies are discovering mobile marketing via smart phone applications as an effective tool which can help to build a brand in countries where 3G networks are already established. The big difference between those markets and China in terms of opportunity is size. There will simply be many more smart phone users in China than in any other country and smart phone applications represent an alternative to traditional online advertising where marketers can interact more directly with potential customers. Although many marketing apps in existence today are available for free and not a significant source of direct revenue, they represent a unique opportunity to push the envelope in terms of targeted marketing and branding.
Outlook for China
The largest impact on the lives of smart phone users in the U.S. does not come from simply having ready access to the internet. Instead, it is the fact that many little applications are now available to organize, inform, and entertain users on the go and make a real difference in their lives. Along those lines, Chinese smart phone users won’t stay far behind and will find creative ways to use their 3G phones.
Clearly, the advent of mobile internet to a large part of the world’s population is nothing short of a revolution. Its impact is far-reaching but cannot yet be fully gauged. Still, many companies have already started to explore how to use this technology to increase sales and reach customers through more targeted marketing. With the largest mobile phone user population in the world, the impact of 3G technology in China will be an important trend to watch as well.
Marcus Gladers is marketing manager for Psyma Business Research China. He can be contacted at Marcus.Gladers@Psyma-China.com
This article was originally published in the November 2009 issue of AmCham Shanghai’s Insight magazine. www.amcham-shanghai.org