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3G will power Chinese mobile Internet to the next level

With the spread and push of 3rd-Generation (3G) technology, stakeholders in the industry chain will adopt a more rationalized approach toward business and that will help innovation.

Service providers, terminal equipment manufacturers, information service providers, Internet companies and mobile Internet companies have already made breakthroughs in terminal equipment, data business, telecommunication charges and services, which will help the advent of new mobile Internet business modes.

"Increase, platform, innovation, opening-up and IPO" became the industry's keywords in 2010. User numbers, new businesses and market scale will continue to rise in 2011.

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Statistics from the big three service providers show that the number of 3G users totaled 25.2 million by June 30, 2010. China Mobile, China Telecom and China Unicom each have 10.46 million, 7.18 million and 7.57 million 3G users. Average revenue per user (ARPU) reached 72 yuan (8.2 euros) in the first half of 2010.

Extend coverage

With China's 3G market on a steady rise in 2010, China Mobile, China Unicom and China Telecom are focusing their competition on the mobile Internet sector by broadening their network coverage, adjusting service charges and seaching for clients in new services

The "Star terminals" as well as mid- and low-end terminals coverage strategy have become a powerful tool in the 3G market. Service providers use high-end terminals to open up the market, at the same time diversifying their product package by adding subsidies for mid- and low-end terminals.

In the meantime, authorities have strengthened regulations on illegal practices. Such operations like adverse information, unreasonable charges and junk messages will jeopardize the development of the mobile Internet. Cooperation between the telecommunications administration and service providers will help promote a healthy development and safeguard the industry chain and mutual interests.

The mobile Internet hax also attracted many terminal manufacturers to readjust their product lines. As the carrier for many new services, smart phones now redefine the concept of mobile Internet terminals. Smart phones are becoming popular for their diversification in operating systems and technical upgrades.

Traditional terminal manufacturers, mobile manufacturers and business solution providers have also stepped into the mobile Internet market. Lenovo announced its strategy for the mobile Internet sector and its terminals in April. Liu Chuanzhi, director of its board, said the strategy was an innovation for Lenovo to extend its business scope.

Growing together

By integrating the mobile Internet business and its application and increasingly downmarket smart phones, the whole industry chain can upgrade and will promote the development of 3G and the mobile Internet market. In July, HTC (High Tech Computer Corporation) announced its official entry into the Chinese market and issued at the same time four new phone models with two supporting China Mobile's TD-SCDMA and the other two for China Unicom's WCDMA network.

Mediatek Taiwan, a MTK platform solution provider, joined the "Open Handset Alliance" in July to promote Google's Android system and started to provide exclusive Android smart phone solution services. These moves have accelerated the subdivision of the terminal and mobile Internet market, which will help maintain healthy competition based on different platforms. The advantage of the operating system manufacturers will extend and rivalry in the smart phone market will in the future focus on competing for users to use specific operating systems.

Service providers also compete on application service platforms. Apple saw huge success in its "iPhone+App Store" model. By offering comprehensive solutions to its customers, Apple provides well-designed and high functional terminal products, as well as high-quality application services to upgrade its user experience.

In March, China Telecom launched "e-surfing", a mobile software application service platform. The initial proposal signed with Microsoft, Qualcomm and Nokia promises the user an open, cooperative and mutually beneficial application platform.

China Unicom later launched its application download and upload platform "Wo Store" in November, which will see China's top three service providers setting up their own applications store. "Wo Store" will serve as "a trans-platform, open mobile application development and promotion platform and a service platform for mobile software trade".

The success of mobile application stores has been acknowledged within the mobile Internet industry. Service providers, operating system providers and information service providers have started to create and run their own mobile applications store. They have started to attract developers and users to create a promotion platform for mobile software. Such stores have become the focus for service providers to promote terminal sales, upgrade business scope and increase users. With its coverage on multi-terminals, these stores will further develop into mobile application service platforms.

With the rise of mobile Internet services and the transformation of mobile value-added service platforms, service providers should establish co-partnerships within each industry chain and create open service platform to strengthen their voice in the chain. Major international mobile application stores should aim to localize their application contents, payment method, marketing and promotion styles to keep their competitive advantage.

Internet companies have stepped up innovation in their mobile businesses. The number of new services based on the mobile Internet sector has been on the rise. Traditional Internet companies have been extending their mature businesses to mobile terminal services. By concentrating on unique products, new Internet companies also expand their business front to realize the integration between mobiles and desktop experiences.

Powering up

Upgrading terminal technology and hardware equipment have also propelled the emergence and marketization of new services. NetEase launched in August its mobile e-mail client "NetEase pmail", another strategic disposition after its "flashmail". Users can log onto either its Web or mobile end to write and receive mails and messages, manage their chat logs and back up their phonebooks.

Mobile-based location services and mobile payment have also become the industry's hot spot in 2010. With new business models being explored, established and created, they will become important application branches for the mobile Internet sector. Digu in August said its mobile clients for location-based services had 1 million location clicks in 2010 by 200,000 mobile users.

The industry chain has reached a consensus on platform opening-up. It has become one of the keywords defining China's mobile Internet in 2010. In December, Baidu mobile put its official open Internet platform (open.shouji.baidu.com) online. Baidu launched its mobile Internet open platform by website trans-coding, mobile website set-up, frame computing, mobile map location-based services, as well as mobile behavioral analysis platforms. Baidu is now trying to duplicate its advantage in the PC Internet sector to the mobile Internet one.

By establishing platforms and Application Programming Interface (API) Opening-up, Internet companies enable developers to share network flow advantage and user numbers to realize application development innovation, meet user demand, upgrade user experiences, strengthen their voice on the industry chain, and promote the healthy development of the sector.

In July, Sina's mini blog service website (t.sina.com.cn) was put online. Sina said it aims to become users' social engine. Developers can make use of the API provided by the mini blog to create interesting applications to make the website more "socially involved".

The cost for application developers to innovate their technology and marketing promotion will decrease in the future. The business order and the industry structure based on open platforms will have deep influence on the subdivision of further PC Internet and the mobile Internet sectors. Alipay has also joined the scene. In October, it announced its open payment plan by setting up open platform for mobile application developers to solve payment issues on the Chinese mobile Internet platform. According to the plan, application developers on Alipay API will enjoy 90 percent of the profits from the industry chain.

Mobile Internet firms have gained capital market recognition. The 3G business has expanded the mobile Internet market and propelled telecommunication terminal equipment manufacturing, information service and network construction.

In April, IPOs of four second board companies, GQY Ningbo, Nationz Technologies, Century Hangzhou and Sumavision, drew attention across the capital market for their mobile payment and tri-network integration. In December, Sky Network Technology, a mobile middle ware company, priced at $6 on its Nasdaq debut with its market value totaling $210 million. It is China's first mobile Internet-related stock. Tri-network integration and the concept of "the Internet of things" have further helped companies related to equipment rebuilding, comprehensive multimedia telecommunications and industry chain stimulation to attract attention in the second capital market.

Financing and IPOs in China's mobile Internet industry will increase, while value-added services and mobile application will become the industry's hot spot.

The author is an analyst of the iResearch Consulting Group.