Monthly Archives: November 2008

Connecting the un-connected

While initially challenged by alternative technologies such as fibre optics, satellite communications in China is actually finding a market to leverage its unique features (wide coverage and rapid deployment): the rural communities.

China DBSat, operating a fleet of five in-orbit satellites, is providing communication and backup to public telephone networks in some of China’s remotest areas. By applying cellular backhaul technology, satellite companies are also able to help mobile operators to extend the reach of their networks. In 2007, access to 70% of the 20000 villages was achieved via satellites, thus playing an active role in increasing universal service.

The next step? Providing broadband services to rural communities who would have had to wait a decade or so till fiber optics reaches them!

Will telecommunication benefit from China's stimulus package?

While nobody failed to notice the USD 580 billion (!) stimulus package from the Chinese government, the current lack of details has left many wondering how much money would actually go into the telecommunication sector.

While not directly targeted by the package, there are a number of ways the sector could benefit. First, the Chinese government has indicated its wish to expand railway infrastructure. This is good news for China Mobile thanks to its merger with China Tietong (the telecom arm of the Ministry of Railways). Second, Beijing maintains strong investment in projects being undertaken under its informatization policy. Both domestic and multinational companies providing the equipment, as well as companies offering services are the most likely beneficiaries from ongoing investment in informatization. Third, investment in housing construction will further expand the market for fiber-to-the-home, again good news from the companies providing equipment.

Finally, and more cinically, the package may divert some of the funds initially earmarked for the construction of the 3G network. Adding to the difficulty for Chinese operators to secure financing on capital markets, the sector and the government may think twice about what technology to invest it!

Is Kayak the solution?

Will Kayak – the recently unveiled “PC alternative” from Qualcomm – provide a solution to the infrastructure gap in developing countries? The idea this time is to access the Internet wirelessly without a computer via a mobile device that can be hooked up to a TV or computer monitor; it then connects to the Internet over wireless networks (using mobile-phone chips instead of processors).

For sure, in many parts of the developing world, countries suffer from poor or limited land-line networks. Wireless infrastructure is more often than not more allowing emerging economies to leapfrog the costly and time-consuming laying of fibers in the ground.

While original, Kayak will face a number of hurdles. Qualcomms comes a bit late in the game. Intel, Symbian and others have been at work for quite some time to crack the market of “digital-left-aside”. Not to mention mobile operators and equipment makers who are improving their devices to connect to the Internet directly, i.e. without bulky equipment to connect to. Competition will also come from Google with its 03b network – Internet satellite project. Finally, powering the Kayak system (station + monitor/TV) will require a significant amount of electricity, in comparison to a mobile phone, a commodity that doesn’t always come easily and in a reliable manner.

Priced at USD 399, it remains to be seen if Qualcomm’s first attempt to step outside of its traditional business will prove a success!

Wireless portability in China?

China is working on wireless local number portability (WLNP) with the objective to roll out the new policy as early as 2009. Trials are already under way in Shenzhen and Tianjin. Experience has shown us that asymmetrical regulatory measures are usually needed to balance telecommunication operators and reduce market control of dominant/incumbent  operators.

Unfortunately they are not always as effective as expected. Only about 8% of customers said they would use WLNP service, according to an internal survey of operators. The low percentage is not surprising. It actually mirrors empirical studies. For example, in the Korean mobile market subscribers kept perceiving the switching barrier as high, hence discouraging them from switching carriers. Moreover carriers develop new subscriber lock-in strategies that make them stay with current carriers. In addition, there is a technical issue since some handsets may be incompatible with other networks (GSM, CDMA). Finally, some scholars have argued that under WLNP number prefix has no indicative power, thus reducing the level of information available to consumers.

P.S.: There is evidence that number portability has improved competition in the market (e.g. in the USA) despite the perception gap