The kick-off of the 3G network in 2009 and the launch of smart phones finally have enabled Chinese carriers to broaden their Location Based Service (LBS) portfolios. Prior to the official start of the 3G era in China, all three Chinese wireless carriers experienced difficulties promoting LBS due to limited bandwidth, slow Internet connection, and scarce handset support.
Because the penetration rate of mobile phones in China is very high, carriers now regard data services as the next source of growth. They deem LBS, particularly carrier-branded turn-by-turn navigation and mapping services, as the one of the most important ways to gain a competitive advantage over rivals.
Smart Phones Give Smaller Carriers a Chance
As the largest wireless operator in the world in terms of subscribers, China Mobile long has been the dominating force in the domestic wireless business. However, this dominance ended last January when China Mobile was issued a license for TD-SCDMA 3G, a Chinese proprietary standard that is not used anywhere else, while China Unicom and China Telecom were issued the common WCDMA and CDMA EVDO 3G standards, respectively.
By issuing the 3G licenses to these three carriers, China’s telecom industry completed its restructuring. This restructuring means China Mobile now will be forced to fight on a new battlefield with two smaller rivals.
This creates some challenges for the first, since handset makers must make distinct smart phones for China Mobile that support the TD-SCDMA standard. Nokia has been the most supportive of China Mobile with its Symbian-based smart phones. There are only 12 manufacturers selling 23 phones based on the adapted version of the Android operating system for China Mobile. In contrast, China Unicom not only has the iPhone, but also the biggest Android-based smart phone portfolio.
Carrier-Branded Navigation and LBS Apps Help Product Differentiation
China Telecom appears to recognize the importance of promoting carrier-branded turn-by-turn navigation and other LBS apps for product/service differentiation. Early this month, China Telecom officially introduced its own-branded navigation app, e-Surfing Navigator, to its eStore free for use. The eStore also has three carrier-branded apps for location information, reviews and bookings of nearby restaurants, hotels and tourism places. All smart phones made for China Telecom will be pre-installed the eStore access widget as well as unique apps of China Telecom, including the navigation and LBS apps just mentioned.
Before this, China Mobile already was involved in such carrier-branded LBS business. On China Mobile’s Mobile Market, there is a carrier-branded LBS app and a carrier-branded navigation app available: the Mobile Map and Mobile Map Navigator, respectively, by TeleNav, with the maps supplied by AutoNavi. The Mobile Map LBS app is free, while the Mobile Map Navigator costs either 15 yuan per month ($2.20), or 2 yuan per use ($0.30), plus additional GPRS data fees.
China Mobile also partners with its biggest handset supplier Nokia for a joint app store. All Nokia smart phones made for China Mobile are pre-installed with the MM-Ovi App store as well as the Ovi Map and Ovi Map Navigation apps, free for use.
China Unicom, however, does not provide any carrier-branded navigation and LBS apps on its Wo Store, a.k.a UniStore. The UniStore has been operating on a trial basis since early February 2010 and is scheduled to officially launch in the second half of this year, whereas the two rivals have started commercial operations of their app stores last year. Ironically, China Unicom was the first Chinese wireless carrier to touch upon LBS. It launched its U-Map mobile LBS back in July 2003, but the service has been terminated ever since the telecom industry completed restructuring.
New Venues for Growth
During the past two years, China’s telecom industry has undergone major changes. Smart phone sales increased explosively and wireless Internet took off, as well as the mobile navigation and LBS businesses. All of these present areas new opportunities for growth.
However, it is important to note that China is a very unique market. The Chinese telecom industry strictly protects the three Chinese state-own carriers. Sometimes carriers can use the government regulations to execute their power over handset makers, as in China Mobile’s case.
As for the Chinese carriers, since the competition is still confined among the three of them, the biggest thing they need to do is to avoid becoming just a dumb pipe of the handset suppliers. With that being said, China Unicom has to come up with a better product strategy other than subsidizing the iPhone.
The Chinese consumers also demand localized apps. In order to succeed in the Chinese market, handset makers must coordinate with the carriers for the hardware as well as localizing the software.
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