New Landscape in China's Telecom Market (7) The Pricing of 3G Value-added Services

3G value-added services will be cheap, but not so cheap as you have expected.

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[+] The pricing of video phone service

As a result of the fierce battle for subscribers between operators, 3G value-added services eventually become a secondary role. In the long-term, however, mobile subscribers will gradually accept the services and use them more than they did in the 2G time. In fact, subscribers first switch to 3G because of attractive voice fee rates. Then they begin to use more value-added services because of faster Internet access speed.

Generally speaking, the most talked-about 3G services include video phone and streaming media. With video phone, you will be able to see the one you are calling. Of course, you can also dial a number to watch a live broadcasting program. Streaming media, on the other hand, enables users to watch audio/video programs via the Internet, mostly by logging onto portals of operators with handsets.

Voice service, video phone and streaming media, how should the three services be appropriately priced? First, as video phone consumes 4 times of bandwidth than general voice calls do, should it be 4 times as expensive? The answer is no, because 4 times is pretty scaring. Most operators offer rates ranging between 1.2 to 1.5 times.

Due to privacy and courtesy concerns, video phone is rarely used. Some people argue that operators should offer lower rates to increase use of video phone services. The fact is, however, low price is probably not sufficient to eliminate the privacy concern. Operators even believe there are reasons you have to use video phone (e.g., your wife requires you to). Is there any other chance of earning such easy money?

[+] The pricing for streaming media

Streaming media service, which enables mobile TV and movies, has been in a dilemma of whether to charge by traffic volume (e.g., RMB X for watching Y mega bytes per month) or by service time (e.g., RMB X for Y hours per month). Eventually, all operators chose service time-based fee rate models.

As most users are still not accustomed to traffic based models, while charging by service time also seems weird (nobody pays TV bills by minutes), the best solution would be monthly packages without time or traffic volume limit. Fearing that users might turn on their handsets 24 hours a day, which would result in considerable waste of wireless network resources, most operators dare not choose the solution.

If they choose to charge by service time, how much per minute would be appropriate? Streaming media service usually consumes twice bandwidth as much as video call does. Nevertheless, I suggest its fee rate be set similar to, or even lower than that of general voice calls. As streaming media service is delivered through IP-based packet-switched network, it could use network resources more effectively than video phone, allowing larger bandwidth for users.

That billing model encourages the use of streaming media to improve the efficiency of the network resources of operators. A challenge for operators is that they have to collect payments for content providers, which would increase the total cost of users. However, that seems to be a problem without solution, because content providers need to be paid, too.

[+] WAP monthly package and the pricing for mobile Internet access

In my view, WAP, the service that has been available since the 2G time is more profitable than mobile TV, which is wildly betted on because of the Olympic Games. Some operators have already offered WAP monthly packages without traffic volume limit. With the advent of 3G, they now face a problem: whether to raise or lower the package rates?

As the costs of operators are based on traffic volumes and 3G, with higher speed, will generate far larger WAP volumes than 2G, maintaining the monthly packages does not seem to be a good deal. However, in order to encourage 3G subscribers to use WAP services, it makes no sense to raise the price. But operators do not want to cut price. Eventually, the fee rates are usually kept at the same level of the 2G services.

As to the monthly mobile Internet access packages (via computers) for current China Unicom's CDMA network, no substantial change is expected because the speed of 3G service remains low (384k for WCDMA). However, as 3G has just been launched in mainland China, it would be well equivalent to the level of 3.5G (HSDPA) right from the beginning. As a result, the fee charging model would change.

For example, there might be packages of RMB X/month for the speed of 128k and RMB Y/month for 256k. Such a pricing model is similar to that of ADSL. Theoretically, the peak rate of HSDPA could be up to 14.4M (it is reported that 3.6M Internet access services would be available soon in Taiwan). Therefore, it is possible to introduce different fee rates for different speed.

[+] The fee rate of value-added services is not the key to attract subscribers

Why operators are so reluctant to cut fee rates of 3G value-added services? Because in the fight for subscribers, they have already cut prices of general voice calls. How do they compensate the loss? Through the above value-added services, of course. Will the value-added service fee rate level affect their subscriber base? Basically not. Then why not setting the fee rates a little bit higher?

Many consumers would consider switching to operators who offer lower voice rates, not the one who offer lower value-added service fee rates. The pricing of value-added service is not the key for operators to attract subscribers. With this user experience and such a mindset of operators, 3G value-added services will be cheap, but not so cheap as you have expected. (
2008/07/27 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

New Landscape in China's Telecom Market (7) The Pricing of 3G Value-added Services - 2008/07/27

New Landscape in China's Telecom Market (6) Insight into 3G Price War in Taiwan - 2008/07/20

From Idea to Business (2) How to Estimate Your Income and Cost? - 2007/07/22

New Era of Online Advertising (2) from Exposure to Deal - 2006/07/23

Ultimate Mobile Device (5) Universal User Experience - 2005/07/24

Great Changes in Wireless Internet Industry (2) Yahoo!'s Strategy

What's the difference between Yahoo! MDP and Google Android?

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[+] Isolated and multi-standard industrial environment

If you have developed a PC-based website, what you are most concerned about would be how to attract users, instead of whether your web pages fit the sizes of your users' screens. With regard to browser brands, you only need to consider a few versions for the program you use to build your website.

You don't have to bother about what operating systems your users use, or whether your users access the Internet through ADSL or Cable, or via which telecom operators. However, with a mobile Internet environment, all these are issues you have to think about.

Providing value-added mobile Internet services via handsets is extremely painful. For example, Yahoo! has a searching box on an operator's WAP portal. It wasn't launched until passing telecom network test, value-added platform test, billing platform test and handset compatibility test.

If it wants to cooperate with another telecom operator, it will have to do these tests all over again, as each operator has its own telecom network and platforms. Just consider how many telecom operators there are in the world? Such a service deployment speed makes it almost impossible to duplicate the Internet revolution on handsets.

In the world of mobile communication, each industrial leader wants to develop its own standard. Leaving alone the various platforms of telecom operators, is it possible to have a uniform software development environment in the first place to make it easier for the developers to support a wide range of handsets?

Now we have a crowded market. In addition to Symbian and Windows Mobile, there are the reverend Java and Qualcomm Brew, joined by new comers like Adobe Flash Lite. Even Yahoo! has introduced Yahoo! Mobile Developer Platform.

If you are a handset service developer, what would you feel at the sight of so many standards you have to support?

[+] Handset operating systems are getting increasingly unimportant

These development platforms have everything from operating systems to software deployment environments. Now that none of the handset operating systems could monopolize the market, all will have to seek survival in the long run. What consumers care most about are only services, not operating systems. It would be increasingly unimportant to fight for market shares of handset operating systems.

In my view, therefore, the key to the success of platform development is not the operating system, but the software deployment environment. As a matter of fact, Java, which is best positioned to build a terminal-independent development environment, has not been able to achieve its vision of "write once, run anywhere".

Flash Lite, a product of Flash that holds an admirable share in the computer-based Internet market, is another development environment irrelevant to operating systems. Theoretically, any handset, regardless of its operating system, could use the environment so long as it supports Flash.

If it could really enable "write once, run anywhere", the development platform will be embraced by developers. Yahoo!'s Mobile Developer Platform (MDP) could be regarded as a development platform similar to Flash Lite but more irrelevant with operating systems.

Simply speaking, website operators that write Widget in accordance with the development specifications (simple scripting, instead of binary codes) will be able to deliver existing services of their websites to handsets, so long as these handsets have installed Yahoo!Go.

The goal of Yahoo! is to get Yahoo! Go into every handset, so that more and more websites would support MDP and join Yahoo! This, of course, would include Google's phone - if GPhone has built-in Yahoo! Go.

[+] The Mobile Internet needs a common leader

Any Internet player that plans to provide handset-based service will have to face a variety of handset operating systems, the special functions of different brands, the different browser brands in the handsets and the different telecom operator platforms.

Such a complicated environment would often be a headache for small Internet companies. Investing resources to solve all the problems is, obviously, not in line with their economic interests. Large Internet companies could make such investments and get economic benefits, but then they will have to fight a battle all by themselves.

Computer-based Internet is a large eco-system. Unless there is a platform that enables all Internet companies to deliver their services to handsets, the entire eco-system would not be able to bargain with telecom operators, who control user resources.

So there appears the mainstream requirement for an open platform different from existing software development platforms such as Java or Flash. The former is a development tool customized for small Internet companies to address the compatibility of different handsets.

In addition to compatibility, the platform should be supported by an industrial leader powerful enough to deal with telecom operators or handset manufacturers. In other words, the mobile internet needs a common leader with a sufficiently large user group.

The key is who the leader will be? Yahoo! and Google, both with large user basis, have chosen different approaches. Ignoring other standards, Google chooses to develop its own platform. Yahoo! chooses to co-exist with other standards.

[+] What's the difference between Yahoo! and Google?

What's the difference between Yahoo! MDP and Google Android? Simply speaking, Android is a platform that includes everything - from the operating system to the software deployment environment and even the browser. Leaning more toward handsets and developers, it hopes to build a brand new underlying technical platform in the mobile Internet industry.

Google does not care what operating system is used on a handset, or what impact the browser has on the presentation of web pages, because it has prepared its own. It wishes to persuade handset manufacturers, Internet companies and software developers to use its standards and get rid of all others.

Yahoo!, on the other hand, focuses more on the provision of a front-end environment to enable existing website operators to deliver their services into handsets easily, regardless of underlying technologies. To achieve this goal, however, Yahoo! has to overcome compatibility problems itself.

To be applicable in every handset, Yahoo!Go must be compatible with all handset operating systems (including, of course, the operating system of Google). It has to adapt to handsets or browsers of different manufacturers to ensure normal functionality and display quality.

With all these pains-taking efforts of Yahoo!, medium and small Internet companies will be able to provide handset versions of their services on their websites easily. No more fuss about standards, just follow the leader.

Both players are trying to become the leader, although with different approaches. Who's got the better chance? As of this point of time, we can only say that Google is taking a bigger bet. It will have a big success or a big failure. Both, however, have chosen the approaches best fit themselves. We can hardly imagine Yahoo! to develop a platform like Android.

However, they are not the only ones aiming at the leadership. Nokia has noticed the trend, too. (
2008/03/09 - By Digitalwall.com - Way to
China Internet/Telecom )

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Prev : Great Changes in Wireless Internet Industry (1) Google's Strategy


Next : Great Changes in Wireless Internet Industry (3) Nokia's Strategy

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- Today in History

Great Changes in Wireless Internet Industry (2) Yahoo!'s Strategy - 2008/03/09

Great Changes in Wireless Internet Industry (1) Google's Strategy - 2008/03/02

Predictions on China Internet Market (2) Subscriber Number Is King - 2006/03/05

Media, Community, and Blog (1) The Beginning of the Story - 2005/03/06

Stop Internet Marketing (1) All Market; No Marketing - 2004/03/07

3G Time Comes (1) What Is 3G? - 2003/03/09

Great Future of Wireless Broadband (4) WiMax, 3G and 4G

WiMax will eventually engage with 3G in the field of voice communication.

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[+] The declining communication revenue

Imagine this: you will be able to make mobile phone calls for unlimited minutes so long as you pay a fixed amount of money each month; if you want to watch a movie or download music or use other value-added services, you pay additional charges, but there's no such costs as communication fee or transmission fee any more.

For telecom operators, this is a nightmare. No more are the good days of waiting for subscribers to make phone calls and printing phone bills calculated on talking minutes. They now have to earn their meals by providing sufficient contents. But that is too troublesome and not the specialty for operators. Worst of all, they will have to share money with content providers.

This is what's happening to your phone line at home. For an ADSL line, the telecom operator is able to charge only two types of fee: the lease for the line (including voice and data services) and the Internet access fee. Both are almost fixed each month.

If, instead of dialing traditional phone calls, you use the line only to dial Skype VoIP calls, you will be able to use both the Internet and the voice services with that amount of monthly payment. Eventually, telecom operators will have to sell IPTV to you to look forward to earning more through contents.

Yes, wireless bandwidth resources are limited and incomparable with the cable broadband. But who can say that some kind of a novel technology will not appear in the future to change all this? After all, consumer demands are always there and the amount of bandwidth that a consumer can buy with each dollar has been on the rise over the past years.

[+] The unpredictable future of WiMax

In the field of 4G, a concept which is not even clearly defined so far, players are already fighting for the ability to set the standards. Thanks to the promotion of Intel, WiMax has got the support of many telecom equipment suppliers and handset manufacturers, and is now the hottest bidder for the 4G technology.

Intel is going to embed WiMax into its notebook computers, in a hope to get the popularity that WiFi once had. Despite the slower-than-expectation progress, the ambition of the giant should never be ignored. In addition, Nokia has also got into the line of supporters, announcing its plan of introducing WiMax handsets.

However, in view of the current status of 3G services around the world, WiMax, which claims to be 10 times faster than 3G, is really in an awkward position. As 3G has been in commercial use for only a few years, mobile operators who are yet to retrieve the return of their investments are really hesitating about making additional investments in WiMax.

A more possible solution is to issue licenses to fixed-line telecom operators or emerging mobile operators and allow them to build WiMax APs. As a matter of fact, struggling to stem the multi-year decline in revenue, fixed-line operators have been longing for accessing the mobile market for many years. For them, WiMax could be an opportunity.

When mobile operators have little interest in WiMax, a fallacy has appeared in the market, holding that WiMax is a complementary service, instead of substitute of 3G. This has rendered wider imagination for WiMax, particularly in the China market, where 3G has not been launched yet.

[+] 3G and WiMax: foes, not friends

The two services are considered by some to be complementary because the priority of 3G is the mobile voice communication, while WiMax, with its advantages in data transmission, can provide notebooks with the Internet access. In this regard, mobile operators could build two types of network to separate the services: "3G serves people on feet, and WiMax serves people on seats."

In Korea, dual-mode handsets supporting both 3G and WiMax are already available in the market. It seems possible for both to co-exist peacefully? However, we see now that the two technologies are born to fight each other to death and there could never be such a thing as complementation for each other in the real market.

First of all, if fixed-line operators get the WiMax license, they will use the data transmission capability of WiMax to provide wireless VoIP services, which is bound to dig a portion of subscribers away from mobile operators. With so many world-leading suppliers involved in the development of WiMax handsets, the supply of terminal devices will not be a problem sooner or later.

It is reported that the data transmission cost of WiMax is only one tenth of that of 3G. Maybe the WiMax community led by Intel is too optimistic. But if it were true, the fee rate of WiMax-based VioP could be as low as one tenth of that of 3G too.

If the operators that have got the license forget the fact that the number of mobile phone subscribers is far larger than that of notebook users, and only plan to provide Internet services to notebook or PDA users with WiMax, then they must be crazy. WiMax will definitely engage with 3G in the field of the voice communication.

[+] Mobile phone flat rate with unlimited minutes

Were WiMax to appear a little bit later, the follow-on versions of 3G might have the chance to provide larger bandwidth and a more comprehensive IP environment; or, in plain words, a 4G network environment upgraded from 3G might be able to provide the VoIP service, thus render WiMax unnecessary?

Could VoIP all-you-can-eat monthly flat rate become a reality in the 4G time? It will have to depend on how low the transmission cost is. Even if it is low enough, the 4G-based VoIP service might still be charged by minutes in the initial stage. Operators will not withdraw to the bottom line of monthly flat rate at once, so long as the fee rate is acceptable to consumers.

Yet for 4G Internet accessing for notebooks, which does not go through a phone number, operators might consider to offer monthly flat rate. Although 4G is a comprehensive IP environment, operators might still want to separate the Internet access from the voice communication after taking into consideration the reality in the marketplace.

However, there's one thing uncertain here. Today, WiFi handsets with embedded Yahoo! Messenger or Skype are already available. Such handsets will be supported in the 4G wireless network too. With such handset and access to the 4G network of an operator, consumers would be able to make phone calls free by only paying the monthly fee.

Such handset might not have their own phone numbers, or would have to go through troublesome procedures (e.g. SkypeIn) for the numbers, or might encounter the containment from telecom operators. But anyhow, the competition is there and operators have no way to pass it by. It will eventually drive 4G VoIP toward the destiny of monthly flat rate.

The trick is that if 4G really offers monthly flat rate, it will deprive Skype of its room of survival on the mobile terminal. How could Skype, a service that depends on consumers' hunger for lower fee rates, expect to survive any longer once the mobile phone service is as cheap as what monthly flat rate offer?

To be able to make free phone calls has been the dream of mankind, and unintentionally become the driver for the evolvement of the communication technology. Telecom operators who depend solely on the switching of phone calls or transmission of data for their income would face severe challenges sooner or later. They will have to transform into service providers with diversified abilities. (
2006/12/03 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

Mobile TV Market (3) Terminal Manufacturers & Content Providers - 2007/12/02

Great Future of Wireless Broadband (4) WiMax, 3G and 4G - 2006/12/03

Internet and Books (1) Dilemma of Online Publishing - 2005/12/04

VoIP (2) Who Depends on Whom - 2004/12/05

VoIP Gives out the First Cry - 2003/12/07

Great Future of Wireless Broadband (3) Scarce Resources

What will not change in the wireless world is the spectrum scarcity.

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[+] Bandwidth that can be increased

In the wired world, when a telecom operator lays a cable into your home for broadband Internet access, it exclusively belongs to you and your bandwidth is guaranteed. If you are not content with the existing bandwidth, you can simply pay a little more to get it increased, so long as it is technically practical; or you can just apply for another line.

For the part of telecom operators, they receive all user data traffic into their servers, and switch or transmit them out. When the user number or the bandwidth of each user increases, they can deploy more equipment or increase the bandwidth to outside by laying more cables.

In the wired world, the shortage of bandwidth can always be solved with additional cables, if the operational costs of telecom operators are let alone. Both the bandwidth of end users and that of telecom operators can be expanded.

Wireless Internet has similar situations. The base stations deployed by telecom operators have user number and bandwidth limits too. That is, the number of concurrent user cannot exceed a limit. The bandwidth of a base station is shared by all concurrent users at any specific point of time. Of course, the more people online, the slower the connecting speed for each one.

In other words, if users are always having trouble accessing the Internet, or are suffering from slow speed, it is time to increase the number of base stations. Let alone the issue of operating costs of telecom operators, they could always increase the bandwidth by deploying additional base stations.

[+] Bandwidth that cannot be increased

For wireless bands, however, there is a lethal vulnerability. Due to its inherent spectrum limit, the volume of data that a wireless band is capable of transmitting is always fixed. When an operator is allotted a wireless band for its services, the total capacity of its bandwidth is almost nailed down.

This is the spectrum scarcity. In other words, wireless operators must decide how to distribute the fixed bandwidth resources available. If there are too many users, the part allocated to each would be too small to satisfy his/her needs.

Technological advances might be able to solve part of the problem. For example, better wireless modulating technologies or compressing abilities might help to squeeze more data volumes into a wireless band, and therefore increase the total bandwidth of the operator. An example is the evolution of the technology from 2G to 3G, and then to the current 3.5G, and to 4G in the future.

Unlike the wired world, however, this increment is still limited. This is why the 3G wireless Internet monthly tariffs of most mobile operators are very expensive. With so many people bidding for limited bandwidth resources, those who afford the high prices can get the service.

In addition, both 2G and 3G systems of most operators are intended for voice communication services. When a number of users are fighting for the bandwidth of a mobile base station, the operator will give voice service subscribers higher priority, in which case, Internet users might be unable to get connected. All these have rendered the prices and experience of the wireless Internet service less appealing.

[+] 3.5G is shining over the horizon.

Generally, there are two solutions to the above limits. One is to introduce new technologies, for example the upgrade from 2G to 4G as mentioned above to squeeze out more bandwidth for operators. The other is to provide separate routes for voice and Internet services to avoid the conflict for base station resources.

When will the monthly fees for the wireless Internet service drop down? Currently in Taiwan, the fee rates of most WCDMA 3G operators range between NTD750 to 850, while, in theory, the data rate is 384K.

Compared with ADSL, it is cheaper, but the speed is much slower, although it already has the "bandwidth sufficient for mobile services". Compared with WiFi, it also has its own advantages: signals are available everywhere and users don't have to search for hotspots. This explains the continued hot sale of 3G wireless network cards since their introduction.

As I explained in previous sections, the wireless Internet service should be able to substitute ADSL if it were ever to see a substantial increase in its user number. Currently, this is still beyond the ability of 3G. If there could be a wireless Internet service that can be used both at home and out on the road and has about the same data rate of ADSL, isn't that great?

3.5G is here. The HSDPA-based wireless Internet model could offer a download data rate up to 14.4M in theory, and 3.6M in practice. It was first introduced in Taipei in October 2006 at the same monthly package fee rate as the 3G wireless Internet service.

[+] The cost for serving household users will increase drastically.

With this price and proven data rate, the service, which is capable of substituting ADSL, has attracted the eyeballs of many computer addicts and business people ever since it was introduced. Yet on the other hand, operators who have vowed to develop the WiFi service in Taipei are caught in a dilemma.

Currently, 3.5G wireless network cards are still a little bit too expensive—about NTD10,000. In the meantime, notebooks with built-in 3.5G chips are already available in the market, sold at about NTD 80,000. Price cuts can be expected so long as operators have the momentum for promoting the service.

For operators, however, this is a mixed feeling, as HSDPA has not fundamentally increased the number of concurrent users. A 3.5G base station can still accommodate only 16 people online at the same time. When the situation of "substitution of ADSL" does occur, the base station will be short of resources.

In the case of the mobile voice service, a normal phone call will last for minutes and will not occupy the base station for long. However, for the wireless Internet service, it is a different case. A user could stay online overnight to download files. To address the needs of household users, the number of base stations will have to increase too.

Consequently, there could be implicit increases for monthly fee rates or restrictions to the bandwidth assigned to each user. The scarcity of resources will never change in the wireless world, unless there is a better technology to provide larger bandwidth. Will 4G be the new technology expected? (
2006/11/26 - By Digitalwall.com - Way to
China Internet/Telecom )

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Prev : Great Future of Wireless Broadband (2) Public WiFi is Not Enough


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- Today in History

Mobile TV Market (2) the Subtle Role of Telecom Operators - 2007/11/25

Great Future of Wireless Broadband (3) Scarce Resources - 2006/11/26

Google's Choice (2) Lessons for the Software Giant - 2005/11/20

VoIP (1) It's a Fool Not to Make Telecom Money - 2004/11/28

Great Future of Wireless Broadband (2) Public WiFi is Not Enough

Many round-about business models have appeared as a result of the technical bottleneck. Unfortunately, none is the ultimate solution.

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[+] "Killer application" does not exist at all.

What is the "killer application" that attracts consumers to apply for ADSL? Or, in other words, if you want to apply for ADSL, what is the application behind your decision?

Is the reason for a larger mailbox, or the Internet TV, or the ability to download larger files, or the video phone? You can hardly tell what it is exactly. Anyone who applies for ADSL is aiming at "all of the services available on the Internet", instead of any particular one.

In other words, the killer application is the entire Internet itself, which is a fact ignored by most people even though the Internet has been developed for more than a decade now. Whenever a new transmission technology runs into a bottleneck in the market, the first reaction of those involved is to find a killer application, although they have never succeeded to find one at all.

This is the paradox of Taipei, the largest WiFi city in the world, which has merely 40,000 WiFi subscribers. Both the city government and its contractors believe that Voice Over WiFi could substantially stimulate the growth of the subscriber number.

I don't know if you ever have the experience of making phone calls through WiFi. I myself once dialed a call with the Skype phone of a leading supplier over WiFi (without connecting to a computer). Frankly, the communication quality depends on your luck. After all, WiFi is not designed for voice communication.

[+] Price cut is not the solution.

If we look back at the process that we upgrade all the way from the dial-up access to the 512K ADSL, and then to 1M, 2M, 8M and 12M, we can see that there is only one fundamental driver behind: the price. Following each price cut, a large number of users switch to services of higher bandwidth.

Currently, the monthly fee for the public WiFi service in Taipei is about NTD400. Will the number of subscribers rise drastically if the fee rate is cut down to NTD200? Frankly speaking, with my own experience of using the service, I dare not say yes. Yet for service providers, such a fee rate is too little.

From the viewpoint of consumers, a flawed product (at least with many restrictions to its functions) has little appeal however cheap it is. From the standpoint of service providers, those who could bear the flaws and functional restrictions are the ones with real demands, and therefore, a price cut is the least thing they should do.

The question is how large is this group? When we get the answer, we will see that the target group of the public WiFi is really a small one. They must be notebook owners who are often out of their office and have Internet access demands. What's more, their range of activities must be around streets, where good signals are available.

Typically, such people are either computer addicts or salespersons. In this sense, it is safe to say that we are lucky to have so many public WiFi subscribers. Then how come we have built so many WiFi APs - enough to cover 90% of our population - for such small group of people?!

[+] Households are the only hope for the increase of the subscriber number.

With the earnings pressure, public WiFi service providers are beginning to shift their eyesight to corporate users. This is a right business decision, as they will be able to secure a large user base rapidly by introducing service packages or price cuts in the corporate market, not mention corporate users are the very target of the public WiFi.

Nevertheless, it is by no means a smart investment to spend so much money in building so many APs to only serve business people who own notebooks in Taipei. If the subscriber number is what counts, the target market of the public WiFi service should be households. In other words, it should try to substitute ADSL.

Notebooks have become the mainstream in the computer market over the past years. With their mobility, notebooks can be used in your study, sitting room, bedroom, or on the road. Once regarded as a subsidiary product to the desktop computer, the notebook is now in the mainstream and the primary choice for many people.

The problem is, when you use your notebook at home, the ADSL cable does not follow you everywhere. Yes, you can use a WLAN at home, but not everyone is good at constructing a WLAN AP. Maybe WWAN like 3G could provide a solution to such problems.

Theoretically, 90% of the citizens in Taipei will be able to surf the Internet with their notebooks at their sitting rooms, kitchens and bedrooms without the restriction of the ADSL cable, so long as they pay NTD 400 each month to subscribe for the public WiFi service. The reality, however, is not that simple.

[+] Technical restriction is the root.

"To compete with ADSL in the same market" is a viable direction. However, with the bottleneck of the WiFi technology in the WAN field, the commercial public WiFi service has been unable to grow big. With such a large coverage, the APs have not been able to enter the largest household market, and suppliers engaged in the niche market are still struggling to sustain themselves.

How about offering the AP in households free of charge to the public, instead of having all APs run by a single operator? This is the idea of FON, which was founded in Spain in November 2005. By purchasing a USD5 FON router, consumers could share the broadband at their homes with anyone else.

Of course, you can use the FON wireless broadband of others when you are out of your home. The WiFi service provider, which entered the Taiwan market in November, has secured 80,000 subscribers all over the world within only a half year after the introduction of the service. What's more, its subscriber base is growing by 10,000 each month.

However, the deployment of APs is a highly sophisticated technological work, and requires optimization for satisfactory quality. It is beyond the ability of this grass-root model. Can this service cover 90% of the population? Or even if it can, would the problem that it will face be any different from the existing public WiFi network in Taipei?

Few people would be willing to install an AP at their homes, fewer to share them with others. Considering the world population, the subscriber number of FON is nowhere near large at all.

The root is the technical bottleneck, which has led to the appearance of a lot of round-about business models, in wireless broadband market, like public WiFi in Taipei or FON. Unfortunately, none is the ultimate solution, for what consumers need is the ubiquitous access, which only WWAN, for example, 3G or WiMax can provide. (
2006/11/19 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

Mobile TV Market (1) Cell Phone plus TV, the Dream of Everybody - 2007/11/18

Great Future of Wireless Broadband (2) Public WiFi is Not Enough - 2006/11/19

Great Future of Wireless Broadband (1) Living in the WiFi City - 2006/11/12

Google's Choice (1) Lessons for Portals - 2005/11/13

A Word of Advice for Small Online Stores - 2004/11/14

Great Future of Wireless Broadband (1) Living in the WiFi City

Ubiquitous Access is what people really want.

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[+] Living in the largest wireless broadband city in the world

Imagine this: you are living in a city where you can access the Internet through WiFi from 90% of the city area, where you can receive signals from access points whenever you turn on your notebook. Doesn't it sound great?

In early June of 2006, Taipei was awarded "Intelligent Community of the Year" by the Intelligent Community Forum (ICF) of the World Teleport Association (WTA). In the meantime, the world's WiFi hotspot authority JiWire announced that Taipei's city WiFi network was the largest in the world.

While most other cities around the world are just beginning to build their city WiFi networks, the wireless access points in Taipei has already covered 90% of the city's population. It will take other cities at least one and a half to two years to keep up with the pace of Taipei.

Taipei city government does not pay a cent for the project. All the wireless access points in the city are built by outsource contractors, who are allowed to retrieve the return of their investments from follow-on service charges. Most other cities in the world also follow this model in designing their wireless city blueprints.

I bought my first notebook computer in September and was excited when I read the news. Thank God I am a citizen of this great city. I immediately applied for a NTD 400/month package, dreaming about the freedom of accessing the Internet anywhere, anytime.

[+] Real life and experience about the wireless city

The first problem I encountered was no signal available in my office, which was on the 8th floor (surprisingly, the office of the outsource contractor responsible for the access points deployment was at the 9th floor of the same building). Among the so many access points, which allegedly covered 90% of the population, none was detectable. Carrying my notebook, I walked down the stairs and finally got signals on the 4th floor.

Later, I learnt that, as the access points were installed on lamp posts, trees, and telegraph poles, it was natural that the signals were unavailable at high floors. Yet while I was able to access the Internet at the side facing the street on the 4th floor, the signals vanished again when I moved to the farther side of the same floor.

Already accustomed to the ubiquitous availability of mobile phone signals, I was surprised. As a consumer who spent NTD 400 each month on the service, I didn't feel it was normal that I should "cooperate" with the technical problems of contractors, and find a way to access the Internet myself.

Later I figure out that it'd better to use wireless networks precisely according to the instructions in the user manual offered by service providers: sitting right at Starbucks outlets below the second floor, beyond which, there's no guarantee for signal availability.

Many people would argue that nobody really carries a notebook computer and walk around, and being able to access the Internet from a cafe is good enough to meet most people's needs. They do not understand for sure that what consumers need is the freedom for ubiquitous access.

[+] Wide area wireless network is the future

Having experienced the setbacks of the public WiFi, I realize that the Wireless Wde Area Network (WWAN) is what consumers really desired. Trying to use WiFi, a technology designed for local areas originally, in wide areas and making patches here and there are just like to have a mall kid behind the steering wheel of a big car.

Please note the word I used: desire. Now that the Internet is already an integral part of people's life, they will not tolerate such a defective wireless Internet service, on which they spend money.

I also think about applying for the 3G wireless Internet service, which has been available in Taiwan for many years. Plug a 3G wireless PC card, which you can get from any telecom operator at an affordable price into your notebook and you will be able to surf the Internet. What holds me back is that the cost for the monthly package is twice as much as the amount of a public WiFi package.

For 3G telecom operators, that is a right pricing strategy. Although in theory, the speed of the WCDMA technology is only 384k, far slower than that of WiFi, the signals are ubiquitously available. I once tried the 3G link on a highway and did not encounter any single disconnection for two hours.

Due to the wide signal coverage, the service with a much slower data rate can be sold at a higher price. I finally realize that the ubiquitous access is what people really wanted. Consumers are willing to pay for additional freedom, but the public WiFi is facing severe challenges from other WWAN technologies.

[+] Too few subscribers

Despite the alleged 90% population coverage, Taipei, the so called "the largest WiFi city in the world", has as few as 40,000 subscribers for its WiFi service. For contractors who have spent so much time and money on the construction of wireless access points, the miserable income is pushing the day of profitability even farther beyond the horizon.

Many discussions are focused on the high service fee, which has diminished the infiltration rate of the service. However, compared with the fee rate of local ADSL, WiFi is not really expensive. There are also arguments that, due to the scarcity of wireless applications, consumers have little interest in it.

Both arguments, however, only touch the surface of the problem. The real problem is not the slow increase in the number of WiFi subscribers, but our over high expectation, which has led to the wrong market positioning, and all those follow-on problems. (
2006/11/12 - By Digitalwall.com - Way to
China Internet/Telecom )

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Next : Great Future of Wireless Broadband (2) Public WiFi is Not Enough

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- Today in History

Mobile TV Market (1) Cell Phone plus TV, the Dream of Everybody - 2007/11/18

Great Future of Wireless Broadband (2) Public WiFi is Not Enough - 2006/11/19

Great Future of Wireless Broadband (1) Living in the WiFi City - 2006/11/12

Google's Choice (1) Lessons for Portals - 2005/11/13

A Word of Advice for Small Online Stores - 2004/11/14

The Web 2.0 Revolution (10) the Big Future of Web 3.0

Web 2.0 is not the end of the revolution; it is but an evolution.

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[+] Web 2.0 is a confusing term

On the topic of Web 2.0, I have written 10 series articles, spanning the areas of Internet media, search engine, online communities and electronic commerce. I elaborate my thoughts on Web 2.0 thoroughly with the axis on the idea that the declining cost of storage of bandwidth will trigger changes when it continues to drop to a critical level.

In this last article I would like to point out a simple fact that, for me, there is no such a thing as Web 2.0 in the world. The source of the confusion, which has become even more ambiguous when there are so many people in the world so eager to give it an explanation, lies in its version number.

The appearance of 2.0 easily leads people to mistake that it is a completely different thing from Web 1.0, and to ignore that there may also be versions like Web 1.7354 or Web 1.212 in between these two. It misleads people to think that web 2.0 is a Revolution but not Evolution.

This is why Web 2.0 is but a transition but not an end of some kind of revolution. As nobody can clarify the causes and effects and even the direction of future developments, it does not bring too many benefits to us by using this term.

[+] The survival condition for Internet services: Cost

Along the course of Internet development, many new things have appeared, and managed to survive, with the decline of Internet bandwidth and computer storage cost. Many innovations may have been brought up long before the year of 2000, but they didn't make it to survive or succeed because of the lack of a favorable cost condition.

Now the operators have found that they can buy bandwidth and storage several times as much as what they used to get with the same money, and now they can supply services, in great quantities, which they may not be able to provide even with huge investment. An example is the 1GB email service by Google. This is the first type of typical responses.

For free personal homepage and photo album service appearing in the early time, once abandoned by portals because of the unbearable burden of high bandwidth cost after the year of 2000, they are now in mass supply in the form of Blog similar to the old personal homepage service. There is now a favorable cost condition for the emergence and popularity of Blog.

Broadband access is getting more popular among Internet users, and users can get several times the bandwidth they used to get with the same amount of money. As such, users are become more willing to use more sophisticated services that demands higher bandwidth and involve more interaction. There are still cost conditions for users to accept certain types of services.

[+] Cost shifted back to Internet users

It is not smart for website operators to only thinking about providing services that consume a lot of bandwidth. The real smart operators will think about how to shift the cost of high-bandwidth services back to users. As such, we've seen some B2C services turning to the C2C model.

One most striking example is the Internet phone service provided by Skype, which shifts the part of the service that consumes the most bandwidth back to users by enabling them to connect to each other directly. The operational cost has thus been greatly reduced, which has drastically changed the cost structure of and the dynamics in the telecom industry.

The reason why Wikipedia can challenge the traditional Encyclopedia Britannica is that it has shifted the huge burden, the compilation of the encyclopedia, back to Internet users themselves. This is the typical challenge posed to B2C by C2C in the so-called Web 2.0 way.

Even software developers are taking this trend seriously and are starting to take advantage of it. Microsoft, Google and Yahoo! rush to open their website API, hoping to attract programmers in the world to develop applications in accordance with their standards. It is exactly to throw back the software development cost back to the Internet.

[+] Cost conditions for web-based software to prevail

Speaking of software, there are more and more software companies putting efforts in developing web-based software. In the past, consumers used to buy packaged software to install on their home PCs, now they only need to connect to vendors' websites to proceed with similar functionalities via their browsers without buying packaged software or any installation.

Among various web-based tools, those which provide functionalities similar to Microsoft Office receive most attention. Many websites provide registered users with functionalities similar to Word or Excel that can be operated via browsers; the most striking example is Google's Google Docs & Spreadsheets.

At the moment, these web-based browser-interfaced software tools are given for free, but there will certainly be for-pay services. For example, versions with less, simpler functions may be given to users free of charge and subsidized by advertising revenue, but premium versions are to be provided on a monthly subscription basis. For developers, it means that they can sell software online now.

AJAX technology provides better interactivity and similar experience on a browser as that with conventional software. It also allows multiple users to edit the same document at the same time, enabling efficient communication. It was but it didn't hit the market many years ago when Microsoft put it at the core of its browser system. Why?

The answer is still the cost! For many years, software companies sell packaged software through distributors. Now because of "the declining cost of computer storage and network bandwidth", web-based versions will be cheaper than packaged ones in terms of selling costs. There are cost conditions for a product to become a market success.

[+] Take the advantage of low interpersonal communication cost

When the bandwidth becomes cheaper for users, the cost of interpersonal communication, whether between acquaintances or strangers, will consequently fall. This paves the way for social network websites to take off. We finally come to realize that "the cost to find a certain type of people gets a lot lower than before", which is sure to arouse dramatic industrial changes.

When the cost of interpersonal communication keeps dropping, the transaction cost would be falling down too. By this it means that the intermediaries who had played a role in facilitating the meeting and transactions between two parties are no longer able to charge high fees for the matching service.

This is why eBay has posed a threat to traditional B2C business, and classified websites like Craigslist are to encroach on the market of auction websites like eBay. As the direction of the Internet development is clearly towards lower transaction cost, there will be little room for intermediaries to monopolize and charge for transaction information.

As for e-commerce companies, there is no need to fear or doubt, because the key underneath the transformational force has remained the same thing: cost. The only thing they need to think through is how to take the advantage of the growing user base to drive the cost down and to create more value.

[+] What does Web 3.0 look like? When will it arrive here?

For those who are not familiar with the Internet industry, they may base their understanding on media reports and associate Web 2.0 with gossips and online dating, online diaries and photo sharing, getting to know more people through social network websites, or hearsays about big buyout bids for some Web 2.0 website.

I am always in the belief that terms like RSS, Blog, SNS, and Wiki describe only the appearances; they are the effects, not the causes, of the changes. Allow me to reiterate that "the key is always the cost," and the true spirit of the so-called Web 2.0 is:

The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".

I have been asked by some reporters to predict the possible scenario of Web 3.0. All I can say is that, just imagine what will happen to the world when the above mentioned cost is approaching zero, and you may get to see some look of Web 3.0.

As to when Web 3.0 will arrive, I can give you a sure answer. It is when the fiber reaches each household or 4G wireless broadband network prevails everywhere, when you can get bandwidth several times as much as that offered by ADSL or 3G services now. It will surely arrive in five to ten years time. (
2006/11/05 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

The Web 2.0 Revolution (10) the Big Future of Web 3.0 - 2006/11/05

The Web 2.0 Revolution (8) Transformation of the Telecom Industry

The P2P technology enables Skype to provide service without making huge investment, since the bandwidth cost has been handed down to users.

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[+] The operational cost of email service

The lowering of communication cost is the best gift brought by the commercialization of the Internet. Most people can't even remember when is the last time they wrote a letter with a pen on paper to friends afar, but they write emails to colleagues next desk in the office everyday.

Emails are sent through a central mail server from a sender's PC and forwarded through another mail server that link to the receiver's PC. This method has completely replaced paper letters that are more costly and slowly.

Emails may have eliminated traditional paper letters, but it is also facing the challenge from yet another communication tool. In fact, since there must be a mail server in between to deliver emails, an email service provider has to afford a significant amount of storage and bandwidth cost.

If the delivery of electronic messages can be completed by connecting two PCs directly without servers involved in between, and thus shifting the storage and bandwidth cost to the sender and receiver, then the financial burden of communication service providers may become lower.

Instant messaging (IM) software like QQ, MSN Messenger is such kind of service, the provider of which is only responsible for connecting the communicating parties. After the connection is established, all messages are transmitted from one individual user to another, with no server involved.

[+] The low operational cost of P2P model

In fact, IM software has partly replaced email tools. As those we contact frequently are mostly acquaintances or partners at work, IM is more convenient and responsive. Many times we choose IM, instead of emails, to communicate with others.

Users of these communication tools users may not be aware of the technology involved, but for communication service providers, P2P is more cost efficient than Client-Server architecture.

Though the use of these tools has nothing to do with Web, but the emphasis on peer-to-peer (C2C) rather than client-server (B2C) communication is in accord with Web 2.0. In fact, let's keep in mind the true meaning of Web 2.0:

The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".

Finally, the new generation IM service provider has brought a radical and unprecedented change to the application of P2P technology: the arrival of Skype is the consequence of P2P architecture introduced to the Internet telephony service which used to be dominated by client-server technology.

[+] Revolution can not succeed by mimicking your competitor

In the case of traditional telephone service, a call is initiated by a caller, who dials a number, and switched by a telecom operator, which sets up the connection with the receiver; the switch continues to take care of the transmission of the conversation that follows. Every word you say will first enter the telecom operator's switch then be forwarded to the receiver - what we see here is a client-server relationship.

Telecom operator thus needs to invest in costly equipment to provide such service. As the subscriber base continues to swell, the investment will grow in a relatively linear manner. Operators are constantly driven and by the demand for bandwidth by new subscribers - this difficulty is intrinsic to the client-server technology.

Internet phone emerged ten years ago when the operators were thinking about lowering their cost by providing voice communication service via the IP technology. Yet their thinking was still centered on a client-server approach: users purchased an Internet phone set and had it installed at home; users' conversation was still transmitted through operators' switch.

Such way of thinking is no different than that of the traditional operators and has kept the cost of bandwidth and equipment high for Internet phone service providers. To compete with operators they have to set their rates lower in order to attract subscribers, which has capped the growth in their revenue. That is why the Internet phone business remains lukewarm for these years.

Obviously, it is a naive idea to try to compete with traditional telecom operators by mimicking their business model. The telecom market is characterized by severe barriers to new entrants because of the huge investment needed in building up the client-server type telecom infrastructure. To challenge telecom giants, the only way is to come up with a new business model.

[+] The achievement of Skype: challenging the cost structure

Skype, as an IM tool, didn't bring too much surprise to the world at its debut, but it did leave good impression to users by its good sound quality. Its focus on providing Internet phone service was a refreshing approach.

When users using Skype, all communication data is transmitted directly to and from the both parties without any Skype server in between. This P2P model enables Skype to provide service without making huge investment, since the bandwidth cost has been handed down to users.。

This is what really upsets the telecom operators. Telecom operators are not particularly concerned about of potential competitors with deeper pockets as long as the market barrier remains high. Now even small companies can join the business, which has shaken the fundamentals of the industry.

Why Skype's Internet phone model didn't show up ten years ago? As a matter of fact, the broadband service was costly and not very popular then. But now people can enjoy the benefits of high-speed access with relatively less money, so that it is possible now for Skype to shift the bandwidth cost to users themselves with the help of P2P technology.

When the Internet phone service will succeed in revolutionizing the telecom industry? It is when users are able to benefit from higher bandwidth with even less money. At the initial stage, the high perpetration of ADSL and Cable broadband service has paved the way for the scene, now we are expecting FTTB (Fiber to the Building) with stronger broadband capabilities to drive the progress.

In terms of wireless communication, we've already seen 3G on the stage, and we have high hopes for WiMax which promises even high bandwidth. It may take five to ten years to see the results of these developments. Yet we should always keep in mind the big question: what would happen to the world when people can get ten times the bandwidth at the same price they are paying now? (
2006/10/22 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

The Web 2.0 Revolution (9) New ECommerce - 2006/10/29

The Web 2.0 Revolution (8) Transformation of the Telecom Industry - 2006/10/22

Predictions on China Internet Market (1) Saturation Stage

The number of Internet subscribers in China will not exceed 180 million.

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[+] China's Internet market is about to enter its saturation stage.

Before I gave a speech at China Telecom Fujian about a year ago, I made a study on future trends of the Internet market in China. After I finished reading the Internet investigation reports released by CNNIC over the years, I had a feeling that China's Internet market was about to enter its saturation stage.

As I dug deeper into this subject in 2006, I was more convinced. Despite numerous reports in China and other parts of the world boasting about the strong momentum of China's Internet sector, I chose to support a different opinion in the hope of helping companies to find the right marketing strategies.

All data in this study series came from reports released by CNNIC. In addition, I used two time-proven strategic marketing methods, Market Growth Curve (MGC) and High-tech Marketing Curve (HMC) in my prediction of the stages of China's Internet market. With further investigation in consumer behavior, I was able to eventually form a set of marketing strategies.

The above figure shows the trend of MGC. With just a few points marked for the accumulated subscriber number of each stage, a continuous curve can be formed. The most important task is to find the turning point on the curve as marked with the green circle on the above figure. Once such points are identified, all market stages become clear immediately.

[+] The number of internet subscribers in China will not exceed 180 million.

The following is a figure of Internet subscriber numbers based on data released by CNNIC over the years. The deep blue curve indicates the actual number of subscribers. A notable turning point appeared in December 2001, after which, the number of subscribers grows rapidly.

The subscriber number that corresponds to that point is 33.7 million, which, on MGC, is the point of 16%. With reverse calculation, it is able to predict that: 1) the market will enter its saturation stage after the subscriber number reaches 105.31 million; and 2) the market will touch its ceiling when the subscriber number reaches 176.92 million.

According to a CNNIC report on January 2006, the number of Internet subscribers has reached 111 million, which means the market already entered its saturation stage at the end of 2005. The following are some of the predictions that I have made on the Internet market in China:

1) The number of Internet subscribers in China will not exceed 180 million; 2) the room for the market growth for the next 5 years would be as small as 60 million subscribers; and 3) in the broadband (ADSL and Cable Internet) sector, the growth room is also limited to 30 million subscribers.

[+] Price sensitivity in a saturated market

Companies need to be aware that the 60 million subscribers they are about to face would be extremely sensitive to prices and less contributive to their revenues. For telecom operators that usually means they have to lower the Internet subscription fees to be able to attract this group.

High price sensitivity is one of the identities of a saturated market. Unfortunately, given the brag of the telecom carriers in China about the No.1 subscriber number in the world and the fast growth, the market has entered its saturation stage, as indicated in the following figure.

From the above figure, it can be seen that the broadband sector entered its high-speed growth stage back in December 2003 when the subscriber number reached 17.4 million. Calculations indicate that the sector would enter its saturation stage when subscriber number reaches 54.37 million. Checking the CNNIC reports, we can see that the broadband sector also entered its saturation stage after 2005.

Telecom operators are on the verge of a price war, as they will increasingly feel that the same amount of marketing efforts are not bringing in new subscribers as fast as they did in the old days. Under the pressure of subscriber number growth, price cut or covert price cut (for example, the offering of all-you-can-eat packages with a great discount of annual fee would be the fastest approach.

[+] The impact of broadband on value added services and Internet cafes

The spread of broadband has brought unimaginable benefits to the Internet industry. The data show that, in addition to more Internet surfing hours per week, it also allows subscribers to carry out more online activities, for example, more online shopping, more online advertisement contact and more exposure to broadband contents.

For telecom operators, the promotion of value added services to make up for their losses incurred in the cut of broadband subscription fees has become an inevitable task. Unlike the early mindset of "attracting consumers to subscribe broadband access by providing broadband value added services or contents", value added services will become the key revenue generator and the form will be increasingly diversified.

In addition, broadband is infiltrating fast into families. However, despite the rise in the rate of accessing the Internet at home, the rate of people who access to the Internet at Internet cafes has, surprisingly, gone up too. Obviously, home broadband has not substituted for Internet cafes.

Internet cafes might respond to the fast spread of the home broadband with price cut. However, with continued drops in subscription fees and with home subscribers continue rising by additional 30 million, Internet cafes are going to suffer setbacks sooner or later. In the next few years, a massive Internet cafe merge and acquisition tide will be expected. Eventually, the weak is going to be washed out and the strong get stronger.

[+] The Internet market in China: a dual-horse carriage

Despite the fast growth of the Internet subscriber number during the past years, the ratio of high-income subscribers (above RMB 2,000/month) and low-income ones has not been changed substantially, which indicates the infiltration speeds of the Internet among these 2 groups have been very close.

In other words, most of the new low-income subscribers have been Internet cafe frequenters, while high-income subscribers have been switching to broadband. This is the dual-horse carriage characteristics of the Internet market in China, which has affected many other sectors, for example, the online shopping.

A "saturated market" is not something to cause panic, because, in the first place, saturation is not going to happen immediately, but gradually (currently, the market is only at the start line of saturation); second, some sectors, for example, eCommerce, are going to see leap developments only in a saturated market. Therefore, a "saturated market" also means new opportunities.

In addition, despite the relative low attractiveness of the 60 million new subscribers, the number itself is still stunning. It could cause the collapse of industrial leaders overnight, or enable those lagging behind to enter the first echelon. It could be the last chance for startups. Therefore, companies should be very careful. (
2006/02/26 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

Predictions on China Internet Market (1) Saturation Stage - 2006/02/26

The PDA Trilogy: A Story of Evolution - 2004/02/22

Crime and Punishment of P2P (2) Fire of Greed

P2P is inherently decentralized, born with the possibility of infringement. And the records companies can never put up with this.

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[+] P2P should remain non-commercial

With legal determinations around the world getting more adverse, it is expected that commercial P2P software companies which ignorantly claim that, "I have no idea about users' infringement and no obligation to stop them from doing so," will soon falling away.

If P2P software remains non-commercial, and anonymous engineers around the world keep on volunteering to update the software and open the source, the music/records industry can hardly find a real target of complaint. Just like in the myth, Prometheus continued to suffer on the mountain, but men can never stop using fire.

Is the records industry, which has the mighty power to wreak torture on the Promethean culprit, a victim or an inflictor? It is an interesting question. In the past the records industry considered itself the victim and accused that illegal music download had caused it tremendous loss.

The deep-pockets who are capable of dominating the world not only choke the development of P2P but also direct their charges to search engines. August 2005, seven major records companies in Hong Kong sued the biggest search engine in China: Baidu.com.

The reason: Baidu as a search engine, provides information of and links to illegal MP3 download websites. China has been the paradise of free music and movies, and Baidu just went public in the U.S., which made it a conspicuous target.

[+] Who should check on infringement?

If the disclaimer that, "I supply the software only and will not be liable for users' infringement," can't prevent a commercial P2P software company from a legal action, then it is to nobody's surprise that a search engine is sued even if it claims, "I provide search results only and will not warrant the legality of such results."

Such thinking can continue to develop. Take a telecom operator offering ADSL service for example. It can claim that, "I offer Internet connection service only and will not be liable for the legality of users' online activities." But the record industry companies can still sue it, and precedents tell that they have a good chance to win.

So how to eradicate the root of illegal music, where to start? If there are loads of providers/software engineers/crazy downloaders everywhere, then to start with telecom operators seems to be a solution once and for all. In fact, telecom operators do have all the connection records.

But, telecom operators have their own trouble, too. It can cause huge burden to the system as well as extra cost if ADSL users hang on the Net and use P2P software to grab music and movies all day long. Not so long ago, there were even rumors that telecom operators in China were about to shut out one of the most popular P2P software: BitTorrent.

Telecom operators in China now plan to change the way they bill ADSL users. It used to be a flat fee per month for all, now they want to charge higher monthly fee from high volume users. Suddenly we realize that the flat monthly fee scheme is based on the calculation of telecom operators that we users will not need that much bandwidth at all.

[+] The true face of records companies

Will records companies work with telecom operators to take away the fire from men? The truth is, telecom operators have tried hard to avoid such an outcome, because it means they will have to bear the liability for users' infringement ever, which may lead to tremendous monitoring cost and endless trouble of lawsuits.

Yet the records companies will never give up. Before, the atmosphere was more favorable to P2P. Seeing that there was little hope to curb P2P, some records companies chose to work with P2P companies and sought to incorporate them into the legal music download business and "to get the child once gone astray back on the right track."

If you believe this benignant face, you can be very wrong. The records companies join your side simply because they are incapable of doing the opposite. Once they become strong enough to fight back, they will do so relentlessly. P2P is inherently decentralized, born with the possibility of infringement. And the records companies can never put up with this.

In addition to the legal actions employed to frustrate P2P software companies/websites, records companies are also encroaching on the area of legal music download. Apple has over 70% of the legal download market worldwide. It used to sell at 99 cents per song, but now it is under the pressure of price hike.

Apple's suppliers of music files say that their current offer is under-priced, and that they wish to have more flexibility in pricing. That is, some songs may be priced a bit higher, and some lower. Apple has helped generate magnificent profits for these records companies, and now they are asking to raise their prices.

[+] P2P will continue to survive

What the records companies are asking for is not really price hike but price differentiation theoretically. Yet for those who are familiar with the capitalist market know that, price differentiation is the start of exploitation of consumers. Through price differentiation, businesses are attempting to reap every cent they can out of the consumers' pockets.

Steve Jobs, Apple's CEO, is one of the people who are too aware of the essence of the game. Greed. He sees it through right away. It is quite natural that records companies would think about implanting the rules of their capitalist game in the traditional music industry to the digital world, as they have finally mounted on the throne of power for the first time.

In any case, there is already clear direction about how the digital world should run. In the future, all music files will be encrypted and copyright protected to ensure that every cent is safely collected. As to transmission of music and movies via P2P, it can only go underground. The two modes will co-exist, but there will be no gray area in between.

P2P per se is a communication technology, but once it gets involved with the distribution of copyrighted music, movies or software, it gets stained. Yet there is no lack of smart people. Like Niklas Zennstrom, the creator of P2P software Kazza, he went on and invented Skype. He applied P2P technology to VoIP and successfully got rid of the harassment of lawyers.

My memory brings me to the year of 2000 when the fire of revolution just broke out from AOL; I tried the very first P2P software with excitement and imagined the infinite possibilities behind it. It is true that Zeus could not take the fire back from men, but he did possess the power to have Prometheus chained to Mount Caucasus and tortured as punishment. Well I think we still have a long way to go, my friends. (
2005/10/02 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

The Web 2.0 Revolution (6) Struggle of the Press Industry - 2006/10/08

It All Boils Down to Brand Names - 2005/10/09

Crime and Punishment of P2P (2) Fire of Greed - 2005/10/02

Three Musts of Digital Content Biz (4) Pricing by Consumers' Budget - 2004/10/03

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