October 2002
Take the Number and Run
Hong Kong has long been one of Asia’s key telecommunications centers, with great connectivity and services and a high concentration of fiber optic cables connecting throughout the region and the rest of the world. It has also been a leader in regulatory liberalization, starting with the establishment in 1993 of an independent regulator, the Office of Telecommunications Authority (OFTA).In wireless services, OFTA has pushed the regulatory envelope clearly in favor of the consumer by encouraging interoperability among the six wireless operators—CSL, Hutchison, New World, Peoples, SmarTone and Sunday—and mandating, in 1999, the portability of mobile numbers.The upshot is that a customer of one operator can send SMS messages to a customer of any of the other operators, and can switch his or her account at any time—without changing the phone number—to a different operator offering better rates or services.
Today, Hong Kongis probably the most competitive wireless environment in the world.Voice calling plans cost as little as $10 a month; the churn rate is high (a third of all subscribers moved their accounts to a new operator last year); and most of the operators are losing money.
For the fiercely competing operators, a bit of British “stiff upper lip” lingers.”Portability has been a challenge for the operators,” admits Bruce Hicks , group managing director of Sunday.” But in Hong Kong’s saturated market, it probably doesn’t make much difference in the end.Once you reach saturation, you have to be price-competitive and you have to offer appealing products and services.”
Pictures Worth a Thousand Words
The importance of Hong Kong to the rest of the world is that it has now embarked upon high-speed wireless data services ahead of much of the world—at least the 71 percent of the wireless world that is served by GSM technologies in over 180 countries.While Japanese and Korean operators have successfully launched similar services, most of them have done so with different technologies and in less competitive markets.
In March 2002, CSL launched Asia’s first MMS service over a GPRS network, and in the following May it demonstrated its roaming capability in messages sent to Hong Kong from Beijing via China Mobile’s GPRS network.All six Hong Kong operators are now offering MMS services, and in late October 2002 the three largest operators (CSL, New World and Sunday) launched interoperable MMS using Nokia interconnection equipment.The remaining three operators expect to offer interoperable MMS by year end.
“MMS is the beginning of a new era in wireless communications,” says Hicks, “one in which images-photos, graphics, videos-will enhance text and voice to create a truly compelling communication experience.It is a sea change that will propel the evolution to 3G.”
There are now three MMS-enabled handsets available in the Hong Kong market, two Nokia models and one Sony Ericsson, at prices ranging from about $400 to $500.Operators anticipate that at least ten models will be available by year end.Data services are offered at around $20 per month for two megabytes of data usage plus fees for additional usage.
It’s too early to predict how successful MMS will be in Hong Kong.Hicks does not think the market for MMS will explode, but he expects steady, impressive growth.Michael Kan, executive director of the Hong Kong Wireless Technology Industry Association, is optimistic, but he cautions that the prevailing low cost of mobile voice is an impediment to data services development.”With such fierce competition and little profit, the operators are conservative when it comes to investing in data services.Currently, mobile data—including SMS messaging—accounts for only about three percent of their revenue.”
Another impediment, Kan believes, is that operators have done little to encourage third-party developers of applications and content.”The operators have not provided a standard revenue-sharing model for developers to distribute services to end-users, as NTT DoCoMo has done in Japan,” he says.He also believes that OFTA should lend developers a hand.”OFTA should implement a public awareness campaign for mobile data applications-SMS, MMS, J2ME, etc.-and help local developers produce more applications and content for distribution locally and overseas.”
Hicks, however, claims that operators have been working productively with developers and that the process has been complicated by the variety of wireless technology standards that have prevailed to date.”But this is changing.Standards are becoming more uniform, enabling more cooperation between operators and developers,” he says.
Hong Kong developers will certainly have much to contribute to wireless data services once their talents are fully engaged.Hong Kong has long been a center of culture and communications, bridging cultural divides and serving consumer tastes at this crossroads of Asia.
Hot Times for Hot Spots
Another area of rapid wireless development in Hong Kong is wireless LAN, or Wi-Fi (for Wireless Fidelity), which holds the promise of high data speeds and low-cost networks.According to Hanson Cheah , managing partner of AsiaTech Ventures, a Hong Kong-based technology venture capital firm, Wi-Fi is so prevalent in Hong Kong that you can get it almost everywhere.
So far, however, Wi-Fi is not a money-maker—it is provided normally as a free service courtesy of merchants and organizations at various commercial and public venues—and the technology is still evolving.Secure access and business models for charging fees are two of the unresolved issues.Moreover, Wi-Fi is presently useful only with laptops and PDAs equipped with wireless PCMCIA cards.
PCCW-HKT is the largest Wi-Fi service provider in Hong Kong, with over 100 hotspots in service. In addition, I-Cable, a Hong Kong cable TV provider, and Synergy Technologies (Asia), a wireless solutions company in Hong Kong, own a Wi-Fi network deployed at three large shopping plazas — Harbour City, Time Square and Plaza Hollywood—and at conventions and exhibitions. Ken Fong, Synergy’s CEO, sees many opportunities ahead and believes that Wi-Fi will converge with 3G services in time because the technologies are complementary.
Meanwhile, OFTA is laying the regulatory groundwork for licensing all 802.11 Wi-Fi services (including the higher speed 802.11a, which transmits at 6 to 54 Mbps compared to 802.11b’s 1 to 11 Mbps). In characteristically pro-consumer, pro-competition fashion, OFTA has proposed a streamlined “class” licensing regime in which anyone proposing to operate a Wi-Fi network is only required to register with the Telecommunications Authority before commencing operation. No application and processing procedures are involved. The licensee only needs to meet specified minimum conditions, such as avoidance of interference with other networks, and not run afoul of various legal prohibitions, such as those against anti-competitive behavior and misleading advertising. Fourteen interested organizations, including the six wireless operators, submitted comments on the plan. OFTA expects to implement the licensing regime by year end.
Lab Tests
In many ways, Hong Kong is the perfect testing ground for emerging data services and wireless technologies.While Hong Kong might not end up doing much of the inventing or manufacturing for the wireless world, it will be providing, developing and using wireless data services in a highly competitive environment that is packed with people and is subject to the transmission challenges of high rise buildings and a hilly terrain.” When it comes to deploying new wireless technologies, if a technology works in Hong Kong, it will work anywhere,” says H. C. Lui, director of technology at the Hong Kong Wireless Technology Industry Association.
Sunday’s Bruce Hicks believes that the wireless world will have much to learn from Hong Kong as high-speed data services evolve.”In the saturated markets that many wireless operators will soon confront, especially in Europe and the United States, the keys to profitability will be found in identifying and segmenting markets and putting together packages of specially targeted services.
“Data services and their technologies are the New Territories of the wireless industry.I expect Hong Kong will help show the world how to make them a success,” says Hicks.