China's telecommunication policy got off to a good start in 1995. Recognizing that modern, affordable communications were essential to economic growth, the Ministry of Information Industry was formed three years later, foreign capital and technologies were welcomed and in April 2000 the first step was taken to split up the monopoly of China Telecom.
Today the Chinese telecommunication market is a mix of four leading carriers, two types of network and two standards, GSM and CDMA. China Telecom and China Netcom, the two fixed-line giants, have some 366 million subscribers between them, a figure likely to increase to 430 million by 2008.
Growth in fixed-line services will probably start to stagnate because of market saturation in China's bigger cities, but on the other hand broadband services are set to grow rapidly. This year's broadband subscriber base of 35.2m is expected to grow to over 100m yearly by 2008-10, an increase partly spurred by China's hosting of the 2008 Olympic Games.
China Mobile and China Unicom, the two main wireless operators, have enjoyed double-digit growth in revenues and enviable levels of profitability. There are more mobile phones than fixed lines. By the end of 2005, it is expected that there will be about 390 million cellular subscribers; a figure that could exceed 548 million by 2008. Despite this healthy growth, China's mobile network operators are facing intense pricing competition – something that ironically spurred the tremendous growth of mobile services in the first place.
In an effort to prevent revenue erosion, mobile operators are taking a closer look at added-value services such as mobile gaming and video. About 53 percent of mobile subscribers already use SMS and voice, compared with 23 percent who use voice only. The fortunes of individual network operators are likely to be tied to the arrival of 3G services, which will enable a lot more advanced revenue-enhancing services. But already there is a major interest in data services such as independent news and information channels delivered direct to mobiles. This is not surprising, says Kristina Sandklef, senior China advisor and senior China analyst at Ericsson's Consumer & Enterprise Lab. "In a country where reliable news sources have traditionally been scarce, the ability to access external news sources, or even sports and entertainment via the mobile phone, is seen as being highly desirable," she says.
Because of its rapid transition from an agrarian to a high-tech society, China is leap-frogging consumer technologies. It skipped the video cassette recorder, for instance, going straight to DVDs. And its population is curious about concepts that have been slow to pick up in the western world – video telephony being one, says Sandklef. "Many western consumers don't want the world to see them when they are not at their best," she says, "But in China they are thrilled by the opportunity to see each other while talking on the phone to keep social communication. And in a land where names are common, it could be important to see exactly who is calling you."
