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Asia: Centre of the World's Wireless Explosion

Madanmohan Rao reports from the ITU Telecom Asia 2002 summit in Hong Kong

The results are in - and the numbers are impressive. Asia now accounts for 36 per cent of the world's telecom market (up from 21 per cent in early 1991, and scheduled to hit 50 per cent in 2007), the world's largest regional user base of cellphones, 33 per cent of the world's Internet user base (225 million Internet users, or an average of 6.3 users per 100 inhabitants), 95 per cent of the world's 3G mobile users, 47 per cent of the world's ADSL broadband Internet users, and seven of the world's Top Ten most profitable telecom operators.

According to ITU figures of June 2002, the top market worldwide in terms of broadband Internet penetration is South Korea - followed by Hong Kong, Canada, Taiwan, Belgium, Sweden, Ireland, US, Denmark, Singapore, Austria and Japan. At the end of 2001, the market with the highest penetration of cellphones was Taiwan (a whopping 96 per cent), followed by Hong Kong (84 per cent), Singapore (69 per cent), New Zealand (62 per cent), South Korea (60 per cent), Australia (57 per cent), and Japan (57 per cent).

Asia also accounts for four of the Top Ten markets in the world in terms of wireless Internet user base as a percentage of mobile users: Japan and South Korea are in the lead, followed by Finland, Canada, Singapore, US, Germany, Italy, UK, Taiwan and France.

Asia is now the largest and most innovative telecom market in the world - but it must demonstrate leadership in this role, said Yoshio Utsumi, secretary general of the International Telecommunications Union, at the recent ITU Telecom Asia 2002 summit in Hong Kong, titled "From Recovery to Prosperity."

Michael Minges, head of the ITU's data and statistics unit, says the Asia-Pacific region remains the world's largest telecommunications market, posting steady growth in telephone, mobile and Internet subscribers. "This region continues to push the envelope for universal service," Minges says, noting that the region had been able to add "one new telephone user every second for the past decade".

Growth in Asia-Pacific telephone subscribers was around 10 percentage points above the global average, with the gap increasing over last year. There are more cell phone users than fixed line users in 23 Asian nations including Japan, China, Indonesia and Fiji.

From 1991-2001, China added over 300 million new telephone subscribers, half of the regional total, taking its combined teledensity from less than one in 1991 to 30 by mid-June 2002. "Never before has a country added so many telephone subscribers so quickly and raised its teledensity so rapidly," says Minges.

Challenges remain, of course, for many operators in terms of figuring out how to migrate to 2.5G or 3G for competitive reasons without losing out on fully recovering costs of GSM networks that have already been rolled out. The entry of new wireless players in some Asian markets has not been a smooth process either, and other markets like China are slowing down.

Confusion is also growing as companies like Nokia announce new 3G standards.

Uncertainty in liberalization rules has hampered international carriers from investing in markets like China.

There is also confusion in some markets as to whether WiFi will compete with 3G, when they are actually complementary services.

"Companies need to figure out how to leverage the wireless explosion for creating new fields of applications, new ways of using applications and new ways of developing applications," said Naoyuki Akikusa, CEO of Fujitsu.

A mix of content and transactional services has also been beneficial for Korean mobile operator KTF, which has 11 million users today (SK Telecom leads with 17 million). KTF rolled out 2.5G services in 2001, and MMS in May this year. More foreign investment is also coming into the Korean wireless sector, such as from Microsoft and Qualcomm. In Australia, Telstra and nineMSN have tied up to bring Hotmail and Instant Messenger to mobile users.

"The most popular services on our 2.5G network are Internet, adult TV, games, video on demand, and karaoke," said Joo Young Song, executive vice president at KTF. As a percentage of total ARPU, data services accounted for 10 per cent in October 2002, up from 5 per cent in January 2001. This could cross 15 per cent in 2003 and 30 per cent in 2005, Song predicted, as the market for voice gets saturated.

"Content-centric value chain coordination has been key to our success," said Takeshi Natsuno, managing director of I-Mode strategy for NTT DoCoMo; I-Mode has 35 million users today since launch less than four years ago. Similar content-centric models accounted for the success of AOL in the US and Minitel in France.

"Coordination of these layers involving devices, network, server, marketing and user needs should be seamless and continuously evolving. We were advised by consultancies like McKinsey to take as much money as possible from content providers - but we did not listen to them, fortunately," said Natsuno. I-Mode takes only 9 per cent commission from its content providers.

Carriers should also keep an eye on newer devices created by the IT industry, such as PDAs and PCs with GSM and 3G chipsets fully integrated. "Completely new devices will emerge in five years. Handsets will be as powerful as today's laptops," said Bosco Fernandes, vice president at Siemens Information and Communication Mobile Networks.

Currently, however, NTT DoCoMo has no plans for I-Mode on other handheld devices like PDAs. User growth of the 3G FOMA service has been slow because of fewer devices in the market and smaller coverage area, said Natsuno.

i-Mode has not taken off yet in Europe, and many European operators prefer to build on existing successes like SMS and focus on MMS for expansion.

Cell phone subscribers will send about 400 billion text messages globally during 2002, up from 250 billion in 2001, according to the GSM Association.

The Asia-Pacific will be the world's test-bed for 3G services for the rest of the decade, said UMTS Forum chairman Bern Eylert. The region will account for $118 billion of global 3G revenues of $320 billion in 2010; the top three 3G markets in the world will be the US, China and Japan.

Interesting cultural differences are also emerging among users across the world. For instance, the craze for wireless content is not as high in Hong Kong as it has been in Japan or South Korea, observed Francis Wong, managing director of Trident in Hong Kong.

The Hong Kong market will experience more growth in applications like email and not entertainment, Wong said. 80 per cent of business users in Hong Kong access email on the move. The market already has 84 per cent penetration of cellphones, and growth will come not from new users but new and improved services.

Many carriers are now expanding their focus from basic telecom and wireless services to value-added services, especially for corporate customers. "Carriers are forming partnerships with us for managed network services, VPNs and other enterprise applications," said Gordon Astles, president of Asia-Pacific operations for Cisco.

There has been too much focus on the gloom of industry dynamics in markets like the US, on issues such as governance -- but the consumer has never had it so good.

Other mega-projects to keep an eye on include the Digital Beijing project for 2008, during the Olympic Games, which includes city-wide fiber and wireless internetworking called "City Information Infrastructure" (CII), information kiosks, and smart cards.

In many developing countries of Asia, the penetration of cellphones has already exceeded the penetration of landlines (Cambodia was the first country in the world to cross this threshold, in 1983). "A whole new development paradigm will be unleashed in the next few years in Asia," said Utsumi.

Telecom players and vendors need to focus on inclusion strategies and not just products, said Noah Samara, CEO of Worldspace; the company beams radio and Internet content via satellite to parts of the world like Asia and Africa, including medical journal archives for healthcare workers. "Content should become a major focus area for telecom players," advised Samara.

A lot of data that is critically needed by the masses is in the public domain, and a number of technologies are emerging that can help bridge the critical "last mile" problem such as WiFi and satellite.

But regulatory obstacles are holding back services like WiFi and VoIP in many developing countries of Asia, observed Heather Hudson, telecom professor at San Francisco State University.

Universal access goals are also becoming moving targets, evolving from basic landline connectivity and wireless access to Internet and then broadband. Developing nations should prioritise these services and targeted user organizations such as healthcare, libraries, NGOs, schools and governments. Sites like www.UniversalService.org have useful information resources and case studies in this regard.

"Technology is moving in the right direction. Human brokers - for instance, for operating telecentres and providing wireless access on a shared basis - are very important in this regard for developing nations," advised Hudson.

Mobile voice alone will account for huge markets in countries like India and Vietnam. By 2005, half of the world's population will be using cellphones, according to Amarendra Narayan, executive director of the Asia-Pacific Telecommunity, in Bangkok.


Madanmohan Rao is the author of "The Asia-Pacific Internet Handbook" and can be reached at madan@techsparks.com


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