Chinese whispers

China has long been seen as a potential goldmine for foreign investment due to the sheer size of the market, but the trick is always going to be catering to niche audiences within the country’s substantial economic diversity.

January 11, 2013

9 Min Read
Chinese whispers

By The Informer

China has long been seen as a potential goldmine for foreign investment due to the sheer size of the market, but the trick is always going to be catering to niche audiences within the country’s substantial economic diversity.

The country has a luxury market the size of Western Europe as well as a huge number of lower income earners. But in a bid to encourage direct foreign investment, China’s Ministry of Industry and Information Technology (MIIT) has issued a draft proposal to allow MVNOs to set up in the market for the first time.

The MIIT is currently in consultation with the industry’s stakeholders, including the three mobile network operators – China Unicom, China Mobile and China Telecom – with a view to launching a two-year trial which would see each operator mandated to sign up at least two MVNOs to run on their network.

Before long, junctions on the high street will be populated by marketers handing out free SIMs to Western ex-pats, promising them cheap calls home.

Carrie Pawsey, senior analyst at Ovum, expects that China Unicom and China Mobile won’t be very open to the idea. “They would probably prefer to keep wholesale players out of the market, but we could see some interest from China Telecom for a number of reasons,” she said. And who wouldn’t like to get their hands on some of those customers? “It’s a massive opportunity in terms of the size of the market, and it is also very heavily prepaid: 70 per cent of subscribers are prepaid and most MVNOs tend to go with a prepaid offering, rather than postpaid, so it’s an attractive market from that perspective,” she said.

Apple clearly has designs on the market. Boss man Tim Cook was in China this week, meeting with government officials, business partners, Apple employees and customers, including China Mobile CEO Xi Guohua, who isn’t technically a customer. Yet.

The meet threw more fuel on the rumours that Apple is looking to bring a version or versions of the iPhone to China Mobile and its 720 million subscribers, perhaps catering to both the high and low ends of the market.

In fact, during an interview with China’s official Xinhua news agency, Cook said that he expects the country to eventually replace the US as Apple’s biggest customer. Getting access to a target audience of three quarters of a billion people would certainly help that prediction come true.

In a similar vein, Chinese manufacturers are looking to the handset space to bolster their own presence overseas. With both firms facing resistance in the US to their network infrastructure businesses, Huawei and ZTE unveiled high-end smartphones at CES in Las Vegas this week.

In October last year, a US House Intelligence Committee report warned operators that the companies pose a threat to the country’s national security, effectively blacklisting them from network infrastructure contracts. But David Dai Shu, ZTE’s director of global public affairs, told that this would only have a minimal impact on ZTE’s business in the US because out of around $400m in revenue generated in the country last year, only around $30m was from infrastructure.

ZTE’s Grand S, unveiled at CES, is a high-end handset running Google’s Android Jelly Bean OS and powered by a 1.7GHz quad-core Snapdragon S4 processor. Conversely to Apple, ZTE has set its sights on the US to lead adoption of the device, given that the US controls the core part of the product, referring to the device’s Qualcomm chip and Google’s software.

Domestic rival Huawei meanwhile unveiled its first Windows Phone 8 smartphone at the show — the Huawei Ascend W1, also powered by a Qualcomm Snapdragon S4 processor.

CES is always a bubble of innovation, and this year Las Vegas played host to several connected car manufacturers eager to show off their wares.

Toyota demoed its autonomous driving tech through its high-end Lexus brand, including the Lexus LS model, which Toyota claims is equipped with the world’s most advanced pre-collision safety system. The Informer doesn’t really understand that. You’re safe pre-collision anyway, aren’t you?

Meanwhile Ford showcased its in-car integration of the Android app Kaliki, which curates the top news stories from major newspapers and magazines and provides an audio version for on-demand playback in the vehicle. Apparently the service’s unique selling point is the fact the firm employs professionals to read every story, making the content “pleasing to the ear”. Has so much time passed that dodgy pre-bubble era internet startup business models have become retro chic?

Troubled Canadian vendor Research In Motion (RIM) was trying to maintain its relevance in the industry through an appearance with Bentley, showing off QNX, the software subsidiary it bought in 2010, by focusing on connected cars.

Version 2.0 of the QNX Car development platform, which launched at the show, has apparently slashed the development effort of one company down to 14 months from three years. The operating system popped up in a concept car based on a Bentley Continental GT convertible featuring speech recognition technology from AT&T called ‘Watson’. Just say “Hello Bentley,” and the car’s voice recognition system starts interacting in a distinctly British accent. Elementary.

One of the perennial issues with machine to machine in the consumer space is getting all these devices to get along with each other. Technology provider for the media and entertainment sectors, Technicolor, reckons it has developed a software framework to allow connected devices, regardless of brand or ecosystem, to “speak the same language”.

The firm launched Qeo software modules to address the problem of disparate ecosystems used for device interaction, allowing devices, applications and over-the-top cloud solutions to speak to one another and deliver simple and richer media services.

Along these lines, chipmaker Nvidia announced Project Shield, a dedicated portable gaming device, running on the Android platform, which comes wifi-enabled and LTE ready and plays both Android and PC titles; giving access to any game on Google Play and streaming games from the Steam library any PC that is powered by Nvidia GeForce GTX GPUs. On a side note, Steam owner Valve was showing off its own console, or ‘PC in a box’, codenamed Bigfoot’ which aims to drive usage by guaranteeing compatibility for games.

On the subject of streaming content, it’s becoming a cliché in TV land that content-rights restrictions, and not technology, are slowing the pace of industry development. At CES, Boxee and Dish demonstrated workarounds that have allowed them to offer two products frequently blocked by rights issues; namely cloud-based DVRs and out-of-home live TV viewing.

Network DVRs have kept many a media lawyer in business over the last decade, but Boxee’s Cloud DVR provides a nice workaround. When users chose to record a show using the Boxee DVR, the content is pulled down to the Boxee box, transcoded in the box and sent back up the user’s broadband network to be stored in the cloud. This avoids the issue that has stymied many a network DVR, namely that copies of the content are made and stored before they hit the consumer’s set-top box.

Dish’s latest iteration of its Hopper whole-home DVR will cause similar legal pondering. The company has added a version of the Hopper integrated with Echostar’s Sling technology which takes a user’s live and DVR content and transfers it to their iOS – and soon Android – devices, wherever they are, inside or outside the home.

Online giant Amazon is also looking to tackle the content rights issue, in the US at least, with a provocatively-named offering, AutoRip, which stores digital versions of physical CDs bought via its store in a cloud storage account.

Customers will be able to access the stored music via Amazon’s Cloud Player on the web or via tablet and smartphone apps.

Also looking for a loophole is the US gambling community, which is constantly running into trouble with complex US laws that prevent businesses from knowingly accepting money transfers for internet gambling purposes. Digital currency Bitcoin is being heralded as a solution, because it’s a decentralised peer to peer transfer technology, those involved can avoid using US banks.

Bitcoin has attracted both good and bad press and falls into grey areas of legislation in many cases. A researcher called GamblingCompliance estimates the value of the US online gambling market at between $4bn and $6bn, and when the government cracked down on online gambling sites in 2011, gamblers in the US had more than $100m in online accounts frozen. The government is still working on reimbursements now. One of the reasons Bitcoin is appealing in this case is because the coins are actually stored on the user’s own computer, making it incredibly difficult for the Feds to seize it.

Google’s executive chairman, Eric Schmidt, also attracted the ire of the US government this week, after he embarked on a somewhat enigmatic trip to North Korea. It’s not clear what the withdrawn country, or Schmidt for that matter, hoped to achieve, but the web is now not short of photographs of the Google exec visiting the visit the nation’s computer labs and perhaps giving Kim Jong Un ammunition to show that he is moving his country forward.

The same cannot be said of India, apparently, which has had its spectrum policy labelled “a complete shambles” by an analyst with experience of dealing with licensing auctions in India in the past.

The comment comes as the Indian government is understood to be looking to cut reserve prices by up to 50 per cent in its second attempt in recent months to auction off CDMA radio spectrum, after all potential bidders pulled out of an auction in November last year, claiming that the reserve price had been set too high.

The re-auction was forced after the Supreme Court of India cancelled all licences allocated in the initial 2G auction in 2008, due to allegations of corruption.

“The government views the telecoms sector as a cash cow,” said Stefan Zehle, CEO at consultancy firm Coleago. “This goes back to the 3G auction, where they arranged the auction in such a way that there would be a significant excess of demand over supply by not making all of the 2.1GHz 3G spectrum available. So in India, some of the world’s highest prices were paid and there still wasn’t enough spectrum.

“It’s a shocking state of affairs and I find it amazing how such an important sector which could do so much for India, how in such a deliberate and wilful way the government is hell-bent on destroying it as much as they can, and in a way that is manifestly unfair to foreign investors.”

Causing trouble in the US meanwhile, was US satellite player Dish Networks, which is aiming to scupper a potential deal between national mobile operator Sprint and Wimax operator Clearwire by making a bid for the latter at $3.30 per share, a higher price than the $2.97 offered by Sprint.

Sprint looked close to sealing the acquisition of the Wimax player; after it gained ownership of a 50 per cent stake in the firm and made a bid of $2.2bn for the remaining shares. The firm still believes its own agreement to acquire Clearwire is superior to the highly conditional Dish proposal.

And that’s about it for this week,

Take care

The Informer

Read more about:

Get the latest news straight to your inbox.
Register for the newsletter here.

You May Also Like