|Issue:||Asia-Pacific III 2008|
|Topic:||Learning from China’s emerging telecoms markets|
|Title:||Senior Vice President|
|Organisation:||Patni Telecoms Consulting|
Colin Orviss is the Senior Vice President of Patni Telecoms Consulting. Mr Orviss is an industry veteran who has more than 30 years’ experience in the telecoms industry and has worked with major players such as Telefonica and Sprint. Mr Orviss provides strategic consulting and advisory services to senior executives of service providers worldwide. He specialises in understanding their unique competitive position, and articulating the strategic transformations that are needed to ensure growth and survival in today’s disrupted telecoms environment.
Western telecom companies are accustomed to relatively long development-to-market cycles and, compared to markets like China, slow growth and limited markets. The vast size of the Chinese markets, its enormous potential and lack of legacy systems encouraged the Chinese telecom sector to develop in unprecedented ways. Today, China is an innovative and high capacity productive force in the market. Its equipment manufacturers have already made serious inroads in western markets and its software developers are sure to follow.
In the currently slowing economic climate in the west, the UK and US are looking more than ever to the growing economic power that is China to see what they can learn in order to drive growth. Despite natural disasters and decreased external demand, China maintained a growth rate of over ten per cent in the first half of 2008. China’s telecommunications market The Chinese telecoms market is a major contributor and enabler of China’s strong economic environment. The telco market is extremely dynamic; China recently announced it would reshuffle the assets of its six telecoms firms to improve competitiveness in the sector. This should take until the end of 2008 to complete, at which point it will issue third-generation mobile telephony licences. At present, there are three 3G standards: TD-SCDMA, WCDMA and CDMA2000. According to the restructuring plan, China Mobile will get TD-SCDMA, China Telecom will get CDMA2000 and the new China Unicom will get WCDMA. The telecoms audience in China expects much from technology and is deeply interested in modern methods of communication, including feature-rich social media. A January 2008 Frost and Sullivan report predicted the number of IPTV subscribers in the region will grow from today’s 1.5 million subscribers to 27.4 million by 2013. The explosion of broadband in various high-growth markets across the region will facilitate this growth of IPTV, and advances in transmission, compression and watermarking technologies will enable more service providers to move toward IPTV delivery. East meets west – different telecoms models As a result of massive growth in China’s telecoms market, operators have had to change the way they work compared to methods traditionally used in the western markets. By adapting the way they roll out their services, operators in China are able to support almost three times the customer base seen in western markets. While most operators in western markets max out at 30 to 40 million customers, Chinese operators have substantially more and their growth continues at an astounding few million per month pace. This provides a business opportunity due to scale, but also great operational and technical challenges due to the customer and data volumes involved. One of the main advantages of the scale is the ability to focus on differentiated service offerings and, in particular, the provision of important data rich applications. This has helped operators build new revenue streams. As purse strings tighten around the globe, there are lessons that can be learnt from the way telecommunications are handled in the east. Western telecoms companies have evolved gradually over time; at first they provided voice calls, and then progressed to data, and finally enabled newer data rich applications, which, depending on geography has had a variable success. This approach has meant that progression of an application from roll out, through take-up and into the mainstream has traditionally been quite slow. The Chinese market, however, had much quicker growth and it realised very early on that mobile voice was just one part of the experience for customers and that more was being sought. At this stage they began building telecoms environments around mobile broadband, enabling more interactive technologies than voice to be rolled out. In fact, in terms of revenue realisation from these new services China is growing faster than any of the Western markets. According to analysts from Heavy Reading, China’s telecom service providers should reach US$90 billion in combined revenue in 2008. with a double digit percentage coming from non-voice services – one of the operators currently handles 68 billion short messages (SMS) per month, 100 billion WAP sessions per month and two billion multimedia message (MMS) sessions per month. As a result of their forward thinking mindset, not only are data rich applications considered mainstream, but there is a heavy demand for more and more of these applications from operators. A pragmatic approach China did not simply copy the western telecoms setup, it changed it to be ready for what they view as the future of communications. The government pushes Chinese companies to be innovative and creative. The local Chinese hardware vendors – Huawei and ZTE – have paved the way in terms of branching out internationally from their home market and have forged a path that it is expected the local software companies will follow. It was no surprise that when the Chinese operators created their first billing and operational support (BOSS) system, using local suppliers, that it came in at less than ten per cent of the cost of a comparative western offering. Given the increasing sophistication of operators and their related demands, these local software companies are creating innovative software that has been proved to be a very demanding, high volume, high growth market, but with prices significantly lower than commercial offerings from western companies. When, not if, they expand beyond their local market, these software vendors will provide significant competition to the traditional Western suppliers of BSS/OSS (business support systems/operational support systems) software solution suites. The government’s recognition of the value of software and its intellectual property rights (IPR), and the increased enforcement of copyright infringement, will have a marked impact on the local software vendor community, and increase the number of vendors competing locally and on the international stage. The Chinese telecoms market mindset can offer important lessons to Western markets. While it is all too easy to be rooted in traditional ways of working, and aim to grow gradually, this can result in slow progress and frustration for users who want the future in their hands now. In the UK broadband market, ntl:Telewest is winning the battle due to its foresight, investment and development of a NGN network, while BT is still working on getting its 21st Century Network off the ground. It will be the operators who can adopt a progressive mindset and plan for the future of communications who will benefit the most in the west. The telecoms market continues to be dynamic around the globe. New technologies and methods of communication are arriving all the time, and it is vital that operators plan now to reap the rewards these technologies bring by ensuring their seamless enablement. China will be increasingly seen as a software and network technology innovator, and will ultimately influence the business operations of operators across the globe.