Global Development of Mobile Value Added Services

    The application of mobile Value Added Service (VAS) is growing fast worldwide. In Japan, the income from non-voice services has exceeded 30% of the total revenue of the mobile operators. Moreover, the rapidly escalating income from Wireless Application Protocol (WAP) and Interactive Voice Response (IVR) services has guaranteed the speed of the mobile VAS development in China, although the income from the Short Message Service (SMS) is declining. Full music download, mobile E-mail and mobile TV are becoming the most promising VASes globally.

1 Japan Leads Mobile VAS Development, Followed by South Korea
The mobile VAS has become the major drive leveraging the revenue of the mobile operators worldwide, because the VAS income has taken more and more proportion in their revenues. Figure 1 shows the income proportion of
non-voice services to the overall revenues of six major mobile operators.

    Figure 1 shows that the income proportions of mobile VAS of Japanese and Korean operators have exceeded 20%. NTT DoCoMo and KDDI in Japan are especially in a prominent position with their VAS incomes accounting for 30% of the total revenues. Besides, in the Asia-Pacific region, Philippine mobile operators Globe and Smart have 38% and 45% incomes from mobile VASes respectively, mainly profiting from the development of their SMS.
The European mobile operators represented by Vodafone, have more than 10% incomes from mobile VAS, but are rather slow in growth. The income proportion from mobile VAS of China Mobile, by comparison, has increased rapidly from 10% in 2003 to 15% in 2004.

    USA has been lagged behind in the sense of mobile VAS development, but the mobile VAS is developing at the highest speed in the America market. In the 2004 fiscal year (March 2003-March 2004), Sprint PCS witnessed the mobile VAS growth rate of 130%. Other companies in USA also reached about 100% growth rate. Besides the most common SMS, users increasingly utilize the services of ring tone download and Internet surfing. According to the survey report released by an American consulting company M:Metrics in June 2005, there were 24.58 million mobile subscribers using the service of ring tone download, and this group had taken 13.58% of the overall mobile subscribers in USA, as shown in Table 1. In 2004, however, there were only 6% of the surveyed utilizing the service.

2 Development of Mobile VAS Application in China Is

   Accelerating, Although Income from SMS Declines
The growth of mobile VASes and their application from China Mobile and China Unicom, two biggest mobile operators in China, has shown fabulous velocity, as the VAS incomes exceeding 10% of the general income at both mobile operators. Besides, the growth percentage in 2004 is higher than that in 2003. This indicates the mobile VAS market in China is still at the stage of fast development. Figure 2 illustrates the mobile VAS income proportions of China mobile and China Unicom in 2002-2004.

    SMS is still the main source of the income from mobile VASs. Its income takes up 51.8% and 61% of the overall incomes of China Mobile and China Unicom respectively. However, with the development of voice VASs such as Coloring Ring Back Tone and IVR, as well as WAP and Multimedia Messaging Services (MMS), SMS is weighting less in the overall services.

3 The Time for SPs/CPs in China to Make Sudden and Huge Profit
   Has Ended
According to statistics, the Service Providers (SPs)/Content Providers (CPs) in China gained more than 4 billion RMB income from SMS, 800 million from WAP service and 700 million from MMS in 2004. However, the Ministry of Information Industry of China started to rectify the arbitrary charging in the mobile VAS market in 2004. Such rectification has affected their incomes from the mobile VASes, especially the incomes of three biggest portal websites NetEase, Sina and Sohu. Figure 3 shows the growth of the mobile VASes at the three websites in Quarter 4, 2004 and Quarter 1, 2005. Moreover, the commercial SMS based on TV and radio broadcast has been most seriously affected by the rectification.

    Moreover, China Mobile remodeled its charging program of MMS in January 2005, which also affected the income of the SPs/CPs. Taking NetEase as an example, the income from MMS in the first quarter of 2005 dropped 50% from the previous quarter since. However, in the aspect of WAP, IVR and other new services, NetEase, like other SPs/CPs, has been only lightly affected because the income of first quarter of 2005 increased 69% compared with the figure in the previous quarter. KongZhong.com that focuses on 2.5G based services was less affected by the rectification compared with the three biggest portal websites. It recovered and has had good performance in the forth quarter of 2004.

    The rectification on the mobile VAS market will urge the SPs/CPs in China to input more efforts to new services such as the 2.5G based data services and IVR services. This is favorable for the mobile VAS market of China to develop in the direction of maintaining orders and diversification and to lay foundation for the future 3G market.
Presently, there are more than 2 000 SPs in China. They have polarized on the revenues. Only 5% of the total SPs maintain the monthly income of 10 million RMB, while 24% has the monthly income below 100 thousand RMB. Therefore, many unqualified and ill-managed SPs will certainly be washed out in the new business environment. We can possibly expect more merger and acquisition to further integrate the market in the future.

4 Three Promising VASes
With the increasing demand for VAS from the subscribers, mobile operators are making efforts to create more services to promote the continuous development of the non-voice service application. The following three mobile VASes are becoming the development focus of the operators.

4.1 Mobile Full Music Download
In the past, music in the mobile field was mainly used for the ring tone, which has become an important mobile dada service. The ring tone download is generally leading the services provided by mobile operators. However, most mobile music for the ring tone is in the form of highly compressed files as MIDI or WAV. It is hardly regarded as real music. From the end of 2004 to early 2005, mobile music is gathering more elements of the real music. Download of the full music video and audio and music stream media are increasingly welcomed by the subscribers.

• In February 2005, British company Three announced the download of its new service of auto music video on demand (download of full MV) had reached 10 million times in six months since the service launched.
• In the first three months after the launch of Chakuuta Full, the full music download service from KDDI in Nov. 2004, the number of download had exceeded three million.
• Vodafone Live!has launched its full music download service at the end of 2004 and there were one million music tracks downloaded in four months.
  

    Though there were mobile operators in the past utilizing 2.5G networks to provide similar services, the public reaction was indifference. Seen from the reaction of the current subscribers, the conditions start to change because the 3G subscribers are very interested in the services. 3G networks free the 3G subscribers from monotone MIDI ring tones, and enable them to enjoy the real-life music and songs through handsets.

    Limited by the transmission speed of the existing networks, the full music download service is currently unsuitable for large-scale application in China. However, this service will become a powerful weapon in promoting 3G data services once 3G networks spread in China.

4.2 Mobile E-mail Service
There are two methods to implement mobile E-mail: PULL and PUSH. The subscribers need to dial numbers through mobile terminals before receiving PULL-based mobile E-mails. The PUSH-based or always-on-based mobile E-mail service allows E-mails received anytime and anywhere as long as the mobile terminals are on. The later method is obviously more convenient for the service users.

    The Canadian mobile E-mail equipment developer Research In Motion Limited (RIM) was the first to forecast the potential of mobile E-mail service. The company started using the paging system to provide the PUSH-based mobile E-mail service to the enterprise clients in Canada and USA. With the development of mobile networks, RIM rapidly adapted to the new developing environment. It extended its BlackBerry terminals to the 2.5G networks based on General Packet Radio Service (GPRS), providing voice and data functions at the same time. RIM successfully changed the BlackBerry terminal from the two-way pager to the intelligent phone. Its professional enterprise solutions and comfortable terminal keyboard have attracted numerous enterprise clients.

    Presently, there are more than 50 mobile network operators having purchased BlackBerry terminals to provide services to their enterprise clients. The number of BlackBerry users rose by 470 thousand in Quarter 1, 2005, with a total of 2.51 million users. Compared with the users in the same period of 2004, the number rose by 135%. It is clear that RIM has become the No.1 in the market of mobile E-mail service. Figure 4 shows the growth of BlackBerry users of RIM from 2000 to 2005 (The collection deadline of the annual data was the end of the first quarters of that year).

    The success of BlackBerry makes the mobile E-mail service a very important service in the market of mobile enterprise application. Many terminal manufacturers, software companies and even mobile operators start to look into this promising market, and the target clients of the service have been extended from enterprise to individual subscribers. Similar to BlackBerry, the mobile E-mail service launched by Vodafone in May 2005 can send E-mails automatically to any handsets. The service has been applied in Germany and Italy, and will be expanded to the entire Europe according to Vodafone. Sprint and Yahoo announced recently that they were going to offer a mobile
E-mail service to Sprint PCS subscribers. The subscribers could utilize the service after downloading the Yahoo E-mail software as long as they used Samsung and Sanyo handsets or mobile terminals based on PalmOne Treo operating system. The monthly service fee is 2.99 USD and the data traffic is charged separately.

    As for Chinese operators, the mobile E-mail service has just started. Only China Mobile has announced a plan to introduce BlackBerry in 2005. However, the lacking of Chinese version of BlackBerry terminal will cause the problem of authentication. This service is expected to be launched until the end of 2005. Chinese mobile operators and mobile equipment providers should be aware that the mobile E-mail service is very attractive to both enterprises and individual users, especially for the enterprises that regard receiving E-mail in time as the priority of mobile office program. This is the key for RIM´s success in short period of time and Chinese enterprises may learn from it.

4.3 Mobile TV
When the concept of mobile TV was just introduced to the market, many people thought the business couldn´t bring profit to mobile operators. That is due to lacking of practicality in application. Watching TV on the small screen of a handset is not a pleasure and costs dearly. With the progress of commercialization of the mobile TV service, the telecom industry is more optimistic about its future.

    Presently, Vodafone subscribers can receive more than 20 TV channels, including the most popular channels in Europe such as CNN, Playboy Channel, 2GOTV and MTV. In April 2005, Vodafone extended the service coverage to the Netherlands. Since April 3, 2005, Vodafone subscribers in the Netherlands can watch live sport programs from Eurosport on their UMTS handsets that can support the functions of Vodafone Live!. The subscribers only need to click their UMTS handsets to choose “Live TV & Video” on the menu of “Vodafone live” to watch their favorite sport programs from Eurosport anywhere and anytime.

    Six terrestrial mobile TV and broadcasting companies in South Korea announced to provide free mobile TV services to their mobile subscribers. At the same time, SKT, the biggest mobile operator in South Korea, made a commercial trial of the satellite digital broadcasting and TV service for 4 months and has provided its commercial use in June 2005.

    In China, the State Administration of Radio, Film and TV (SARFT) formally proclaimed on May 10, 2005 that Shanghai TV Station affiliating to Shanghai Media Group (SMG) had obtained the first IP TV license in China. The station also got the approval for providing mobile TV services. SMG plans to use Digital Multimedia Broadcasting (DMB) technology to offer mobile TV services.

    At the same time, though the Ministry of Information and Industry of China is acquiescent for mobile operators to provide mobile TV services, it is hard for telecom enterprises to obtain license for broadcast and TV operation. The reason is that the SARFT prohibits the mutual permeation between telecom service and broadcasting and TV services. However, enterprises in the broadcast and TV industry need to cooperate with the mobile operators to realize mutual communication with their audience because the digital broadcast technologies such as DMB are one-way transmission without the uplink transmission channel. Therefore, the mobile operators still have great opportunities for developing mobile TV services.

Manuscript received: 2005-07-18