China and Hong Kong SAR: The world’s largest market and best testing ground for information and communication technologies

China and Hong Kong SAR are among the leading economies pioneering the use of the cutting edge Information and Communication Technologies (ICTs), including latest-generation mobile phones, broadband, and converged technologies. China is the biggest market in the world in terms of the number of telephone subscribers, and is investing heavily in ICTs. Hong Kong has one of the most competitive mobile markets in the world, with a broadband market that offers a full range of the latest technologies. The size and strategic importance of these East Asian economies make them vital testing grounds for the introduction of new technologies.

China: Competition Helps Fuel Growth

Telecommunications in China have been transformed since its early start on market reforms in 1978. Since then, investment in telecommunication networks has increased. Following the establishment of the Ministry of Information Industry (MII) in 1998, deregulation has accelerated, the penetration of telephone subscribers has risen dramatically (Table 1) and investment has soared, although it has tailed off more recently, following the bursting of the telecom bubble (Figure 1).

Moves towards deregulation have included the restructuring of the formerly state-owned China Telecom into separate operators for fixed, mobile, satellite, and paging services, as well as separate operations in the North and South. Table 2 shows the structure of the Chinese telecommunication industry after these changes. Although some caps for foreign investment in telecommunications remain, China’s entry to the World Trade Organization in September 2001 has further stimulated competition. As a result of these developments, China has emerged as the largest market in the world, with China Telecom and China Mobile holding the world’s biggest fixed-line and mobile network capacity respectively. In 2005, the net total of broadband subscribers was second only to the United States in absolute numbers.

Mobile Market in China

China's mobile multimedia market is evolving rapidly. China has sought to import, master and then establish domestic facilities for manufacturing and upgrading these technologies domestically. For third-generation (3G) mobile, China has developed its own Time Division Synchronous Code Division Multiple Access (TD-SCDMA) technology that is recognised by ITU as compliant with the IMT-2000 family of standards. The new standard has yet to be commercially launched and domestic operators and foreign vendors are still waiting to see which standards will be applied in the Chinese market, but China's selection of a standard will have a profound effect on the global market. Competition between China Mobile and China Unicom has increased the number of mobile subscribers over recent years (Figure 2) with mobile overtaking fixed for the first time in 2003. The combined market size of fixed and mobile at the end of 2005 was 744 million subscribers. Interestingly, Short Message Service (SMS) has proved more popular in China than in Hong Kong with China Mobile carrying some 300 billion messages in 2005 (Figure 3).

Hong Kong SAR

Since the start of liberalization of its fixed-line market in 1995, Hong Kong has been one of the leading pioneers in the launch of advanced ICTs. As a result of sustained moves to encourage competition, new entrants to the market held 32 per cent of the market for local fixed line services in 2005. In the mobile phone market, the Hong Kong Government has encouraged competition from the very start. Hong Kong's mobile phone market is one of the most competitive market in the world. Mobile number portability prevents any single mobile operator from dominating the market. Indeed, Hong Kong operators were among the first to provide both interactive TV, which PCCW launched in 1998, and real-time TV broadcasting on mobile phones, launched in 2006.

Hong Kong has a favorable regulatory environment, and the Office of the Telecommunications Authority (OFTA) has established clear principles for the liberalisation of the broadband market to create an enabling and stable regulatory framework. Hong Kong's broadband market is one of the leading markets in the world. In 2005, Hong Kong had the fourth-largest broadband market in the world, with 98 per cent of Hong Kong's households within the reach of a broadband connection. 71 per cent are covered by fiber-based service, while the penetration rate of IPTV subscriptions reached 25 per cent.

Multimedia Convergence in Hong Kong SAR

Despite a relatively late start to 3G services in Hong Kong in January 2004, multimedia convergence through mobile phones is evolving fast. When Hong Kong hosted the WTO conference in 2005, news services became increasingly popular. The operator 3 Hong Kong, part of Hutchison Group, was the first to provide 24 hour live streaming news. In the following year, One2Free, CSL's mobile brand launched the first 3G Mobile TV with more than 20 channels. Technological innovation now enables PCCW's customers to tune into TV broadcasts. PCCW's IPTV service is seeking to develop synergies in content with the largest IPTV service in the world, NOW TV to attract more customers through rich content.

Fixed/Mobile convergence is evolving further. SmarTone-Vodafone and Microsoft announced the launch of Windows Mobile Email, which allows users to send email using Microsoft Outlook at home and abroad. Instant Watch Service, developed by CSL, enables customers to monitor e.g. their babies at home remotely, or the condition of their property in the Pearl River Delta over either a Wired or WiFi connection. In late 2005, Hong Kong Broadband Network has launched its second generation of broadband phone services, based on Voice Over Internet Protocol (VOIP) phone service.

Conclusion

With the biggest market and one of the most competitive markets in converged ICTs, China and Hong Kong SAR provide good testing grounds for the use of advanced ICTs, from which operators and regulators around the world can draw lessons. China has huge potential for dramatic growth in ICTs. With its liberalized, dynamic and highly competitive market, Hong Kong has enjoyed accelerated convergence of fixed, mobile, wireless, and broadcasting. However, alongside such rapid progress, there have been a few teething problems with mobile multimedia and convergence, spam message, harmful content, and privacy in both markets. Hong Kong and China are markets where some of the hottest issues relating to the future of ICTs are decided.

Note

For more information, please see ITU (2006) "The regulatory environment for future mobile multimedia services: The case of Hong Kong SAR and China", a country case study prepared by Prof. Xu Yan for the ITU/Federal German Network Agency New Initiatives workshop, held in Mainz, 21-23 June 2006, and ITU (2006) World Information Society Report.