china vas - mobile value added services in china


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china vas - mobile value added services in china

  1. 1. Mobile Value-Added Services in China Project Summary Report Bernhard Holtkamp Fraunhofer ISST (Ed.) January 2006
  2. 2. Summary Report VAS CHINA Project March 2005 – February 2006 Mobile Value-Added Services in China Project Summary Report Bernhard Holtkamp (Ed.) January 2006 Funded by the European Union In the 6th Framework Program under contract number FP6-2004-IST-3-015774 © VAS CHINA Project [FP6-2004-IST-3-015774] 3
  3. 3. Summary Report Editor Dr. Bernhard Holtkamp Fraunhofer Institute for Software and Systems Engineering (ISST) Emil-Figge-Straße 91 44227 Dortmund Germany © VAS CHINA Project [FP6-2004-IST-3-015774 4
  4. 4. Summary Report Contributors BUPT Prof. Shiduan Cheng Dr. Yuhong Li Chongqiu Tao Dr. Qiang Yan Xiaopeng Li Kuifei Yu Huifang Jin Dr. Jian Ma Dr. Seppo Hamalainen Na Li Dr. Yue Fei Shudong Liu Lucy Lee Dr. Bernhard Holtkamp Dr. Päivi Kallio Mika Hongisto © VAS CHINA Project [FP6-2004-IST-3-015774] 5
  5. 5. Summary Report Contents 1 Objectives of the Project 12 2 Approach 14 3 VAS Situation in China 16 3.1 Economic Environment of Value-Added Services 17 3.1.1 The Economic Prosperity Stimulates the Increase of the Telecommunication Requirement 17 3.1.2 The Improvement of the People’s Living Standard Promotes the Change of Telecommunication Requirements 17 3.2 Political Environment of Value-Added Services 20 3.2.1 Supervision and Regulation on Telecommunications 20 3.2.2 Effects of Policies on Mobile VAS 21 3.3 Technical Environment of Value-Added Services 22 3.3.1 The Influence of IP 22 3.3.2 The Influence of Soft Switch Technology 23 3.3.3 The Influence of 3G Technology 24 3.3.4 The Influence of Terminal Technology 24 3.4 Conclusion 25 4 Mobile VAS Value Chain 26 4.1 Mobile Network Operators 29 4.1.1 China Mobile Communications Corporation 30 4.1.2 China United Telecommunications Corporation 33 4.2 Service Providers and Content Providers 34 4.2.1 SINA Corporation 35 4.2.2 SOHU Corporation 38 4.2.3 TOM Online Inc. 39 4.2.4 NetEase 40 4.2.5 Tencent 41 4.2.6 Linktone 41 4.2.7 Mtone Wireless 42 4.2.8 KongZhong Corporation 43 4.3 Equipment Manufacturers and Terminal Manufacturers 44 4.4 End Users 45 4.4.1 End User Status and Market Requirements 45 4.4.2 The Demand Trend of Mobile VAS Market 55 4.4.3 Conclusion 60 4.5 Ministry of Information Industry 60 4.5.1 Duties 60 4.5.2 Departments 61 © VAS CHINA Project [FP6-2004-IST-3-015774 6
  6. 6. Summary Report 5 Mobile Value-Added Services 65 5.1 Pricing of VAS Services 65 5.2 Popular Services 66 5.2.1 Short Message Services (SMS) 66 5.2.2 Multimedia Messaging Services (MMS) 69 5.2.3 Individualized Ringing Tone Service 71 5.3 Emerging Services 73 5.3.1 Mobile Phone Games 74 5.3.2 Interactive Voice Response (IVR) 79 5.3.3 LBS (Location-Based Service) 81 5.3.4 Streaming Media 84 5.3.5 M2M (Machine to Machine) 85 5.3.6 Other Emerging Services 86 5.4 Analysis of the Development of Mobile VAS in China 86 5.4.1 Development Features 87 5.4.2 Development Structure of Mobile VAS 87 5.5 Selected Mobile VAS Services 89 5.5.1 M2M in China 89 5.5.2 Sample VAS Services 90 5.5.3 Mobile Virus Killing 91 5.6 Mobile VAS Technology Issues 91 5.6.1 SIP 92 5.6.2 OMA Digital Rights Management 92 5.6.3 Location-Based Services (LBS) 92 5.6.4 Importance of These Technologies for the Chinese VAS Market 92 5.7 International Developments 92 5.7.1 VAS in Germany 93 5.7.2 M2M in Germany 93 5.7.3 VAS in Finland 94 5.7.4 France Telecom Orange Mobile VAS Experiences 96 6 VAS Market Entry Process in China 98 6.1 Telecoms Regulations and Policies 99 6.1.1 Network Construction 99 6.1.2 Regulations and Policies on FITEs 100 6.1.3 Commitments to WTO Regarding VAS 101 6.2 Phase 1: Partnering with a Chinese Company 101 6.2.1 Foreign Investment Telecommunications Enterprises (FITE) for Value-Added Services 103 6.2.2 FITE Registration Process 103 6.3 Phase 2: Getting a Service Provider License 104 6.3.1 VAS License Application Process 104 6.3.2 Licensing Situation 107 6.4 Phase 3: Cooperation with Mobile Operators 107 6.4.1 China Mobile 108 © VAS CHINA Project [FP6-2004-IST-3-015774] 7
  7. 7. Summary Report 6.4.2 China Unicom 109 6.4.3 How to Become a VAS Partner of China Unicom 109 7 VAS CHINA Project Networking 116 7.1 Ministry of Information Industry 116 7.2 Mobile Operators 118 7.2.1 China Mobile 118 7.2.2 China Unicom 119 7.2.3 GD Unicom 119 7.2.4 GZ Mobile 120 7.3 Service Providers 120 7.3.1 TOM Online 120 7.3.2 Biao Qi Century Data Communication Technologies 121 7.3.3 Tencent 122 7.3.4 Linktone 122 7.3.5 A8 Music Group 123 7.4 Related Organizations 123 7.4.1 VAS Committee China (VASC) 123 7.4.2 EU Chamber of Commerce 124 7.4.3 DVB Project PARTAKE 124 7.4.4 eShip 125 7.4.5 International Financing Investment Consultancy Company Ltd. (IFIC) 125 8 Conclusion 127 9 References 129 10 Sources 130 A Project Consortium (Alphabetical Order) 135 A.1 Beijing University of Posts and Telecommunications, BUPT, China 135 A.2 France Telecom 137 A.3 Fraunhofer ISST, Germany 139 A.4 Nokia Research Center / Nokia (China) Investment Company Ltd, China (Project Coordinator) 140 A.5 VTT Technical Research Centre of Finland 142 © VAS CHINA Project [FP6-2004-IST-3-015774 8
  8. 8. Summary Report List of Figures Figure 1 VAS CHINA project workflow and results .....................................14 Figure 2 Mobile VAS revenue and its share in the whole mobile service market.........................................................................................16 Figure 3 The architecture for providing VAS in the next generation packet- based voice network ....................................................................23 Figure 4 VAS value chain members and relationships.................................27 Figure 5 I-Mode value chain ......................................................................28 Figure 6 Monternet value chain .................................................................28 Figure 7 Departments of CMCC ................................................................32 Figure 8 Organization of the CMCC data service department ....................33 Figure 9 Organization of China Unicom.....................................................34 Figure 10 Important factors influencing users for using SMS service.............47 Figure 11 Age distribution of mobile phone game users ..............................50 Figure 12 Education of mobile phone game users........................................51 Figure 13 Income of mobile phone game users............................................51 Figure 14 Distribution of mobile game content............................................52 Figure 15 Market share of mobile phone game in 2004...............................53 Figure 16 Expectations of free WAP contents ..............................................54 Figure 17 Using frequency investigations of several WAP services ................55 Figure 18 Reasons why high-end users are not satisfied with current mobile VAS .........................................................................................59 Figure 19 Increase of SMS in China from 2001 t0 2004...............................67 Figure 20 Growth of SP revenue..................................................................67 Figure 21 Market share among SPs in 2003.................................................68 Figure 22 MMS market shared by SPs in 2003. ............................................70 Figure 23 Market share of mobile phone game platform in 2004 ................76 Figure 24 Market shares of different types of mobile phone games .............76 Figure 25 Mobile game industry chain .........................................................77 Figure 26 Market of IVR shared by SPs.........................................................80 Figure 27 Number of mobile VAS users .......................................................88 Figure 28 Revenue structure of mobile VAS market in China .......................88 Figure 29 Mobile services markets in Finland 2002–2005 (M€) (Source: [2]).95 Figure 30 The number of mobile terminals with colour displays, GPRS, WAP, MMS and Java in Finland (Source: [2]) ..........................................96 Figure 31 Overview of the VAS market entry process in China .....................98 Figure 32 Phase 1: Setting up a FITE ..........................................................102 Figure 33 Phase 2: Applying for a service provider license ..........................105 Figure 34 Phase 3: Partnering with a mobile operator................................108 Figure 35 Procedure of application for qualification and services................112 Figure 36 Procedure of service testing and contract ...................................113 Figure 37 Settlement procedure ................................................................115 © VAS CHINA Project [FP6-2004-IST-3-015774] 9
  9. 9. Summary Report List of Tables Table 1 Mobile VAS used by high-end users ................................... 18 Table 2 The interest degree (%) of high-end users in VAS provided by future 3G network............................................................. 19 Table 3 Mobile VAS used by high-end users ................................... 56 Table 4 The interest degree (%) of high-end users in VAS provided by future 3G network............................................................. 58 Table 5 Comparisons of LBS solutions ............................................ 81 Table 6 Materials needed during the application .......................... 111 © VAS CHINA Project [FP6-2004-IST-3-015774 10
  10. 10. Summary Report Abbreviations 3G Third Generation ADSL Asymmetric Digital Subscriber Line ARPU Average Revenue Per Unit BBS Bulletin Board Service BUPT Beijing University of Posts and Telecommunications CDMA Code Division Multiple Access CM China Mobile CMCC China Mobile Communication Corporation CP Content Provider CU China Unicom DRM Digital Rights Management EUCC FITE Foreign Invested Telecomm Enterprises GPS Global Positioning System GSM Global System for Mobile communications IP Internet Protocol ISP Internet Service Provider IVR Interactive Voice Response JV Joint Venture LBS Logical Block Addressing M2M Machine-to-Machine MII Ministry of Information Industry MISC Management Information Services Center MMS Multimedia Messaging Service MofCom Ministry of Commerce OMA Open Mobile Alliance PRC People’s Republic China RBT Ring Back Tone RMB Renminbi (China’s currency) SIM Subscriber Identity Module SIP Session Internet Protocol SMS Short Messaging Service SP Service Provider TAB Telecommunication Administration Bureau VAS Value Added Services VASC Value Added Service Committee WAP Wireless Application Protocol WLAN Wireless Local Area Network WTO World Trade Organisation © VAS CHINA Project [FP6-2004-IST-3-015774] 11
  11. 11. Summary Report 1 Objectives of the Project The first service for mobile phones was "voice". As we know, mobile "voice" was everywhere a great success. But in China its growth has been geometric: in 1998 less than 10 million subscribers and now 6 years later over 300 million subscribers. The first VAS technology introduced to China was the short message service (SMS). It came to China relatively late since both mobile operators and officials believed that "SMS is a European success story – and SMS will never become a success in China". Examples and success stories from Europe were essential, but finally SMS was ignited into Chinese awareness by a local idea. Chinese Internet SMEs offered to send "good news" messages when Chinese won medals at Sydney Olympic Games. SMS service was a success and proved that there are real business opportunities with VAS. In 2004 Chinese already sent some 30.000 million SMS per month and growth still continues. Since then more VAS technologies, applications and services have been introduced for mobile phones in China. Operators are eager to take more benefit of their massive subscriber base via VAS. Here are some examples of VAS offered in China: • short message services (ring tones, other) • Java downloading services (games) • Internet browsing (entertainment, sport news, etc) • multimedia messaging service (MMS) • location-based services (LBS) Since SMS a lot of learning has happened. New Chinese words have been invented to describe various VAS services. The process on how new VAS technologies are getting into market is developing. It is a complex process with evolving regulations, standards, rules, tests, trials, technical forums, and finally business models, tariffs, application developers and more. We see continuous progress with VAS but yet, there is neither clear, known guideline nor process on how Chinese mobile operators adopt European or global mobile VAS technologies into use and into end-user benefits. For every organization VAS is a learning process but in China VAS has strong impact on society and culture, too. Continuously more new global VAS technologies are getting mature. Here are a few examples: • Push-to-talk over Cellular (PoC) service ; “walkie-talkie” service, which will enable other new services when combined with existing VAS technologies © VAS CHINA Project [FP6-2004-IST-3-015774 12
  12. 12. Summary Report e.g. messaging, location-based services, or when taken as an element into applications e.g. mobile games, enterprise applications • TV broadcast to mobile based on DVB-H which will enable the birth of whole array of new innovative applications via mobile network • Payment solutions which use mobile phones Each new VAS technology enables creation of new categories of applications and services. By combining existing and new VAS services, complexity grows but so do opportunities for both Chinese and European SME industries. Chinese market is reactive, so understanding of the situation by Europeans could give us some "first-mover advantage". To be able to enter the Chinese market European companies in general and SMEs in particular need to understand the specifics of this market, its rules and regulations, entry processes and requirements, time-schedules. To be able to sell their applications European SMEs need to match make and localize their products for Chinese taste. Hence, “information” is the most important tool for European SMEs to be able to cooperate with Chinese partners and to enter the Chinese market. The mission of the VAS CHINA project was to challenge the existing unclear flow related to VAS technologies entry into China market. With a systematic approach we tried to learn, understand and map a process and to develop positive networking between organizations and individuals. More precisely, VAS CHINA project objectives were: 1 To identify and network with those Chinese organizations which are key influencers in the market-entry process for new VAS technologies: to create contacts and to find possible partners to explore the possibilities of VAS in China 2 To produce information which will clarify, "map" the process of how China accepts and adopts new VAS technologies 3 To recognize and produce information about China-specific needs related to existing and future mobile Values Added Services, and produce policy recommendations to improve the situation with Chinese-European co- operation 4 To introduce the results to interested EU-parties Compared to many other industries, VAS technologies represent a new innovation space with lots of room. European SMEs are famous about their innovative products related to mobile VAS technologies and applications. But being famous is not enough if wanting to do business in China. The ultimate goal of this project is to provide European SMEs access to latest information about VAS in China. Quality information will enable fast, rational decisions. © VAS CHINA Project [FP6-2004-IST-3-015774] 13
  13. 13. Summary Report 2 Approach The picture below clarifies the workflow and the results distribution of the VAS CHINA project. Figure 1 VAS CHINA project workflow and results During the monthly workshops every consortium member learned about Chinese organizations which participate into China VAS process; their role and linkage to other actors. During the workshops consortium members were introduced to Chinese organizations that have role in China’s VAS entry process. The leading partner for this is BNRC. During the monthly workshops each consortium member “tested” the China VAS entry process by looking it from their focus angles; technology, applications, services. © VAS CHINA Project [FP6-2004-IST-3-015774 14
  14. 14. Summary Report VTT was the leading partner in the work to develop the understanding about the Chinese organizations and their roles in China VAS process, and to map and develop China VAS entry process. All consortium members naturally contributed to this work. VTT and Fraunhofer ISST produced (round-robin basis, 50/50 of the workshops) a condensed report about each monthly workshop’s results and findings. These reports, written in English, have been made public through the VAS CHINA project home page (, maintained by Fraunhofer ISST, and were delivered to the Commission. This up-date of findings has also become part of the VAS CHINA Summary Report. During the VAS CHINA project the Europe-located consortium members, VTT and Fraunhofer ISST, visited the workshops in Beijing 5 times each. One of the workshops was held in Guangzhou in South-China. Guangzhou has advanced mobile services and local VAS-actors’ view needed to be collected. The project’s web-site includes information about the VAS CHINA consortium, project plan, and monthly workshop reports summarizing the up-dates of the findings. The VAS CHINA Summary Report, Seminar Report, and Final Report are also added to the web-site. © VAS CHINA Project [FP6-2004-IST-3-015774] 15
  15. 15. Summary Report 3 VAS Situation in China In recent years, the market of mobile communications has developed very fast. Mobile phone is affecting the way of people’s life. Correspondingly, mobile VAS increases also very fast. Both the amount of mobile users and the requirement of the users on different kinds of services ascend greatly. So far, about 80% of mobile phone subscribers use VAS. The revenue increase of mobile VAS has exceeded the increase of other telecommunication services. As shown in Fig. 2, the market scale of mobile VAS was 1.98 billion RMB Yuan in mainland China in the year 2001, and in 2002, it reached 9.36 billion RMB Yuan. This means that the market has increased 373% compared to the preceding year. And in 2003, the revenue of mobile VAS was 23.32 billion RMB Yuan. It is expected that in 2006 the market of mobile VAS can reach 70 billion RMB Yuan. From this figure we can also see that the revenue share of mobile VAS to the total mobile services increases also annually. 160 35.00% 152 143 140 29.20% 29.70%30.00% 126 27.30% 120 25.00% 100 94 22.10% 20.00% 18.40% 80 70 15.50% 15.00% 60 12.20% 52 10.00% 40 35 6% 5.00% 20 4.30% 23.32 9.36 1.98 1.10% 0 0.00% 2001 2002 2003 2004e 2005e 2006e 2007e 2008e 2009e 2010e Revenue of mobile VAS (billion RMB) Share of mobile VAS to the whole mobile services Figure 2 Mobile VAS revenue and its share in the whole mobile service market Now there are more than 70 thousand types of mobile VAS. These services can be divided into mobile Internet content/application services, mobile Internet access services and mobile value added voice services. According to the running platform, mobile VAS can be classified into five categories at present in the Chinese market. They are SMS, MMS, WAP, JAVA/BREW and IVR. And according to the contents and applications, the services can be classified into communications, business and trading, information support and entertainment © VAS CHINA Project [FP6-2004-IST-3-015774 16
  16. 16. Summary Report etc. In the following, we analyze some typical mobile VAS currently popular and emerging in China. It is no doubt that the external environment can produce great influence on the development of mobile VAS. In the following, we will introduce the economic, political and technical environment in China from the perspective of telecommunication industries, and analyze their possible influence on mobile VAS in China. 3.1 Economic Environment of Value-Added Services 3.1.1 The Economic Prosperity Stimulates the Increase of the Telecommunication Requirement The Chinese economy keeps fast development in 2004 after the GDP broke through 11,000 billion RMB Yuan in 2003. Some authoritative international organizations, such as World Bank, IMF etc. have adjusted the prediction about the annual increment of Chinese economy to over 9%. With the development in economy, the living standard of Chinese people has improved significantly. Demand on housing, autos and telecommunications is increasing strongly. This enlarges the Chinese telecommunication market, and provides also an economic guarantee for the development of the telecommunication services. 3.1.2 The Improvement of the People’s Living Standard Promotes the Change of Telecommunication Requirements The economic development influences not only the total amount of the telecommunication requirement, but also the trend of the content changes of the telecommunication requirement. After some basic telecommunication requirements have been satisfied, people want more and more comfortable, intelligent, individual and entertainment services. How to provide more value added services and keep the increase of the revenue has become the focus for the telecommunication enterprises. Requirement on mobile VAS Mobile VAS plays a more and more important role in the telecommunication market with the economic development. Table 1 illustrates the services used by high-end users nowadays. © VAS CHINA Project [FP6-2004-IST-3-015774] 17
  17. 17. Summary Report Beijing Shanghai Shenzhen Wuhan Chengdu Kunming Mobile phone SMS 93. 3% 95.7% 98.8% 96.6% 98.8% 91.9% Mobile phone lottery 8. 0% 4. 3% 43.0% 18.2% 17.6% 11. 3% Mobile phone stock 8 .0% 18.8% 16.4% 28.4% 16.4% 8.1% Web SMS 26.7% 38.2% 23.6% 29. 5% 43.6% 41.3% Mobile phone E-mail 43. 3% 57.0% 50.3% 51.1% 50. 3% 31.9% Mobile phone 26.0% 46.8% 38.8% 19.9% 28.5% 31.9% information ordering Mobile QQ 28.7% 54. 3% 23.6% 34.7% 43.0% 40.0% Mobile phone online 39.3% 44.6% 52.7% 44.3% 66.1% 43.1% game Web browsing 50.0% 62.4% 29.1% 38.6% 60.0% 25.6% Color messages/Color E 29.3% 53.2% 18.2% 23. 3% 31. 5% 18.1% Mobile phone 8.7% 22.0% 6.7% 9.7% 4.8% 2.5% online shopping Mobile phone pictures & 54.0% 65.6% 49.7% 49.4% 49.7% 74.4% ring tone downloading Travel services 10.0% 1.1% 7. 3% 19. 3% 7. 3% 31. 9% Case= 150 186 165 176 165 160 Table 1 Mobile VAS used by high-end users The data illustrates that many types of mobile VAS other than the widely used SMS are required by the end users from different cities nowadays. Receiving and sending Email and network browsing are widely required and used. In addition, the individual services, such as downloading from the networks are also welcome currently. Moreover, users from different cities display also great interest in online games. Other inquiries have also revealed that the customs who have not used VAS show low interest on the existing services, nevertheless, they are interested in some new emerging services, such as online translation, pictures upload etc. Table 2 shows the interest degree of high-end users in mobile VAS provided by future 3G mobile network systems. From this inquiry we can see that high-end users believe that sending images to friends and relatives will be the most popular services in the future 3G system. Moreover, web browsing and E-mail sending and receiving through mobile phone are also the desired services by high-end users. © VAS CHINA Project [FP6-2004-IST-3-015774 18
  18. 18. Summary Report City Beijing Shanghai Shenzhen Wuhan Chengdu Kunming Total Case= 150 186 165 176 165 159 1001 Transmitting images to 15.9 14.9 14.6 15.8 17.1 14.1 15.4 friends or relatives Web browsing 14.6 15.8 13.6 15.2 15.6 13.3 14.7 Transmitting information 14.3 14.7 14.4 14.8 16.0 13.1 14.6 with videos E-mail receiving and 14.3 15.7 13.3 14.5 15.2 13.2 14.4 sending On line music 12.5 15.4 13.6 15.0 14.8 12.1 13.9 Video phone 12.1 14.3 13.9 14.9 15.3 12.2 13.8 Internal Email transmitting 12.6 15.0 13.6 14.0 14.1 12.1 13.6 Emergency location 13.5 13.9 12.3 12.5 14.3 14.1 13.4 Customer relationship 13.0 14.2 13.4 13.4 14.5 11.8 13.4 management Online translation 11.9 14.5 13.2 13.5 14.2 11.0 13.1 Film on demand 12.5 13.7 12.1 13.4 15.1 11.4 13.1 Internal document sharing 11.8 14.3 12.6 13.5 13.6 11.4 12.9 Movie or TV foreshowing 11.2 14.4 12.2 13.4 14.2 10.9 12.8 Online virus killing 11.1 14.0 11.5 12.7 14.4 10.8 12.5 Video program ordering 11.0 13.6 12.3 13.1 13.7 10.2 12.4 Online interactive games 10.9 13.6 11.9 13.1 14.0 9.6 12.2 Online shopping 11.1 14.3 11.2 11.4 13.3 9.7 11.9 Mobile picture QQ 10.5 14.3 11.3 11.9 13.4 9.4 11.9 Internal training 10.5 13.1 11.4 11.8 13.0 10.0 11.7 Broadcasting 10.6 13.4 11.9 12.0 12.1 9.6 11.7 Navigation 11.9 13.0 10.7 9.8 12.1 10.8 11.4 Information ordering in 10.6 12.6 10.3 10.1 11.8 9.5 10.8 shopping center Mobile phone stock 9.2 12.2 10.4 11.2 13.2 7.7 10.7 Instant monitoring of 10.3 12.4 10.4 9.7 11.8 9.2 10.7 posting goods Remote medical treatment 9.0 10.5 10.0 11.8 8.8 10.0 Mobile phone lottery 7.4 11.9 9.9 10.9 12.0 7.0 9.9 Remote education 9.1 9.1 10.3 11.5 9.6 9.9 Table 2 The interest degree (%) of high-end users in VAS provided by future 3G network © VAS CHINA Project [FP6-2004-IST-3-015774] 19
  19. 19. Summary Report Some changes of the requirements on mobile VAS can be found through the comparison between the inquiries made in 2002 and in 2003. Dissimilar with the inquiry result obtained in many foreign countries, in 2002 most of the people in China were not interested in the services of messaging and mobile entertainment such as game, video and so on. However, in 2003, video services were accepted by most of the people. 3.2 Political Environment of Value-Added Services The political environment influences also the development of the telecommunications and the market of mobile VAS. In the following, we first review the major activities related to the supervision and regulation on telecommunications and then analyze their possible influences on the mobile VAS market. 3.2.1 Supervision and Regulation on Telecommunications From the beginning of the 1990’s, a series of definitions concerning VAS have been given and policies regarding the supervision and regulation of the Chinese national telecommunication market have been put forward. The major points are summarized as follows. • In December 1993, the State Council authorized the construction of China Unicom Corporation Limited, and defined the concept of basic telecommunication services and value-added services for the first time. • According to the “Telecommunication Regulation of the People’s Republic of China” issued by the State Council in September 2000, VAS includes 9 services: E-mail, voice mail box, online information storing and searching, electronic data exchange, online data and trade processing, value-added fax, Internet access services, Internet information services, video conferencing . • On June 11th, 2001, the Ministry of Information Industry (MII) made a declaration to classify the VAS into five categories, which are VAS in the fixed telephone networks, VAS in the mobile telephone networks, VAS in satellite networks, Internet VAS, and VAS in the other data networks. • According to the “Catalog of Telecommunication Services” defined and implemented by MII since April 1st, 2003, the telecommunication VAS will be classified according to the characteristics of the services instead of network features. Namely the services that can be implemented on different networks but do not have much essential difference are combined. Furthermore, considering the factors such as the degree to which the VAS may influence the telecommunication market, the VAS may be also divided into two categories. One is the services that can affect the telecommunication market greatly. These services have aptitude requirement on the service operators. This kind of services includes mainly online data and trade processing, domestic multi-party communication services, domestic Internet VPN services, Internet data center services. The other category of services has relative less impact on the market, and do not © VAS CHINA Project [FP6-2004-IST-3-015774 20
  20. 20. Summary Report require the operators to have special aptitude. This kind of services includes mainly the store and forwarding services, call center services, Internet access services and information services. • On December 8, 2003, the Committee of the Internet News and Information Service of the Chinese Internet Association was founded. The people from more than 30 Internet news and information services companies, such as People’s Net, Xinhua Net, China Net, Sina, Sohu and Wangyi etc. signed together the “Common Agreement of Internet News and Information Services”. With the agreement these companies promised to accept the government administration and public supervision. • Depending on the “Reference Process for Telecommunication Opening” signed when China joined the WTO, the stock of value-added telecommunication services hold by the foreign capitalists may not exceed fifty percent (50%). At the same time, China will cancel the region restriction of value-added services completely. The opening range of mobile voice and data services will expand to fourteen cities. Foreign capital may reach 49% in a joint-venture company. • On February 10, 2004, Jiang Yaoping, the director of the department of Policy and Regulations of MII, said during the meeting of “Information exchange about the development of telecommunications and the corresponding policies”, that the draft of Telecommunication Law has been sent to the related organizations and enterprises for comments. • In the middle of June 2004, MII issues a “Notification about the standardization of SMS market”. The notification deals with problems in the SMS market, such as the opaqueness of SMS charging, charging for non- ordered SMS, complains cannot be solved in time and so on, aiming at standardizing the SMS market, and protecting the legal rights of the users. • In late June 2004, MII defined the year 2004 as the Telecommunication Service year. MII tries to standardize the telecommunication service protocols, and to insure the rights and responsibilities of the formatted contracts. MII requires that the telecommunication enterprises should ask the opinions from the customers, specialists on law, and the related administrative organizations when they issue the telecommunication service protocols. The telecommunication enterprises should provide services to the customers according to the service contracts. When conflicts occur, the telecommunication supervision organization will solve the conflicts according to the service contracts. 3.2.2 Effects of Policies on Mobile VAS The Chinese government has made a lot of efforts on the standardization of VAS and VAS market. From the above activities on the supervision and regulation of VAS, following conclusions can be made: • The amount of the operating entities for VAS increases continuously, and the market competition becomes much stronger. The threshold for permitting a VAS to enter the telecommunication market © VAS CHINA Project [FP6-2004-IST-3-015774] 21
  21. 21. Summary Report becomes lower, and more third parties participate in the running of a VAS. More and more foreign companies, as well as companies from Hong Kong and Macau are entering the VAS market actively. This is helpful for breaking the monopoly and improving service quality. However, this may also result in illness competition and finally have negative effect on the VAS development. • The competition activities are expected to become standard, and the capabilities for service creation will increase. Currently the competition in the VAS market focuses on only some small service area. In case no mature regulations, laws as well as policies exist, the competition may simply go through low prices. This results in some illegal and short sighted activities which are not beneficial to the long term healthy and sustainable development of VAS market. Under the political regulation and supervision, the service providers may concentrate more on the user requirements instead of illness competition. • The rational participation of foreign capital may stimulate the development of the Chinese VAS market. On the one hand, the customers will benefit from the introduction of foreign capital into the Chinese market. For example, the irrational price for some services will decrease, and more types of VAS can be provided. On the other hand, some advanced theories and technologies can be provided to the Chinese service providers through cooperation. This may stimulate the development of VAS and VAS market. 3.3 Technical Environment of Value-Added Services In the recent years, computer, Internet and IP technology developed very fast in the world and in China. This provides a strong technical support for the development of VAS. With the pervasion of IP technology in elecommunication networks, the application of soft switch technology and the evolution to 3G, the telecommunication networks in China will have greater capability for supporting various VAS. 3.3.1 The Influence of IP With the transfer of telecommunication services from voice service to data service, all kinds of the traditional telecommunication networks carrying the services, such as the access networks, transmission networks, and signaling networks and so on, also change to a single carrier network system based on connectionless IP technology. This change strengthens the capability of the networks. The networks become more flexible, and at the same time possess also high stability, reliability and are easy to manage. Not only the current quality of services can be guaranteed, but also an open system architecture can be provided, which allows rapid deployment of new VAS and provides services to third parties. The evelopment © VAS CHINA Project [FP6-2004-IST-3-015774 22
  22. 22. Summary Report of IP technology provides plenteous network resources for value-added services. 3.3.2 The Influence of Soft Switch Technology Soft switch technology is a kind of new technology based on IP phone, and is deemed as one of the key technologies for NGN. In a soft switch system, in order to be able to introduce new or value-added services, the call control function provided by the soft switch technology should be the basic or atomic call control function required by all kinds of services for the purpose of convenient introduction all kinds of new services and value-added services. The ISC application workgroup has put forward an architecture for providing value-added services in the next generation packet-based voice network. Fig. 3 illustrates this architecture. API: application program interface API SIP: session initiation protocol App Server RTP: real time transmission protocol Media Server SIP BICC: bearing independent call control SIP RTP BCP: bearing control protocol Soft switch Soft switch BICC/SIP-T RTP Signaling Media gateway Media gateway Signaling gateway gateway Figure 3 The architecture for providing VAS in the next generation packet-based voice network The greatest advantage of soft switch based NGN is that it can introduce some exciting new value-added services rapidly and economically during the provisioning of the normal services. Soft switch only provides some basic and supplementary services, whereas processing the value-added services has been moved out from the soft switch. Application server can provide the environments for deploying VAS rapidly and economically, and various kinds of programming interfaces (API), such as JTAPI, JAIN, Parlay, CPL, CGI, Servlet and so on. These interfaces are open and flexible, and enable establishing, managing and deploying new services without updating or renovating soft © VAS CHINA Project [FP6-2004-IST-3-015774] 23
  23. 23. Summary Report switch equipments. This can reduce the cycle and expenses for deploying the new services. 3.3.3 The Influence of 3G Technology Being able to provide various mobile multimedia services is one important feature of 3G mobile network systems. The technical breakthrough may stimulate greatly the development of mobile VAS in China, and following services become possible. Mobile location based services Many location orientated services can be provided, such as navigation, measurement, first aiding, vehicle scheduling, guarding against theft and robbing, city planning, tourist guidance and so on. Since the data transmission rate increases greatly in a 3G system, the location based services will play an important role in 3G networks. Video telephony and video conference Video telephone will become more and more popular in 3G networks, where the network bandwidth can be guaranteed. Especially with the development of coding technique and the introduction of IP technique, the cost of the network operators for video telephony based on IP can decrease. This may promote the popularization of video telephony and video conference services. Mobile business Mobile business is another hotspot of VAS in 3G networks. Users can obtain, process and send information at anytime and everywhere. The trading based on the closed mobile networks may be more safe and reliable than that based on the open Internet system. Mobile business uses the mobile network operators with good reputation as the medium; this solves the reputation crisis problem in the current Internet. Moreover, it is allowed to use multiple ways such as voice, SMS, WAP for trading, and the mobile business becomes more convenient and flexible. Hence, mobile business is a launch point for the development of E-business, and the 3G networks provide a platform for the mobile business. 3.3.4 The Influence of Terminal Technology The development of different kinds of terminals provides conditions and possibilities for enriching value-added services. Especially the improvement in encapsulation, displaying, and CPU processing speed etc., has made it possible for enjoying VAS using mobile multimedia terminals. © VAS CHINA Project [FP6-2004-IST-3-015774 24
  24. 24. Summary Report 3.4 Conclusion In general, China possesses a suitable environment for the development of mobile VAS. The continuous increase in economic in China provides a necessary precondition for the development of mobile VAS. A large amount of potential users and requirement on diverse mobile VAS can be expected. In addition, the telecommunication laws and regulations in China can guarantee also the normal operation of mobile VAS and the rational market competition. Furthermore, the technical progress in China provides the basis and possibility for the introduction of mobile VAS. The network infrastructure and platform needed by various mobile VAS can be realized and provided. © VAS CHINA Project [FP6-2004-IST-3-015774] 25
  25. 25. Summary Report 4 Mobile VAS Value Chain The value chain for value-added services consists of • content providers (CPs), • service providers (SPs), • device manufacturers, • mobile operators, • infrastructure providers, • end users, i.e. customers • Ministry of Information Industry. Strictly seen, MII is not a part of the value chain. However, in China, MII plays a very important role in the whole information industry and influences each entity in the VAS value chain heavily through stipulating regulations and laws. On the one hand, MII ensures the fair developing environment for the value chain. On the other hand, each entity in the value chain should abide the regulations stipulated by MII. They choose standards and technologies used in networks, e.g. 3G (Third Generation) standard, or alternatively may develop new standards when they see that it is good for Chinese economy. In particular, MII provides the regulations to get a mobile VAS License. They also control the domestic VAS economy through these fixed-term licenses. For local services (e.g. City of Shanghai) it is necessary to get the license from the local telecoms administration. Equipment manufacturers are in a key role to bring new technologies on board. They initiate trials for new services together with operators and sell terminals to end users. Operators do not lock their SIM (Subscriber Identity Module) cards to mobile phones and consumers are free to choose any phone they desire. Current market shares for terminal manufacturers are Nokia (15,5 %), Bird (11 %), Motorola (10,8 %) and Samsung on the fourth place. Operators provide voice and data services, portals and micro payment mechanisms for VAS. They control content and services provided by the service providers, according to MII and government regulations. e.g. prevent the distribution of ”harmful” and ”politically incorrect” information including erotic content. They also have a strong role in initiating trials and inviting SPs to join into providing new services. It seems that operators are interested to have a greater role in service providing. The mobile operator market is divided between two companies, China Unicom (40%) and China Mobile (60%). China Unicom is focusing on CDMA technologies and offers a service platform based on BREW from Qualcomm. Their revenue sharing model is 80% for the SP and 20% for the operator © VAS CHINA Project [FP6-2004-IST-3-015774 26
  26. 26. Summary Report China Mobile is using GSM (Global System for Mobile Communications) technology and offers the Monternet portal based on a Java platform from Motorola. China Mobile is commanding 85% for the SP and 15% for the operator. The role of service providers is to provide content for operators. They are strictly controlled to comply with MII regulations and need licenses to operate. Market share figures for SPs is difficult to come by, but Sina, Sohu, Tencent and Tom Online are major players. Currently, more than 70% of the service providers operate on loss. Third party content providers are quite rare at the moment, as service providers and operators provide their own content. Some big global companies such as Sony Music, Disney and AOL are providing content for the Chinese market. The figure below describes business actors and their interaction in mobile service arena. Figure 4 VAS value chain members and relationships Revenue sharing models are due to change in the future as operators are going to provide marketing on behalf of SPs. They might also be trying to diminish the role of SPs by locking content into their own service mechanisms. © VAS CHINA Project [FP6-2004-IST-3-015774] 27
  27. 27. Summary Report The following diagrams compare the Japanese I-Mode from Docomo to China Mobile’s Monternet offering. Figure 5 I-Mode value chain Figure 6 Monternet value chain © VAS CHINA Project [FP6-2004-IST-3-015774 28
  28. 28. Summary Report The above figure 4 indicates that: • The mobile network operators are the core in the value chain • Equipment manufacturers and Integrators are the upriver participants in the value chain. They provide the network environment together with the operators. • CP→SP→Operator→End User is the value fulfillment process. • Network operators, SPs and terminal manufacturers are facing end users directly. • Customization of the terminals is an emerging tendency. Hence, there exists links among terminal providers, network operators and end users. Generally speaking, the efficient cooperation between various participants is the key factor to form a healthy value chain. Moreover, the cooperation and competition coexist between the participants of the value chain. In the following, we will analyze the entities in the value chain in detail. 4.1 Mobile Network Operators Under the current Chinese circumstances, the mobile network operators, as an entity in the value chain, have the following features. Operators are cores in the value chain On the one hand, operators possess network infrastructure and large customer resources. On the other hand, SPs can only provide services to end users through the network infrastructures owned by the operators. These two facts make the mobile network operators have absolute advantages in the value chain. However, this means also that the operators must be responsible for maintaining a good and healthy value chain. Operators have taken actions to enhance the management for SPs For the first several years when VAS began to develop, SPs have developed rapidly. Both the number of SPs and the services they provide increase very fast. However, the management from the mobile operators is relatively mild at this period. Driven by profits, some SPs have taken some actions violating the regulations and even the law. As a result, the operators’ reputation was affected too. Having noticed this phenomenon and to keep the value chain in good condition, MII, together with China Mobile and China Unicom, began to take measures to supervise SPs severely. The relationship between mobile operators and SPs have changed from cooperation to cooperation and competition In the early phase of VAS development, mobile operators encouraged SPs eagerly to develop VAS for the consideration of profit and market share. Operators and SPs cooperated happily with each other. Operators charge for © VAS CHINA Project [FP6-2004-IST-3-015774] 29
  29. 29. Summary Report network flow fee, while SPs for service fee. Gradually, the operators realized that SPs have more profit space. They are not satisfied with the profit sharing mode anymore. Therefore mobile operators begin to act in SP’s role themselves. For example, China Mobile has set up a corporation called “ZHUOWANG”, which is an SP actually. Thus, operators and SPs become competitors. However, we should note that operators can not do everything. SPs will not be died out. Therefore, in the future the cooperation and competition between SPs and operators will coexist. The cooperation between operators and equipment manufacturers and terminal manufacturers will be even tighter The development of VAS depends on perfect network environment and terminals to some degree. Especially in the 3G mobile network environment, mobile network operators and equipment as well as terminal manufacturers will be bound together. On the one hand, operators can feed back information to the equipment manufacturers and terminal manufacturers. On the other hand, facility and terminal manufactures should provide new technology and possible VAS in time to operators. In a word, they should communicate sufficiently and contribute to value chain together. Operators begin to pay attention to enterprise applications Having some success and experiences in developing VAS for individual applications, China Mobile and China Unicom have both realized the importance for cooperating with enterprises. They both begin to develop VAS for enterprise applications. With the development of the communication industry and market, China communication industry was reformed and reconstructed at the beginning of 2000. As a result, China Mobile was split from the former China Telecommunication, and the former China Telecommunication (China Telecom) was reconstructed to the current China Telecommunication and China NetCommunication (China Netcom). On July 1994, the United Telecommunications Corporation (China Unicom) was established. Together with China Satellite Communication Corporation and China Railway Communication Corporation, now they represent the major network operators in China. Since China Mobile concentrates its business on mobile communications, and China Unicom has a big competition capability in both the mobile and fixed network market, in the following we introduce China Mobile and China Unicom in detail. 4.1.1 China Mobile Communications Corporation China Mobile Communications Corporation (China Mobile or CMCC for short) ( was officially founded on April 20th, 2000 and is directly under the leadership of the central government. It is a key state- © VAS CHINA Project [FP6-2004-IST-3-015774 30
  30. 30. Summary Report owned enterprise focusing on mobile business, and is now the largest mobile network operator in China. CMCC has a registered capital of 51.8 billion RMB Yuan, assets of over 320 billion RMB Yuan and 120,800 employees. It has wholly-owned subsidiaries in 10 provinces/autonomous regions in China and fully holds the equity of China Mobile (HK) Group Limited. China Mobile (HK) Limited, of which China Mobile (HK) Group Limited is the major shareholder, has established wholly-owned subsidiaries in 21 provinces/autonomous regions and municipalities directly under the central government in China and went public in HK and New York Stock Exchanges. CMCC is the only network operators focusing on the development of mobile communications. It plays a dominant role in the development of Chinese mobile communication, and has an important position in the international mobile communication area. After the construction and development of more than 10 years, CMCC has established a comprehensive communication network with wide coverage, high communication quality, various service types and high level services. The network scale and the customer number are in the first position in the world. Till the end of 2002, the network has covered most of the cities and regions in China. All the main traffic lines have been covered, and indoor coverage has been realized in the major areas of cities. The GSM exchange capacity has reached 182 million, and the total user number is over 138 million. Roaming service has been realized. CMCC deals mainly in mobile voice, data, IP telephone and multimedia service. It has also the right to operate Internet services and possesses the international gateways. Beside the basic voice services, it provides multiple value-added services such as fax, data, IP telephone etc. CMCC has succeeded in shaping nation-wide famous brands like "GoTone", "Shenzhouxing" and "M-Zone". "GoTone" has gained a massive occupying ratio among the high-value customers for the superior value of service, while innovative brands like "M- Zone" are welcome in the Fun-Love-Youth group. The network access numbers of CMCC are 139, 138, 137, 136 and 135. Being a large enterprise, the organization of CMCC is depicted in fig. 7. Among those departments, the Data Service Department is responsible for the operation and development of the value added services. Fig. 8 shows the architecture of the data service department. As indicated by the name, the Service Operating Department is in charge of introducing, managing and coordinating value-added services. Especially, the Cooperation and Management Group as well as the Portal Operating Group have close relationship with SPs. The former is responsible for the cooperation and management of the SPs, the evaluation of services of the “DreamNet”, as well as the service, customer and product supporting, VAS market etc. And the © VAS CHINA Project [FP6-2004-IST-3-015774] 31
  31. 31. Summary Report latter organizes and manages portals, new services, as well as supervises the quality of the services, integrates and optimizes the services. Figure 7 Departments of CMCC Currently, value-added voice services like "E-tone On-line" saw positive results at trial spots. Data services maintained a robust growth momentum, accounting for 6.3% in total sales revenue, an increase of 4.1 percent points over last year. The SMS traffic hit 79.3 billion transactions throughout the year (2004), 8.45 times that of last year. The International SMS has commenced and the initiative launch of MMS service promoted and enriched the application of GPRS. The data-bundled services targeting at young people, businessmen and group clients have been widely recognized and welcomed. © VAS CHINA Project [FP6-2004-IST-3-015774 32
  32. 32. Summary Report Data Service Dept. New Product Center Service Operating Sale Planning Group Customer Dept. Dept. Dept. Service Management Cooperation Portal Operating Terminal Group Management Group. Group Cooperating Group Figure 8 Organization of the CMCC data service department 4.1.2 China United Telecommunications Corporation China United Telecommunications Corporation (China Unicom or CU for short) ( was established on July 19, 1994. The birth of China Unicom brought competition into China's telecommunication market and has been instrumental to the reform and development of the country's telecom industry. Unlike China Mobile, China Unicom not only concentrates on mobile services, but also possesses fixed network and services. Nevertheless, it is the second largest mobile network operator in China. On May 10, 2004, China Unicom announced that the total number of its GSM and CDMA subscribers exceeded 100 million, and thus it became the world's 3rd largest GSM operator and the 2nd largest CDMA operator. Fig.9 illustrates the organization of China Unicom. Dissimilar with China Mobile, where VAS administratively belongs to the data service, China Unicom has a separate VAS department, that is responsible for all things related to value-added services, such as the development of data network, Internet and E- business, the development of VAS market, sale planning etc. The VAS Department is also responsible for the management of SPs. It constitutes rules for the cooperation with SPs, improving and adjusting the cooperation mode with SPs. SPs must hand in service applications, and the applications must be approved by the VAS Department before the services can be operated in the networks. © VAS CHINA Project [FP6-2004-IST-3-015774] 33
  33. 33. Summary Report So far China Unicom has cooperations with a lot of SPs and has already provided a large amount of VAS to users, such as Prepaid Call, Mobile VoIP, Voice SMS, Super SMS, Unicom Secretary, Mobile Pager, Mobile Stock Trading, Mobile Banking, etc. Its wireless Internet service brand "Uni-Info" provides a wide range of wireless VAS such as hot news, weather forecast, stock info, foreign exchange rates, railway schedule and flight schedule. Multiple access modes are available under "Uni-Info". Mobile phone users can not only get on- demand service and customize service, but also access the Internet where shopping, entertainment, sports, video and financial info are available. Moreover, China Unicom keeps introducing new features such as "10158 Voice SMS", which gives users not used to writing short messages an alternative of saying and hearing short messages. Leveraging its integrated service capability China Unicom enables mobile subscribers to receive and send Emails via their mobile phones without accessing the Internet. This is achieved by linking mobile phone numbers to Email boxes. The company's new "OTA- STK" service further satisfies SMS application demands among its users. DIRECTORATE BOARD OF SUPERVISORS PRESIDENT VICE PRESIDENT GENERAL BUSINESS PLANNING MOBILE TELECOMMUNICATION DATA & IMMOBILITY CUCC AFFAIRS DEPT. DEVELOPMENT DEPT. FINANCE DEPT. SERVICE DEPT. TELECOMMUNICATION SERVICE DEPT. COLLEGE HUMAN BUSINESS & GROUP COSTOMER VAS INFRASTRUCTURE CHARGE, SETTLEMENT & RESOURCES DEPT. MARKETING DEPT. CUSTOMER DEPT. SERVICE DEPT. DEPT NETWORK DEPT. INFORMATION SYSTEM DEPT. TECHNOLOGY DEPT./CUCC RUN SUPERVISING INTERCONNECTION AUDIT PARTY & THE MASSES SUPERVISING LABOR RESEARCH ACADEME DEPT. DEPT. DEPT. WORKING DEPT. OFFICE UNION EACH BRANCH EACH SUBSIDIARY COMPANY COMPANY Figure 9 Organization of China Unicom 4.2 Service Providers and Content Providers With the development of technologies and the increase of market demands, the service and content providers (SPs/CPs) play a more and more important role in the telecommunication industry. They have become a separate entity in © VAS CHINA Project [FP6-2004-IST-3-015774 34
  34. 34. Summary Report the telecommunication industry chain. In general, SPs or CPs belonging to the basic telecommunication operators have much more convenience than other SPs/CPs. They have advantages in the VAS market competition and can get the high-end users in the user group, such as the InterStar of China Telecom, JiuZhou Online/Everyday Online of China Netcom, Monternet of China Mobile and Unicom Online of China Unicom. Whereas other SPs/CPs can only obtain the markets given up by the SPs/CPs belonging to the basic network operators. The following sections describe the features of SPs and CPs currently in the VAS value chain in China. SPs are under strict supervision Compared with the earlier phase for VAS development, nowadays, SPs are under severe supervision. SPs are punished for several reasons, such as disobeying the regulations, providing unhealthy information, vague charges, setting SMS traps etc. In addition, the admittance threshold is heightened. SPs will face new challenges from the market The market and regulation environments for SPs are changing quickly. Some small SPs will be washed out of the market or bought by big ones; some SPs will become CPs. Providing inimitable services becomes more and more important for SPs to survive in the market competition.. CPs may play a more and more important role in the value chain in future. So far, one of the biggest problems of the value chain is the lack of CPs. In the current VAS market, SPs play both APs' and CPs' roles actually, i.e., SPs develop and provide both application services and content services by themselves. CPs belong to SPs and have lost their positions in the value chain. As the development of content becomes harder and harder CPs will play a more and more important role in the value chain in the near future. In the following, we introduce some SPs/CPs that have a relatively great competition capability in today’s mobile VAS market in China. 4.2.1 SINA Corporation SINA Corporation (NASDAQ: SINA) ( and is one of the leading online media company and value-added information service (VAS) providers for China and Chinese communities worldwide and has more than one hundred million registered users. With the most recognized Internet brand in China, SINA has established a network of localized Web sites that target China and overseas Chinese communities. © VAS CHINA Project [FP6-2004-IST-3-015774] 35
  35. 35. Summary Report The company has close to 2,000 employees in its offices in six cities throughout Asia and the U.S. and maintains a network of four localized Web sites. On December 31, 2004 SINA generated annual net revenue of $200.0 million. is an online media and entertainment service provider. is committed to becoming an all-in-one online community for the global Chinese population. As the leading Internet brand name in China and global Chinese communities, offers a full range of comprehensive and on time Chinese-language content, multi-functional and easy-to-use web space and cutting-edge ways of enabling free and easy communications worldwide. By cooperating with about 600 content providers, SINA operates over 30 channels on its localized websites across China.'s all-round and timing news coverage includes breaking news, sports and games, entertainment and fashion, and financial and IT information. SINA generates revenues from five major business lines: (online news and content), SINA Mobile (mobile value-added services), SINA Online (community-based services and games), (search and enterprise services) and SINA E-Commerce (online shopping and travel). Together these units provide an array of services, which include regionally focused online portals, mobile value-added services, search and directory, interest-based and community-building channels, free and premium email, online games, virtual ISP, classified listings, fee-based services, e-commerce, and enterprise e- solutions. SINA Mobile SINA Mobile emerged in early 2002 as another major business line of SINA by integrating the advantageous resources of the former SINA Wireless, Memestar, Crillion and StarVi. As a leading mobile VAS provider in China, SINA Mobile provides over various platforms services including SMS, MMS, Coloring Ringing Tone (CRT), IVR, WAP and KJAVA/BREW. Its products range from subscription to dating, gaming and download. The contents are provided by famous brands such as Time Warner, BANDAI, HELLO KITTY and WALKGAME. SINA mobile's partners include the major domestic telecommunication operators, such as China Mobile, China Unicom, China Telecom and China Netcom. With SINA's deep experience in product planning and development, sales, marketing and partnership, the newly remolded SINA Mobile tracks closely the development of the mobile VAS industry in China and provides Chinese mobile phone users with the best value-added content service. SMS Products of SINA SMS are divided amongst subscription, dating, games, downloads and Internet SMS. The flagships are Splendid Downloads, Friends and Headline News. As the leader of mobile VAS SP in China, SINA SMS builds © VAS CHINA Project [FP6-2004-IST-3-015774 36
  36. 36. Summary Report upon its strong content resources, as well as partnerships with numerous CPs both home and abroad, to offer the most exciting SMS services to users. MMS In addition to various MMS products, SINA MMS boasts the largest MMS downloading library in China. The downloading library offers exclusive products including the cartoons of Hello Kitty, Kitten Dream, PUCCA, Zhu Deyong and Jimmy, as well as photos and voices of celebrities such as A-Mei, Ren Hsien Chi, Chow Wah Kin, Yu Quan, Zhang Ziyi. There are over 20 customized services ranging from news to entertainment. CRT (Coloring Ringing Tone) SINA CRT is composed of three parts: songs, funny dialogues and special sounds. For the songs, SINA has obtained copyrights from big music houses such as Warner International, Zhushufang Culture, Star Factory, Kirin Kid, providing access to downloading pop stars' songs. Funny dialogues are popular for its Northeast Dialect and Sichuan Dialect series and Stephen Chow's recognized dubbing voice by Shi Banyu. IVR SINA Mobile provides two kinds of IVR services, Voice Message Interactive and Entertainment Voice Online. Centering on voice content service, SINA IVR provides mobile phone users with a voice information VAS platform integrating voice and SMS. Based on users' demand, SINA IVR sets up a three-tier product system, offering content that includes chatting and dating, news information, interactive games, etc. Products already introduced to the market include Entertainment Scenery, Love Bible, SINA News, Binfen Blessing Zone, etc. WAP SINA WAP offers a full range of information services on its wireless terminal platform with sophisticated design and plan in user experience, product classification and interactive feedback. Based on the design of China Mobile's Monternet services SINA WAP provides compatible products and services in Graphics & Ringing Tones, Chatting & Dating, Fashion & Life, Games & Entertainment, etc. KJAVA/BREW The spread of smartphones in China has enabled the development of KJAVA/BREW technologies. SINA's KJAVA/BREW platform offers SINA Netizens with improved users experience in products such as combat games, puzzles, sports games, poker and chess games. Currently, SINA's K-Java game products are an important part of China Mobile's K-Java mobile product line. SINA's KJAVA/BREW platform also offers products in foreign language tips, Karaoke, entertainment and cartoons. © VAS CHINA Project [FP6-2004-IST-3-015774] 37
  37. 37. Summary Report 4.2.2 SOHU Corporation SOHU.COM (NASDAQ: SOHU) ( and is one of the China's premier online brand and indispensable to the daily life of millions of Chinese who use the portal network for their news, search, e-mail, wireless messaging, instant messaging, browsing, games and shopping. SOHU has built one of the most comprehensive matrixes of web properties in China, consisting of the mass portal and leading online media destination; the No.1 online alumni club; No.1 games portal; top real estate website and wireless value-added services provider This network of web properties offers the vast SOHU user community the broadest possible choices regarding information, entertainment, communication and commerce., established by Dr. Charles Zhang, one of China's Internet pioneers, is in its eighth year of operation. SOHU.COM has been listed on the NASDAQ national market since July 2000 under the ticker symbol SOHU. SOHU products & services Through its pioneering roll-out of wireless services since 2000, SOHU has become a frontrunner in making the Internet ubiquitously available, whether in the office, at home or on the road. Via SOHU wireless messaging services subscribers can receive the latest news, download logos and ringing tones, access their email account, stay in touch with friends and fellow alumni, get dates, play games, or sign up for a host of other information, entertainment and communication applications that have made the mobile phone an essential tool in young people's daily lifestyle. SOHU offers mobile services on SMS (short messaging services), MMS (Multi-media Messaging Services), WAP (Wireless Application Protocol), K-Java based platforms and IVR (Interactive Voice Response). In May 2004 SOHU acquired Beijing G. Feel Technology Co., Ltd. (‘Goodfeel'), a leading Chinese provider of value-added mobile data services for Wireless Applications Protocol (WAP) . WAP is a rapidly growing area in the Chinese wireless data market. Goodfeel, a Beijing-based WAP service provider, offers WAP services via CMCC throughout China. CMCC allows subscribers Internet browsing on their mobile phones through a quick and convenient ‘One Key Access' Monternet platform. Goodfeel is one of the leading WAP service providers to CMCC, with its main product being ringing tone and picture logos. Goodfeel enjoys preferential menu placement positioning on this Monternet platform, a key competitive advantage relative to other service providers. In a joint branding promotional campaign in May 2003, SOHU.COM teamed up with CMCC and Motorola Inc. to jointly introduce short messaging and multimedia messaging services at the Mount Everest, where some twenty international teams had gathered to commemorate the first human conquest of the world's highest mountain half a century ago. © VAS CHINA Project [FP6-2004-IST-3-015774 38