mociology: how mobile technology has changed the world’s

Mociology:

How Mobile Technology Has

Changed the World’s Largest

Country

by Sam Aqua

Media 2010 Winter 2006

UCLA Anderson

Sam Aqua Mociology Media 2010

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It is another sweltering summer morning in Shanghai. It’s one

of those days where you feel like you need an axe just to make your

way through the humidity. But Li-Da Wang, our 25-year-old hero,

doesn’t feel a thing, because his centrally cooled apartment in

downtown Shanghai is as comfortable as can be. At 7:04AM, Li-Da is

awakened by the sound of 50-Cent. He slowly cracks his eye open, and

winces at his mobile phone, which is currently rapping “In Da Club” to

him at a volume all too loud for this early hour.

Grunting, Li-Da gets out of bed and shuts the music off. He flips the phone open, and

logs into his Internet browser. He heads right to nba.com and checks the live Houston Rockets

score: the Rockets are ahead by 10 points in the 2nd quarter, and Yao Ming already has 12 points

on the night. He sings a little cheer in his head – this news will bode well for him in his fantasy

basketball league. After scrolling through the rest of the scores, he gets ready for work.

On a packed subway ride to Shanghai’s Pudong business district, Li-Da entertains

himself with a new mobile shoot-em-up game he downloaded last week. Just as he is about to

advance to the third level, he is rudely interrupted with a text message. It is from his girlfriend,

Zhong-Mei, who is currently away on business in Beijing. She reminds him today is his father’s

birthday. He smiles – what would he do without her?

Between the subway exit and the front door to his office building, Li-Da records a video

message to his father, and sends it off. He then logs on to the mobile version of taobao.com, one

of China’s largest auction websites. He has been eyeballing a new Callaway Big Bertha Driver

that he knows his father will love. With a few clicks, Li-Da has made the purchase, and the


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birthday present will be loaded later today in Hong Kong to be sent to Western China, where his

Father and Mother live.

Without a doubt this is the most different China that Mao Tse Tung could even have

deemed plausible when he set about transforming the country. But, indeed, this is today’s reality.

Technology has transformed our planet into one where boundaries are disappearing, distances

are shrinking, and timing is instantaneous. In China, perhaps no technology has more impacted

the country than that of mobile technology. From advanced handsets to the latest innovations in

value-added services, mobile growth has irrevocably started a chain of events in China that will

profoundly impact the country’s growth and direction forever.

This paper aims to untangle and understand some of the key drivers, trends, and

implications of the extraordinary growth of mobile technology in China. In particular, the

following will be discussed:

1) The Growth – China has the world’s largest mobile consumer base and a rapidly

growing Internet-savvy population. Why is mobile experiencing such rapid growth?

This section will uncover the key drivers in mobile and Internet growth, and lay the

groundwork for future implications.

2) The Impact – The unprecedented growth of mobile services has a clear and profound

effect on two fronts:

a. Sociological factors – Newer mobile technology and value-added services enable

more advanced forms of communication that China’s citizens have not seen

before. The increasing interconnectivity of the Chinese public through mobile


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growth is already beginning to have a significant impact on how people collect

and interpret information, and how people manifest new ideas of individuality in a

society that preaches sacrificing individuality for the greater good of the

community.

b. Economic Factors – mobile growth offers developing countries a significant

opportunity to close the “digital divide”, particularly in a place like China where

newfound wealth does not necessarily spread itself evenly across the population.

3) The Risks – Despite the popularity of mobile services and the seemingly unlimited

ceiling for growth, the government still maintains a tight grip on media in China. Some

barriers will have to be overcome for China’s mobile growth to reach its full potential.

4) The Future – If China’s mobile sector is able to move forward in a natural way, there

will be a multitude of opportunities for both domestic and international parties alike.

From advanced content to more open media paradigms, this section will explore some of

the potential opportunities in China’s mobile market moving forward.

Through these core areas, we will discover that China’s mobile growth is a complex and

fascinating study on how technology can literally change a society.


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China is one of the world’s largest and fastest growing economies and

shows no signs of slowing down.

China’s astounding annual growth is one of the clearest

indicators that this market is one of the most important growth

opportunities for nearly any industry. China’s annual economic growth

reads more like an Olympic scorecard than a country’s growth:1

2001 2002 2003 2004 2005

8.3% 9.1% 10% 10.1% 9.9%

This expansion is largely driven by China’s booming export businesses, as China has

transformed itself into the “world’s factory” over the past 25 years. Importantly, increased

development and prosperity has led to an overall increase in wealth for China’s citizens. Most of

the biggest growth in China is occurring in the urban areas along the coastal regions of the

country.

As the populations in the urban areas increase, so too does the earning potential of

millions of Chinese, and thus China finds itself with a newly affluent and growing middle class.

China is predicted to comprise 29% of the world’s luxury goods market by 2015.2 It is precisely

this growing middle class that is driving the progress behind many of the new technologies that

are changing how China consumes media. Consumers in China are increasingly finding

1 Economist Intelligence Unit, March 2006, Country Report: China, available from EIU Country Reports, http://db.eiu.com/index.asp?layout=displayIssue&publication_id=50001005, accessed March 5, 2006 2 Windle, Charlotte, September 27, 2005, “China Luxury Industry Prepares for Boom”, BBC News on the Web, http://news.bbc.co.uk/2/hi/business/4271970.stm, accessed March 2, 2006


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themselves with the disposable income to spend on mobile phones, broadband internet, and pay

television.

China’s telecom industry is booming

With over 360 million mobile phone subscribers (and growing), China leads the world in

this rapidly expanding technology category.3 The market for phone hardware alone in 2005

grew to US $10.2 billion, and accounted for 40% of all of the Asia-Pacific’s mobile phone

market.4 Yet, despite all this growth, mobile penetration had incredibly still only reached 23% of

the population by the end of 2004. Thus, it is easy to observe that the market potential for

mobile phones remains large.

Part of the reason the mobile phone market has experienced such phenomenal growth in

China is because the technology is incredibly new, and can actually be adopted at a faster rate

than in more developed countries where landlines were predominant for so long. In fact, China’s

mobile subscriber base overtook its total landline subscriptions in 2003.5

Another reason for the proliferation of mobile services has been China’s movement

towards a national Third Generation wireless network. Although 3G services have yet to be

rolled out to their full potential, the process is now underway, and the government has made a

tentative plan to have 3G services up and running by the start of the Beijing Olympics in 2008.

This movement towards the more advanced network can only mean more mobile penetration in

3 Dasgupta, Jayashri, October 7, 2005, “Mobile and Wireless Service Providers in China”, available from Gartner, http://gartner.library.ucla.edu/research/130500/130559/130559.pdf, accessed February 28, 2006 4 December 2005, “Mobile Phones in China”, available from Datamonitor, http://dbic.datamonitor.com/industries/profile/?pid=3261BD24-BAF5-44C2-BF2B-74F45A4B71E7, accessed on February 28, 2006 5 January 7, 2004, “China Mobiles Outstrip Landlines”, BBC News on the Web, http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/3374893.stm, accessed on March 5, 2006


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China – consumers will have unprecedented access to the even wider range of content that 3G

services will allow for.

Key Area of Mobile Growth: Value-Added Services

In China, the biggest area of growth in the mobile sector is in the value-added services by

the mobile providers. Both service providers and content creators alike are continually looking

to innovate and add new value-added services in an effort to both attract new customers and

retain current subscribers. For Chinese mobile providers, value-added services could include

anything from text messaging to gaming to personalized music downloads. Nowadays, as

consumers start to become more used to the technology, even more advanced services such as

mobile banking are being added to the provider choices.

From the perspective of content providers, MVAS are an attractive alternative to other

digital platforms, because of piracy issues. Piracy is clearly China’s biggest problem when it

comes to digital content, and in particular, entertainment-related content such as music. Using

mobile as a platform to distribute this content helps to minimize the risks and problems

associated with the rampant piracy problems in China, because consumers who stream the

content have less incentive to obtain the material illegally.

Data transmission is one of the largest revenue generators for the mobile service

providers, and accounted for 11% of all mobile revenue in 2004.6 From a revenue perspective,

the massive growth of mobile value-added services a boon for the service providers. It creates a

natural bridge between content providers and service providers. The more popular a certain type

6 Dasgupta, Jayashri, October 7, 2005, “Mobile and Wireless Service Providers in China”, available from Gartner, http://gartner.library.ucla.edu/research/130500/130559/130559.pdf, accessed February 28, 2006


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of content is, the easier it will be for the content provider to sell it to the mobile provider. It is a

mutually beneficial relationship that will only continue to grow as technology improves and the

types of mobile applications become more advanced.

The Thumb Culture: Why Text Messaging is So Important in China

Within data transmission services, SMS text messaging has exhibited immense growth in

China in the past 3-4 years. Text Messaging is the most popular method with which China’s

consumers interact via mobile phones. In 2002, Chinese mobile operators facilitated 6 billion

text messages across their systems, a high number by any standard. Incredibly, this number

jumped to 170 billion text messages in 2003, and an estimated 220 billion text messages in

2004.7

Why is text messaging changing the way young Chinese communicate? Two words –

easy and cheap. Sending a text message in China costs 10 fen – the equivalent of 1 US cent. For

a young Chinese student who is in Shanghai and far away from their family in Western China,

text messaging offers a convenient, instantaneous method of staying in touch with those who are

close to you.

There is another interesting school of thought regarding the increase in text messaging

that ties in more closely with Chinese culture – namely, that busy Chinese professionals don’t

like to leave voice-mails. There are a few reasons for this: people who worked for large,

inefficient state-run companies do not feel an obligation to return messages, some professionals

7 “The Mobile is Open For Business”, The Netsize Guide, 2005 Edition


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have simply become “married” to their wireless devices, and some even cite “loss of face” as a

reason for not leaving voice-mails.8

Whatever the reason, one thing is clear – text messaging is the gasoline that is driving the

engine of mobile data transmission in China. As the key foundation in the growing mobile data

transmission market, text messaging almost replacing a voice market that quickly becoming

commoditized. It is a cash cow for mobile providers, and a low-cost entry point for end users.

Content is King

Because Mobile Value-Added Services have taken on such an important role for mobile

providers in China, the importance of content has seen a sharp increase. Many of the most

successful ventures into the Chinese mobile space have been due to the high quality of content

offered.

Gaming is clearly one of the largest and most profitable sectors of mobile value-added

growth. As of 2003, China was 2nd in the Asia-Pacific region with $47.7 million in annual

wireless gaming revenue. This number is expected to reach as high as $522 million by 2008.9

The content providers who are having the most success currently are the ones who operate under

the “pure play” model – creating one game and then putting a lot of weight behind it. The reason

this model works so well is because of the organic growth of wireless entertainment in China.

Much of the word behind the newest applications is being spread on a grassroots level, as often

happens with new technology in other countries. When a new game has received a lot of support

by both the creator and the wireless provider, the potential is huge.

8 Buckman, Rebecca, December 1, 2005, “Why the Chinese Hate to Use Voice-Mail”, The Wall Street Journal, available from Factiva, http://global.factiva.com/ha/default.aspx, accessed March 12, 2006 9 Elkin, Noah, September 2005, “Asia-Pacific Wireless: Mobility on the Cutting Edge”, available from eMarketer, http://www.emarketer.com/Reports/Viewer.aspx?wire_asia_sep05&autodetect=Y, accessed on February 28, 2006


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In addition to gaming, many other entertainment-driven content providers are cashing in

on the mass adoption of wireless technology in China. In 2004, China’s most popular song had

over 5 million wireless downloads, and Morgan Stanley estimates that “…content providers,

such as MTV, may generate more revenue from mobile phones than from pay-TV in a few

years.”10 Simply stated, the generation of content, and in particular teen-targeted entertainment-

related content, will receive some of the highest valuation in China’s mobile space in the coming

years.

Unlike the United States, mobile growth in China is driving Internet growth.

Despite the fact that mobile growth continues to dominate in absolute numbers, we must

still keep in mind that the Internet is still China’s “other” fastest growing industry. After the

United States, China is number 2 in the world in total number of Internet users with over 100

million subscribers.11 When we remember that 100 million represents a paltry 9% of the overall

Chinese population, there is much left to the imagination as to just how much potential there is

for Internet growth in China.

Even more importantly, however, than the total number of Internet users in China is the

age of the users. China is ranked number 1 in the world in total Internet subscribers under the

age of 30, with an estimated 70 million.12 Because young people are the innovators who tend to

drive new technology, this number is especially important. As Internet continues to grow in

10 September 12, 2005, “Creating Consumer Value in Digital China”, Morgan Stanley, available from Reuters Research on Demand, accessed February 10, 2006 11 September 12, 2005, “Creating Consumer Value in Digital China”, Morgan Stanley, available from Reuters Research on Demand, accessed February 10, 2006 12 September 12, 2005, “Creating Consumer Value in Digital China”, Morgan Stanley, available from Reuters Research on Demand, accessed February 10, 2006


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combination with increased broadband penetration, the youth market will become more and

more important to firms trying to reach this segment with value-added services and content.

Much of the growth in Internet is being driven by large scale mobile growth. It is

estimated that there are 3.6 mobile phones for every PC in China (this same ratio is 0.9 in the

US).13 As Internet usage continues to grow, China will see more of the mobile and Internet

entities employ a dual model of delivering content and services. Clearly, both Internet and

mobile service providers will have much to gain through synergistic content delivery. The idea

is that a consumer will log on to the Internet for services at home, and continue their logging on

via mobile phone away from home, effectively doubling the penetration the content providers

can expect to receive.

13 Kanellos, Michael, December 1, 2005, “Cell Phones Outnumber PCs in China”, CNET Networks, http://news.com.com/Cell+phones+outnumber+PCs+in+China/2110-1039_3-5978594.html, accessed on March 10, 2006


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The new methods of communications that are being driven by

the rise in mobile technology and applications have the potential to

create profound sociological and economic impacts on modern China.

Indeed, we can already observe some of these changes taking place.

The story that began this paper may be surprising, but is not far-fetched.

China is a country that has been closely held by a singular ideology for

the better part of the past century, and stands much to gain and much to

lose by an emerging mobile business model. On one hand, mobile

communications tools have the potential to enable some of the poorer parts of China break free

of the poverty that prevents them for taking active part in the tremendous economic growth. On

the other hand, the widespread communications that mobile technology enables will help to

diminish the influence the government has over the population. The next part of this paper will

examine the impact that mobile growth has had on China from both a sociological and an

economic perspective.

Mociology

Wikipedia defines “Mociology” as the study of human behavior in a mobile world and

the study of mobile device/phone lifestyles.14 Certainly, Wikipedia is not the leading authority

on emerging social sciences, and more certainly, there is plenty of debate to be had on whether

such a field can truly be its own discipline. But however one chooses to define it, there is little

14 “Mociology”, http://en.wikipedia.org/wiki/Mociology, accessed March 4, 2006


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doubt that the revolutionary technology behind wireless devices has the potential to profoundly

impact a country’s society, culture and everyday life.

As mobile usage in China becomes more widespread, its 1.3 billion citizens draw ever

closer to having unrestricted access to an asset they have been denied for so long: each other.

Mobile use is empowering members of this society to communicate in a newer, easier and

cheaper ways. Importantly, as the paradigms of interpersonal communication across China shift,

usage will have perhaps its largest impact in two key areas that will cause profound shifts in the

way China’s society lives: Information and Individualism.

Information and the Media

China has long suffered from one of the most severe cases of information asymmetry in

the world. The Heritage Foundation ranks China 111th out of 160 countries in economic freedom

(a “mostly unfree” rating),15 the Freedom House gives China the lowest possible ranking on its

2006 Freedom in the World Survey,16 and the 2005 World Press Freedom Index ranked China

159th out of 167 countries.17 Clearly, the central government has historically made effective use

of one of its central tools of influence: control of information. In China’s centrally planned

economy, the government controls, monitors, and censors virtually every type of mass media

outlet in a manner that allows its citizens access to a staggeringly small amount of domestic and

global information.

15 Heritage Foundation, Index of Economic Freedom 2006, http://www.heritage.org/research/features/index/countries.cfm, accessed March 10, 2006 16 Freedom House, 2006 Freedom in the World Survey, http://www.freedomhouse.org/uploads/pdf/Charts2006.pdf, accessed March 10, 2006 17 October 19, 2005 “The 2005 World Press Freedom Index”, United Press International, http://www.upi.com/InternationalIntelligence/view.php?StoryID=20051019-123716-2072r, accessed March 10, 2006


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However, the spread of mobile devices throughout China is changing the way people

receive and react to information. Never before have China’s consumers had access to such

breadth and depth of information at their fingertips. Through mobile technology, people’s

information networks and sources are expanding rapidly, and they now have instantaneous

access to these networks with the push of a button. As 3G technology infrastructure rapidly

makes its way into China, even more advanced forms of content will be available via mobile

devices, and more content can only mean more information for people. In particular, the

increase in user-generated content (text messaging, blogging, instant messaging, etc) gives rise to

information sharing on a level never seen before in China.

Although the Chinese government does their best to keep unfavorable information out of

the public domain, the speed at which mobile usage is penetrating the country is simply too fast

for them to keep up. The truth is, if a Chinese citizen wants to know what the global reaction is

to a recent tiff between China and Taiwan, there are now easy ways for them to obtain this

information via mobile phones.

Recent history is sprinkled with instances where mobile penetration has induced rapid

information transfer amongst the Chinese population. During the early moments of September

11, sina.com was the first website in China to pick up the news about the first tower being hit. A

mere 14 minutes later, the news was making its way through China’s mobile handsets.18 In 2003,

when the SARS epidemic was at its peak, mobile text messaging was in widespread use to both

demystify (and unfortunately, disseminate) rumors related to how the crisis was being handled.19

18 Fang, Weigui, “China’s Culture of the Thumb”, Receiver Magazine, Volume #13, http://www.receiver.vodafone.com/13/articles/pdf/13_03.pdf, accessed on March 6, 2006 19 Yardley, Jim, April 25, 2005, “A Hundred Cellphones Bloom, and Chinese Take to the Streets”, The New York Times, available from Factiva, http://global.factiva.com/ha/default.aspx, accessed March 4, 2006


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One of the most stark and poignant examples of how access to information via mobile is

changing the way the Chinese live their lives is the increasing number of public protests.

China’s remarkable economic growth has been accompanied with many of the social problems

that often are inseparable from a country’s development. Such issues include a growing income

gap between the rich and the poor and environmental problems in areas where manufacturing

presence is large. In a country where organized demonstration is strictly prohibited, activists in

the past had limited means to organize such gatherings surreptitiously.

In April of 2005, a series of small Anti-Japanese protest began to occur throughout China.

As the protests grew and the government became more concerned about curbing their growth, it

started to become clear that stopping the protests would entail more than just stopping the people

from showing up. In short, a large potion of the communications and campaigning behind these

protests was being executed through non-traditional mediums, in particular the mobile phone. In

fact, the underground messaging became so severe, that one of the government’s primary

responses was to also use mobile technology as their weapon of choice. Chinese police sent an

SMS text message warning to over 30 million mobile users to try and stop the protests.20 Surely

Mao could not have imagined in his wildest dreams that such methods would be used to curb the

public outcries that the government tries hard to quell.

In October of 2004, several large scale and unrelated protests took place within days of

each other at various locations throughout China, including one large protest where up to 148

people may have been killed.21 These protests were driven by problems such as unfair

compensation to farmers for loss of land. Although these types of problems have been common

20 Dickie, Mure, April 29, 2005 “Chinese Police Warns Against Anti-Japanese Protests”, The Financial Times, available from Factiva, http://global.factiva.com/ha/default.aspx, accessed March 4, 2006 21 Mooney, Paul, November 16, 2004, “China Faces Up to Growing Unrest”, Asia Times Online, http://www.atimes.com/atimes/China/FK16Ad01.html, accessed on March 4, 2006


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in the past, the government has always been able to control them through manipulation and

withholding of information from the general public. Now, with mobile phones beginning to

penetrate the countryside of China, mass communication amongst even the most rural

populations has become much easier.

Based on these and other incidents, one can only imagine how the events of Tiananmen

Square might have been different with the availability of mobile devices that exists today in

China. We can be sure that we are headed into a future where mobile communication is poised

to impact an event of historical significance in China – it’s only a matter of time.

Information and E-commerce

The new paradigms of information distribution are also changing China’s behavior

towards e-commerce and digital payment. Essentially, as a consumer becomes used to the idea

of mass amounts of information being made available through their mobile phones, they are

more receptive to the idea of managing their personal information (e.g. their finances) via the

mobile phone.

As strange as it may sound, mobile applications are creating situations wherein a

consumer who had never before used a credit card to buy something could conceivably begin

ordering their next Nike Air Jordans purchase through their cell phones. The transaction costs

are low, and as the technology improves, the corresponding perceived risk by the consumer

decreases.

Currently, one of the biggest barriers to entry for e-commerce applications is in the

relative distrust of online payments. The issue is felt on both the consumer and the seller side:

consumers, not used to the idea of purchasing something they can’t see in front of their eyes,


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exhibit a lack of trust for a digital payment system. Similarly, sellers of goods through e-

commerce have doubts about a population who is unfamiliar with the methods of online

payments. Thus, e-commerce websites are still in relative infancy stages in China.22

However, popular search engines as well as other user-generated content tools such as

podcasts and blogs are leading a change in mindset of the Chinese consumer towards digital

commerce.23 As some of these popular sites gradually expand their e-commerce offerings into

mobile phones, there is a natural shift for consumers to use mobile e-commerce applications with

more frequency. Websites such as SmartPay, AliPay and 99bill offer online and mobile payment

options that are beginning to become popular with Chinese consumers and offer hope that e-

commerce will grow to levels analogous to other countries.

Individualism

“The individual is subordinate to the organization.” This quote, taken from Mao Tse

Tung’s infamous Little Red Book, perfectly exemplifies the climate in which China’s citizens

make their decisions about how far they want to take their individualism.

More open communication through new mobile technology not only enables more

individualism, it actually helps to encourage it. The mobile phone is a very personal device in

today’s world. The intrinsic characteristics of the modern mobile phone are such that it is a

completely customizable, personal device that is specific only to the person who owns it. From

your contact list to your favorite ringtone, a mobile device says something about who are and

22 Buckman, Rebecca, 8/11/05, “Online Payment Firms Target China”, The Wall Street Journal, available from Factiva, http://global.factiva.com/ha/default.aspx, accessed 3/15/06 23 3/13/06, “Blogs, Podcasting, RSS Gaining Traction in China”, Ecommerce Times, available from http://www.ecommercetimes.com/rsstory/49318.html, accessed on 3/15/06


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what differentiates you from others. And, the mobile device is a direct connection from anyone

to you, the holder of the phone.

Although the older generation may not make the immediate switch to a more

individualistic mindset, it is the younger generation who will gradually be responsible for a

seismic shift in ideology. Youngsters who are growing up in China now with mobile devices in

their back pockets will grow up with wholly different ideas about how an individual carries

themselves in modern Chinese society. A recent survey by Hills and Knowlton finds that

“…Chinese college students seek brands that will help them say ‘I am unique’ without making

them ‘look weird or socially unacceptable’”.24

Furthermore, the effects that China is still feeling from the “one child per family” policy

have implications on feelings of individualism. Today’s Chinese youth are growing up, for the

most part, alone. As a result, technology outlets allow young people to manifest their

personalities as individuals, and then when interacting with peers, they often look to differentiate

themselves via technology.

Further adding to the level of individualism is the increasing amounts of Western-based

content that is being offered via the wireless platforms. In particular, entertainment content from

the US and other Western countries continues to be in high demand across China. If anything,

this content is even more in demand as consumers gain more access to the world around them.

The key takeaway in this scenario is that Western content, in particular American content, is

often grounded in individualism. One only needs to turn on MTV for five minutes to understand

how the US celebrates individualism. As more and more of this type of content is made

24 Wang, Jing, 2005, “Youth Culture, Music, and Cell Phone Branding in China”, Global Media and Communication, Volume 1, Number 2


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available in China, we can certainly expect to see the youth begin to shift their ideas of what

individualism really means to them.

Mocio-Economics

As a subset of Mociology, Mocio-Economics attempts to explain some of the economic

implications that mobile usage has on a society.25 Indeed, increased mobile penetration has

demonstrated its ability to play a role in the upward mobility of less-developed countries. In fact,

one school of thought argues that mobile phones “…are even more useful in the developing

world, where the availability of other forms of communication—roads, postal systems or fixed-

line phones—is often limited.”26 Recent research by Leonard Waverman of the London

Business School analyzes causal links between telecom growth and increased national output of

developing countries – the so-called “digital dividend”. Importantly, the results “…suggest that

in a typical developing country, an increase of ten mobile phones per 100 people boosts GDP

growth by 0.6 percentage points.”27

In China, the most important way in which mobile growth will enable economic change

is by helping to close the “digital divide” between the rural and urban populations. A brief look

at the changing demographics of China shows a striking trend: The gap between the wealthy and

the poor is growing. Reports indicate that while the rural Chinese resident has an average annual

income of approximately US $400, that of an urban resident averages nearly $1,300 per year.28

25 “Mociology”, http://en.wikipedia.org/wiki/Mociology, accessed March 4, 2006 26 July 7, 2005, “Calling An End to Poverty”, The Economist, on the Web, http://economist.com/displaystory.cfm?story_id=4157618, accessed on March 4, 2006 27 March 10, 2005, “Calling Across the Divide”, The Economist, on the Web, http://economist.com/displaystory.cfm?story_id=3739025, accessed on March 4, 2006 28 “China’s Economy Sees Steady Growth in 2005”, People’s Daily Online, 1/26/06


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A proliferation of mobile phones in the less penetrated areas of China helps to close the

communications gap between the rural and urban population, and thus close the digital divide.

Whereas previously, the largest barrier to mobile adoption was the price of handsets, the rapid

growth of the mobile industry in China has largely eliminated this, making mobile handsets

affordable for an increasingly larger proportion of the population.

It is in these rural areas where MVAS play an even bigger and more important role. The

different services that mobile phones can provide enable rural residents, many of them farmers,

to essentially conduct business under an entirely different paradigm. For example, a phone with

advanced e-commerce services can allow a farmer to restock his feed for his pigs, no matter

where he is.29 Or, a migrant worker can expand their network and use their phones as devices to

help them find jobs throughout the country.30 Whatever the necessity is, the lesson is still the

same – improved technology and improved value-added services through mobile phones will

only lead to improved lives for the impoverished people in China.

Mobile technology makes its play in these scenarios in a similar way to that of e-

commerce: by providing a low risk, low cost entry into a world of information and thus, wealth.

Now, a fisherman with a mobile phone can check prices before going out, and can potentially

even line up transactions all with the touch of a few buttons. This newfound economic freedom

will empower those who traditionally would have been left behind because of economic

inequality to take a more active role in modern commerce.

29 March 14, 2006 “Phone Firms Tapping into Rural Areas”, http://www.china.org.cn/english/MATERIAL/161526.htm, accessed March 15, 2006 30 October 21, 2005, “Mobiles Better Migrant Workers Lives”, http://www.china.org.cn/english/null/146181.htm, accessed March 15, 2006


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Thus far, we have painted a very rosy picture of the future of

China’s mobile market. However, all of the above factors must take

into consideration that China is still a government driven economy,

unlike the free economies of the West. In an effort to continue to exert

certain levels of control over the economy, society, and culture, all

trends must be balanced with the government. Thus, when we look at

risk factors in China, we are really looking at how the government

wields control over business activities.

We start by looking at government-run businesses. Although the government in recent

years has placed more emphasis on promoting private enterprise, the majority of businesses in

China are still partially or wholly state-run enterprises.

There are currently only six telecom operators in all of China, and two of these six are

mobile operators. China Mobile and China Unicom have market shares of 66% and 33%,

respectively.31 Certainly, this level of consolidation in such a booming industry creates many

kinds of natural incentive issues, and such issues are part of the challenges that have come along

with doing business in China with other industries in years past.

Another major risk factor revolves around the continued tight control the Chinese

government keeps on its media activities. One of the examples closest to home has been the

recent controversy with Google’s willingness to cooperate with China in order to gain entry into

the market. It is estimated China may have as many as 50,000 people working to censor the

31 “The Mobile is Open For Business”, The Netsize Guide, 2005 Edition


22

Internet.32 However, a 360 million+ growing mobile market will be much harder to police. Thus,

it remains to be seen how the government responds to the newer and more innovative methods

with which China’s mobile users are communicating and exchanging information.

As this paper has indicated, China’s extraordinary growth in mobile

technology and services has already made a meaningful impact on

China’s way of life in many different ways. But, it does not stop there.

China is not only the largest country in the world, it is also one of the

most watched countries from business, social and political standpoints.

How China responds to this continued growth in mobile is a topic that

should and will be of interest to parties all over the world. The following

provides a few general trends that we can expect moving forward:

1) The socio-economic impact of mobile phones – as discussed, the social and economic

impacts of mobile growth are already being felt throughout China. Given the continued

growth projections for mobile over the next decade in China, these socio-economic

implications are likely to continue. As consumers continue to gain access to different

information and communications touchpoints, their drive to learn more and make changes

in their lives will only increase. While it is also certain that the central government will

continue to play its part to curb such a rapid spread of information, it will ultimately be

the forces of modern commerce that prevail. Many lives will change as a result of the

32 Yardley, Jim, April 25, 2005, “A Hundred Cellphones Bloom, and Chinese Take to the Streets”, The New York Times, available from Factiva, http://global.factiva.com/ha/default.aspx, accessed March 4, 2006


23

growing communications network, and of course, the ultimate hope is that the changes

will be positive for all.

2) Opportunities for China to expand its entertainment industry – although many of the

largest impacts of mobile growth are felt in social and economic ways, we must also

remember how many of China’s consumers first enter the mobile market – through

entertainment. For many of China’s consumers, and in particular, the younger consumers,

the choice to enter the mobile market is made by the types of value-added services being

offered. From mobile gaming to the growing popularity of music downloads, there are an

increasing number of entertainment-driven services that are compelling people to join the

mobile world. China’s entertainment industry has a large opportunity to capitalize on this

need for entertainment-driven content, as much of this content will be generated within

the country. The beauty of the mobile platform is it allows for a variety of mediums –

China will have opportunities to develop and provide competitive entertainment options

in television, film, music and many other areas.

3) Opportunities for multi-national firms looking to enter the world’s largest market – for

many international firms outside of China, the big question on their minds is how they

can also take part in the remarkable growth in China. International mobile handset

manufactures such as Nokia are already making strides in the massive Chinese market.

However, there is also potential in the area of mobile content. As mobile services

achieve higher penetration rates, the demand for top quality content will continue to

increase, as mobile and content providers compete to give their consumers what they

demand. Multi-national firms who specialize in content creation will have countless


24

opportunities to develop the next big hit in MVAS, and will be driven to innovate by the

exponentially large revenue streams that can result from being in such a large market.

4) Opportunities in marketing and advertising across specific target groups – already, China

is starting to understand the different segments and targets who are leading the charge

into mobile. As these groups separate themselves out, in particular the younger

demographics, firms who are looking to reach these segments will have an unprecedented

opportunity to utilize targeted marketing and advertising strategies in selling their goods

and services. Furthermore, the technology behind mobile services is advanced to the

point where more data can be collected than ever before. This will likely result in more

CRM models being used across China, and most importantly, a more thorough

understanding of consumer behavior in a market where little was known before.

To finish our story, we return to our hero from the beginning, Li-Da Wang. From his life in

the big city to his family’s life back in rural Western China, the presence of mobile technology

has made positive impacts on their lives in many ways. Through improved communications and

access to value-added services, Li-Da is able to take an active part in the changing of one of the

world’s most dynamic economies. Li-Da’s story is just the tip of the iceberg in what appears to

be one of the largest global technology movements in history.


25

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