The last decade has seen rapid advances in telecommunications technology and the arrival of broadband services promises yet more choice for the consumer. Your mobile phone really will be able to give you the world. But for service providers, investing billions to build networks and upgrade content, many headaches exist. How can they start to generate revenue for broadband services which customers already expect to get for little or nothing and when can they hope to see a return on investment?
Professor John Ure, director of tele-communications research project (TRP), Centre of Asian Studies at the University of Hong Kong is an expert in the field and confirms that expanding broadband services is the providers' main target for future business development.
He adds, however, that providers are scratching their heads to work out how broadband and digital rights should be managed and who should do it. "If I sell you content, such as ringtones or a music video on a mobile phone, how can I be sure your friends don't share it on their mobile phones?" he asks. Providers may consider using the business model adopted by DoCoMo, Japan's largest mobile operator, charging customers each month for downloaded content and sharing revenue with the content provider.
"While the industry experienced fantastic growth in the late 1990s, much of the traffic that came through was unpaid for. People enjoyed free emails but because of worries about the security of credit card payments, they did not do e-shopping. Only a few large corporations engaged in e-commerce and e-procurement. Providers are searching for new ways to encourage people to buy on-line."
Prof Ure points out that basic telecom services, such as fixed-line residential telephones, have become a cheap commodity and are seen by the market as standard utilities and no longer exciting. Operators are not expected to invest further as revenue is falling. They are now thinking about how to turn utilities into valued added services.
Many telecommunications companies have special technical development units to create new intelligent devices with broadband connections to cater for market needs. For example, the professor cites: "You might want a telephone featuring a mini-computer with an electronic telephone directory. This can't be done today, but could be available tomorrow."
Expansion will depend on economic growth
Nevertheless, he notes that introducing these innovative products could be risky - your competitors' new devices could be smarter than yours, and it is hard to assess demand. The telecom industry is different from the past when you knew the users' growth rate; nowadays there is more uncertainty.
Amid the economic downturn, job opportunities for the telecommunications sector have been depressed. However, the demand for network integrators, whose main task is to use technical skills to link different network systems, is always high. Operators also find it difficult to recruit enough broadband sales executives. With deregulation of the telecom industry in China in 2005, Prof Ure, who has done extensive research on China's telecommunication reforms, says the move will create jobs in Hong Kong and the mainland but the process will be gradual.
Expansion of the telecom industry will depend on general economic growth. It also hinges on business development by high-end broadband users such as those in the finance and banking sectors. Moreover, the telecom trade will benefit from increasing logistics linkages between Hong Kong transport companies and China.
As telecom operators move to provide better broadband and multi-media services, involving more complicated systems and products, Prof Ure believes there will be a greater tendency for these firms to outsource some services to other telecom and information technology companies to cut in-house expenses.
While the industry is in transition from 2.5G high-speed technology to 3G wireless communications, providers are cautious about the risk involved. In August, Hutchison announced its 3G business incurred a pre-tax loss of HK$3.9 billion, and the market is watching their progress with considerable interest.
The TRP organises the Telecommunication InfoTechnology Forum (TIF) three to four times a year, providing a neutral arena for industry discussion on policy and regulatory issues. As a forum with an international reputation, it is attended by consultants, academics, local telecom operators, government officials, and specialists from the media and IT sectors. The upcoming event on 'Putting the Service in to Broadband' will be held on 14 October.
A proposal at last November's forum to establish a Support Centre for SMEs and content providers was backed by industry executives. The Government adopted the proposal and granted funding for the Centre which will open in late 2003 in the Cyberport.
Prof Ure, whose studies on telecommunication policy and regulatory reform have become well-known as conference topics and published papers, describes the Government's attitude towards the industry as "technology neutral", leaving the private sector to develop the business.
"It also has a pro-consumer policy designed to promote consumer choice without having to intervene directly, so the market is still open for competition. Hong Kong, which is market-driven, does well compared with Singapore which is government-driven. Both usage and access to telecommunications networks are higher than Singapore's," he notes.