The incessant beeping of a pager used to. be the dominant sound in the restaurants and meeting rooms of China's big cities. Today, the noise is more likely to come from a mobile phone.
At the last count more than 20 million people owned a mobile phone, while more than 50 million have a pager strapped to their belts or tucked in their handbag. China's first paging service was introduced in Shanghai in 1982; the national market reaching 440,000 customers in 1990 and now it has become the biggest in the world. In the mobile phone market, China is now number three and also heading for top position.
The highest penetration rate in the world is in Singapore, where 43 percent of all citizens own a pager, but the market there is reaching saturation point. In China's cities ownership is typically between 10 and 15 percent, but subscriber growth levels are impressive, with five million paging customers and around 10 million mobile phone customers added in 1998 alone. The most advanced cities are switching to mobile phones. But while Beijing, Guangzhou and Shenzhen already have more mobile phones than pagers, in inland cities the pager is still way ahead. Advances in paging technology also promise a new lease on life. By 2000, the Ministry of Information Industry optimistically believes there will be 90 million pager users in China.
China's telecommunications market is still highly regulated, with China Telecom accounting for more than 97 percent of fixed-line and mobile operations. Paging, on the other hand, is far more liberalised with at one time more than 2,800 operators. Provincial subsidiaries of China Telecom still grab around 80 percent of the market, but fierce price competition has led to the broad popularisation of the pager. Whereas 37 percent of all mobile phone subscribers are concentrated in China's 44 biggest cities, they account for only 23 percent of all pagers. This shows the extent to which the pager has advanced in the smaller cities in the hinterland.
Flourishing rural demand
In the countryside prices are dropping, opening the market to China's less wealthy citizens. Three years ago, a Motorola pager with Chinese character display cost between Yn1,900 and Yn2,100; now, the price has come down to about Yn900-1,000, including a one-year service fee. Inferior brands sell for as little as Yn200 for the pager itself and
a Yn200-300 annual connection fee, bringing the gadget within reach of many consumers.
The opening up of China's rural market is good news for Motorola, whose pagers account for 70 percent of all sales in China. The US company lost its leading edge in the mobile phone business in China after the introduction of digital handsets suppliers Ericsson and Nokia. Motorola still leads the paging market, leaving other foreign manufacturers, like Sony, Casio and Philips far behind with 25 percent of the market. Just five percent is left for the 80 domestic pager suppliers, which lack a big competitive price advantage because of the high proportion of imported components. Smuggling of pagers has been a widespread practice, adding further price pressure, but the latest anti-smuggling drive initiated by President Jiang Zemin has led to price increases across a whole range of products from computer components to cars and tyres.
Paging operators' profitability is plummeting. Continued investment in research and development is driving up costs, but subscription prices are dropping, leading to a squeeze in profits. Operators are counting on offering roaming and new services to win over customers and increase profitability, but further growth is constrained by limits on expansion of capacity and frequencies.
A return to stricter regulation in China is in the offing. The thousands of small paging operators has led to numerous complaints of interference with air traffic. Paging companies build their transmitters ever higher on buildings, towers and mountains to guarantee a broader coverage and lower costs. Some increase the power of their transmitters or change their frequencies without proper authorisation. A spot check of 15,452 pager transmitters in February this year revealed 1,650 which were in violation of regulations.
In August 1997 a pager transmitter interfered with Shenzhen air traffic control, forcing a temporary closure of the airport. In December 1997, a paging station interfered with traffic at Beijing's Capital International Airport and was ordered to close down.
Beijing plans to set up a national paging company, merging the paging operations of all the provincial posts and telecommunications administrations and listing the new company on one of the domestic stock exchanges. The purpose is to consolidate the market and prepare for China's entry into the World Trade Organisation (WTO). The paging business is slated to be the first telecommunications activity to be thrown open to foreign competition.
In its latest proposal to gain entry to the WTO, China offered on July 24 to gradually open up paging and mobile phone operating services to foreign competition. Until now foreign companies were only allowed to engage in manufacturing of telecommunications equipment, but were barred from offering services. It was the first time China has agreed to open up part of its telecommunications operations, which are considered a strategic sector.
Immediately after accession to the WTO, China will allow foreign companies a stake of up to 25 percent in joint ventures with Chinese paging operators.
China's telecoms planners are very much aware that China, by the mere scale of its market, is entitled a seat at the design table. Manufacturers want to design and brand new pagers in order to capture more of the domes-tic market. The domestic front-runner, Zhejiang Fenghua Waveguide Co., is no match for pagers produced by foreign-owned companies or Sino-foreign joint ventures, especially in terms of branding. However, China is determined to play a role in the development of the next generation of pagers. The traditional pager may be losing ground to the mobile phone, but the latest models offer some prospect of a revival.
Last year, 22 municipalities and provincial capitals were connected to the national high-speed FLEX paging network. In May 1998, work started on the second phase expansion, covering the remaining nine provinces, offering nationwide roaming as of August 1998. Through the expansion project, capacity increased by 1,050,000 subscribers to a total of 4,850,000 million. Motorola and Glenayre supplied the equipment.
The next step in paging development is the introduction of two-way paging. A major drawback of the first-generation pagers is that users do not know whether the correspondent actually received a message. This has now been overcome.
Two-way paging will inform users as soon as a correspondent receives a message. It also opens the door to a range of other applications such as stockbroking and e-commerce.
With a two-way pager, users can receive and send messages without a ring disturbing a meeting or lunch appointment. Even in China, the use of mobile phones in restaurants, theatres and meeting rooms is resented more and more. The less intrusive pager still has a future – with a new two-way pager, users don't need to find a phone to send a reply and, since no operators are required, they don't have to worry whether messages have get through.
Connection to the internet offers new messaging capabilities, allowing users to send messages to a pager from within their browser. They will also be alerted on their pager when they receive an e-mail. In some cases they will even be able to read the e-mail on their display, the size of which tends to grow with each new product release. Swapping voice messages and internet services are additional possibilities. Given these developments, it would be premature to count out the pager.