New Wireless Territories in Hong Kong
By David James, Thu Oct 31 00:00:00 GMT 2002

Hong Kong keeps pushing the wireless services envelope. The wireless world is watching.

More than a century ago, Britain bullied
China into granting it a 99-year lease of a huge area north of Hong Kong
that became known as the New Territories. British control of the area
came to an end with the return of Hong Kong to China in 1997, but the
concept of pushing into new territories lives on in Hong Kong’s wireless
services. Hong Kong—with one of the highest mobile phone penetration
rates in the world, 84 percent—is moving rapidly into multimedia
messaging services (MMS) and high-speed wireless LAN. This is a
wireless laboratory worth watching.

Take the Number
and Run

Hong Kong has long been one of
Asia's key telecommunications centers, with great connectivity and
services and a high concentration of fiber optic cables connecting
throughout the region and the rest of the world. It has also been a
leader in regulatory liberalization, starting with the establishment in
1993 of an independent regulator, the Office of Telecommunications
Authority (OFTA). In wireless services, OFTA has pushed the regulatory
envelope clearly in favor of the consumer by encouraging
interoperability among the six wireless operators CSL, Hutchison, New
World, Peoples, SmarTone and Sunday and mandating, in 1999, the
portability of mobile numbers. The upshot is that a customer of one
operator can send SMS messages to a customer of any of the other
operators, and can switch his or her account at any time 'without
changing the phone number' to a different operator offering better rates
or services.

Today, Hong Kong is probably the most competitive
wireless environment in the world. Voice calling plans cost as little
as $10 a month; the churn rate is high (a third of all subscribers moved
their accounts to a new operator last year); and most of the operators
are losing money.

For the fiercely competing operators, a bit
of British “stiff upper lip” lingers. “Portability has been a challenge
for the operators,” admits Bruce Hicks, group managing director of
Sunday. “But in Hong Kong’s saturated market, it probably doesn’t make
much difference in the end. Once you reach saturation, you have to be
price-competitive and you have to offer appealing products and

Pictures Worth a Thousand

The importance of Hong Kong to the
rest of the world is that it has now embarked upon high-speed wireless
data services ahead of much of the world—at least the 71 percent of the
wireless world that is served by GSM technologies in over 180 countries.
While Japanese and Korean operators have successfully launched similar
services, most of them have done so with different technologies and in
less competitive markets.

In March 2002, CSL launched Asia’s
first MMS service over a GPRS network, and in the following May it
demonstrated its roaming capability in messages sent to Hong Kong from
Beijing via China Mobile’s GPRS network. All six Hong Kong operators
are now offering MMS services, and in late October 2002 the three
largest operators (CSL, New World and Sunday) launched interoperable MMS
using Nokia interconnection equipment. The remaining three operators
expect to offer interoperable MMS by year end.

“MMS is the
beginning of a new era in wireless communications,” says Hicks, “one in
which images—photos, graphics, videos—will enhance text and voice to
create a truly compelling communication experience. It is a sea change
that will propel the evolution to 3G.”

There are now three
MMS-enabled handsets available in the Hong Kong market, two Nokia models
and one Sony Ericsson, at prices ranging from about $400 to $500.
Operators anticipate that at least ten models will be available by year
end. Data services are offered at around $20 per month for two
megabytes of data usage plus fees for additional usage.

too early to predict how successful MMS will be in Hong Kong. Hicks
does not think the market for MMS will explode, but he expects steady,
impressive growth. Michael Kan, executive director of the Hong Kong
Wireless Technology Industry Association, is optimistic, but he cautions
that the prevailing low cost of mobile voice is an impediment to data
services development. “With such fierce competition and little profit,
the operators are conservative when it comes to investing in data
services. Currently, mobile data—including SMS messaging—accounts for
only about three percent of their revenue.”

Another impediment,
Kan believes, is that operators have done little to encourage
third-party developers of applications and content. “The operators have
not provided a standard revenue-sharing model for developers to
distribute services to end-users, as NTT DoCoMo has done in Japan,” he
says. He also believes that OFTA should lend developers a hand. “OFTA
should implement a public awareness campaign for mobile data
applications—SMS, MMS, J2ME, etc.—and help local developers produce more
applications and content for distribution locally and

Hicks, however, claims that operators have been
working productively with developers and that the process has been
complicated by the variety of wireless technology standards that have
prevailed to date. “But this is changing. Standards are becoming more
uniform, enabling more cooperation between operators and developers,” he

Hong Kong developers will certainly have much to
contribute to wireless data services once their talents are fully
engaged. Hong Kong has long been a center of culture and
communications, bridging cultural divides and serving consumer tastes at
this crossroads of Asia.

Hot Times for Hot

Another area of rapid wireless
development in Hong Kong is wireless LAN, or Wi-Fi (for Wireless
Fidelity), which holds the promise of high data speeds and low-cost
networks. According to Hanson Cheah, managing partner of AsiaTech
Ventures, a Hong Kong-based technology venture capital firm, Wi-Fi is so
prevalent in Hong Kong that you can get it almost everywhere.

So far, however, Wi-Fi is not a money-maker—it is provided normally as a
free service courtesy of merchants and organizations at various
commercial and public venues—and the technology is still evolving.
Secure access and business models for charging fees are two of the
unresolved issues. Moreover, Wi-Fi is presently useful only with
laptops and PDAs equipped with wireless PCMCIA cards.

is the largest Wi-Fi service provider in Hong Kong, with over 100
hotspots in service. In addition, I-Cable, a Hong Kong cable TV
provider, and Synergy Technologies (Asia), a wireless solutions company
in Hong Kong, own a Wi-Fi network deployed at three large shopping
plazas—Harbour City, Time Square and Plaza Hollywood—and at conventions
and exhibitions. Ken Fong, Synergy’s CEO, sees many opportunities ahead
and believes that Wi-Fi will converge with 3G services in time because
the technologies are complementary.

Meanwhile, OFTA is laying
the regulatory groundwork for licensing all 802.11 Wi-Fi services
(including the higher speed 802.11a, which transmits at 6 to 54 Mbps
compared to 802.11b’s 1 to 11 Mbps). In characteristically
pro-consumer, pro-competition fashion, OFTA has proposed a streamlined
“class” licensing regime in which anyone proposing to operate a Wi-Fi
network is only required to register with the Telecommunications
Authority before commencing operation. No application and processing
procedures are involved. The licensee only needs to meet specified
minimum conditions, such as avoidance of interference with other
networks, and not run afoul of various legal prohibitions, such as those
against anti-competitive behavior and misleading advertising. Fourteen
interested organizations, including the six wireless operators,
submitted comments on the plan. OFTA expects to implement the licensing
regime by year end.

Lab Tests

In many ways, Hong Kong is the perfect testing ground for
emerging data services and wireless technologies. While Hong Kong might
not end up doing much of the inventing or manufacturing for the wireless
world, it will be providing, developing and using wireless data services
in a highly competitive environment that is packed with people and is
subject to the transmission challenges of high rise buildings and a
hilly terrain. “When it comes to deploying new wireless technologies,
if a technology works in Hong Kong, it will work anywhere,” says H. C.
Lui, director of technology at the Hong Kong Wireless Technology
Industry Association.

Sunday’s Bruce Hicks believes that the
wireless world will have much to learn from Hong Kong as high-speed data
services evolve. “In the saturated markets that many wireless operators
will soon confront, especially in Europe and the United States, the keys
to profitability will be found in identifying and segmenting markets and
putting together packages of specially targeted services.

services and their technologies are the New Territories of the wireless
industry. I expect Hong Kong will help show the world how to make them
a success,” says Hicks.

David James is president of Business Strategies International,
a San Francisco-based consulting and venture-development firm
specializing in technology business