It was reported recently that China's Ministry of Industry and Information Technology (MIIT) has been in discussions with top telecoms industry players on the possibility of requiring over-the-top (OTT) service providers, such as Tencent, to pay subsidies to support the financial impact these services are having on telecoms operators.
These added expenses, of course, would go on top of the current costs OTT service providers - which in this context refer to Internet companies offering value-added telecommunications services that bypass the operators' networks - are already paying for wholesale broadband network capacity from China's three major telecoms operators.
If anything, this matter highlights how uncertain Chinese telecoms operators have become in their businesses as OTT services dry up the easy revenue stream that has long been flowing their way.
If this move goes into effect, Tencent will likely be an early victim. Tencent, as many know, is the homegrown tech titan behind the wildly popular WeChat and QQ services, which allow mobile device users to communicate via video, voice messaging or text chatting. The real rub in all of this lies in the fact that these web-based applications have been chiseling away at growth in mobile phone usage and text messaging, two of telecoms' operators biggest money makers.
According to MIIT data, text messaging in China was up just 2.1 percent in 2012 compared to the previous year, the slowest growth pace in four years. Meanwhile, the number of short messages sent by each mobile subscriber fell by an annual rate of 9 percent over the same period, marking the first such drop in the country's history.
While all of this was going on though, WeChat was able to attract 300 million users within two years, Tencent figures show. In comparison, China Unicom had 242 million users by the end of January and China Telecom had 158 million users by the end of November 2012.
China's State-backed telecoms operators have long been accustomed to raking in easy profits thanks to their monopoly on this sector. This also left them with little motivation to develop value-added services - and thus they became easy targets for competition from IT giants such as Tencent.
In fact, it's largely due to the monopoly on China's telecoms sector that fees for traditional telecommunications services - telephone calls and text messaging - are more expensive here than almost every other country in the world. Applications like WeChat though have provided an innovative and economical alternative and should not be punished financially for providing services that are valued by the market.
Ultimately, the goal of the MIIT should be developing a fair market and encouraging industry players to provide a wide range of high-quality services to the public, not to promote complacency among a handful of vested interest groups.
The author is an IT independent commentator. firstname.lastname@example.org
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