It’s easy to overlook China’s fixed-line carriers.
After all, they lost 25 million customers last year while their mobile counterparts clocked up another 93 million subs.
And right now the imminent outbreak of full-blooded 3G hostilities is holding everyone’s attention. But in the new landscape mobile and fixed-line will become inextricably linked.
To backtrack a little: under the previous industry structure, China Telecom and its then-rival, Netcom (now Unicom’s fixed-line division), split the country in two, with Netcom serving the north and China Telecom the more lucrative south.
The pair terminated several years of desultory rivalry in early 2007 with a “truce” in which they agreed not to pursue each other’s customers in each other’s territory.
This might have been illegal anywhere else in the world, but it nonetheless underscored the difficulties they faced: falling ARPU, loss of voice customers and the inability to open up new services like IPTV.
Now the deck has been reshuffled, they’ve both teamed with mobile operators and competition is set to resume around converged services.
Already China Telecom is selling bundled home phone, broadband and mobile data services in its first commercial 3G trials. Unicom will do the same.
But this is the easy part, warns Vikki Tam, a partner at Bain China. Fixed mobile convergence competition always begins with bundles, “but it’s not a sustainable strategy, because a lot of bundles are offered as a discount.”
Telecom and Unicom will have to figure out how their bundling strategy benefits in other ways - most obviously in reducing churn, Tam suggests.
But it will also have to help them make ground against the market’s 800-lb gorilla, China Mobile.
China Mobile will dominate the mobile sector, but it has no footprint in wireline. A new license condition requires that it offer a fixed-line service, and it has taken control of tiny Tietong, which owns the railways fiber infrastructure.
All of which means it will be vulnerable to an assault by FMC. But will it make any difference?