Latest: China Mobile's war on WeChat

China's OTT battlefront is essentially a contest between Tencent, the savvy internet firm, and China Mobile, the mobile titan. In the past week it's become a daily news staple.

The latest is Tencent chief Pony Ma at a public forum on the weekend, denying he has any plan to charge fees for WeChat, Tencent's wildly successful messaging app. 

Just as predictably, he also made a pitch for continued cooperation with the operators, pointing out WeChat was already generating a good deal of traffic. In an interview last week he talked up future joint efforts around machine-to-machine. 

Yet the sheer weight of WeChat fee stories – even the denials – has helped create a climate where people believe paid WeChat is a possibility. The state China Radio news service reported Ma's denial but also went ahead with a voxpop asking people if they would use WeChat if they had to pay for it.

In his denial, Ma avoided addressing the reports that the MIIT had called in the operators and Tencetn to canvass the possibility of paid WeChat.

In that light, the form of words from Tencent’s spokesperson is interesting: “We have not received any advice of any meeting,” he reportedly said. Like his boss he said there was “no plan to charge fees.”

So what’s China Mobile’s game plan? The head of China Mobile Research Institute, Bill Huang, memorably floated the idea of the freecall 800 charging model - ie, called party pays – being applied to mobile data. Sensibly he went on to say merely that this “might emerge in the future.”

Huang complained that because of its always-on function, WeChat occupied 60% of China Mobile’s signalling layer despite accounting for just 10% of data traffic.  But even he said it would be unrealistic for operators to try to squeeze the OTT players because “they represent customer needs.” 

In the same vein, China Mobile CEO Li Yue said technology change was inevitable in the industry, and observed that SMS pretty much wiped out much of the greeting card industry.

Meanwhile, in an amazing coincidence, a China Mobile slide pack was leaked online last week, revealing the firm is considering a revamp of its Fetion messaging service for the WeChat era. Launched three years ago, it has some 99 million active users, up 15% in the last year. 

Given the lamentable record of operators versus apps, Mobile's ambitions are brave. This blog applauds them, however. As long as China Mobile is willing to throw a few punches, those headlines will keep rolling.

Huawei brandishes its CSR credentials

Huawei was out selling its corporate social responsibility (CSR) programme this week. Cue eyes rolling in the Pentagon.

There's nothing unusual about CSR for western corporations, but among private sector Chinese companies it's still quite rare.

About 120 large Chinese firms have signed the UN Global Compact, which was set up in 2000 to encourage the corporate to adopt sustainable business practices. But almost all of them are state-owned, like China Mobile, ZTE, and oil companies Sinochem and CNOOC.

They’re probably following a state policy, but the UNGC is problematic for companies operating in China, both local and foreign. The first principle - to take one random example – is to “respect the protection of internationally-proclaimed human rights.” 

At a media lunch in Hong Kong, PR vice-president Scott Sykes said Huawei’s CSR was not about improving its image abroad but was “the right thing to do.” 

Still, most of Huawei’s CSR work is conducted outside China.The single biggest part, an ICT skills development scheme called Telecom Seeds, operates solely offshore, although CSR head Holy Ranaivozanany says the company is weighing whether to set it up at home.

Telecom Seeds is in 18 countries, mostly in the developing world, but will also be expanded to Japan, Spain and Australia in the coming year.

When it comes to supply chain management – the tricky area of labour standards that has caught up Apple, Samsung and others – Huawei audits all of its suppliers and, according to Ranaivozanany, has won a UN Global Compact award for best practice in the supply chain.

Ranaivozanany did disclose that Huawei sources as many components from the US as it does from China – 30%. Which presumably makes it as much a threat to Chinese national security as to the USA’s.

There's nothing special about Huawei's CSR programme, other than the fact it has one and is promoting it. 

For most people it's a Rorsach test. Those who believe Huawei is a PLA wormhole into the west's secrets will see it as a feint; those who think it's a company put-upon by protectionist scaremongerers likewise will see it as no different from any other CSR scheme.

Asian CIOs love and fear iOS

Apple’s iOS is the platform Asia-Pacific CIOs are most keen to deploy. Yet when it comes to security, it’s also the one they’re most anxious about.

That apparent disconnect shows up in IDC’s latest survey of regional IT decision-makers.

A hefty 43% said they most preferred iOS as the system to support their mobile apps and solutions; just chose 28% Android.

Yet when it comes to security iOS is the one they’re “most worried about.” Open-source, fragmented Android and its often-unpatched security holes comes in fourth.

The explanation probably lies in Symbian’s ranking as the OS that enterprise IT guys are least worried about. As IDC’s Claus Mortensen puts it, that’s because they aren’t planning to use it.

So the high nervousness about iOS most likely reflects its growing popularity as an enterprise platform.

From that perspective, the poll is a spot of good news for BlackBerry. It’s the fourth most preferred OS, chosen by 12% – just behind Microsoft/Windows Mobile.

But in the security anxiety rankings the BlackBerry 10 and BlackBerry 7 come in second and third respectively. Asian enterprises at least seem to have plans for BlackBerry.

China Mobile vs. the internet

China Mobile’s amped-up network investment plan doesn’t surprise in light of its modest result and its recently-expressed views on the rising internet menace.

It yesterday posted a 2.7% rise in earnings to 129.3 billion yuan ($20.8bn) – slightly ahead of estimates, according to a Reuters analysts’ poll, but still the slowest growth since 1999. Net income rose 5.2% in 2011.

Its now promising to spend nearly $31 billion on its GSM, 3G, LTE and Wi-Fi networks this year, including $6.7 billion on 4G. Chairman Xi Guohua says the company’s “mantra” is that “network quality is the lifeline for telecommunications companies.”

But tipping a bucket of cash over the vendor community isn't going to do much about the existential threat from OTT players that supposedly keeps Xi awake at night.

He recently described internet players like WeChat and Skype as a bigger threat than China Unicom and China Telecom - a neat putdown of his smaller rivals as well as a hint that the three are ready to band together to fight off the threat.

The Chinese web is aflame this week with speculation of a “showdown” between the telcos and the OTT guys,  including talk of forcing fees upon Tencent, the company behind WeChat. Tencent has denied this.

For all this, the evidence of serious bleeding for operators is thin.

Total SMS volume grew a little over 2% last year, but the number of texts per user fell 9.45%, as this chart from Marbridge shows. Yet the number declined 7.54% in 2011 and 6.81% in 2010.

Given that WeChat didn’t start until January 2011, it’s hard to see the trend as anything more than the natural decline in user spend.

In neighbouring Hong Kong, PCCW Mobile feels so threatened it’s actually done a deal with WeChat, offering customers all you can eat starting at HK$8 (US$1.03).  Hutchison has been offering a similar deal with WhatsApp since September.

In truth, the crimp in China Mobile’s earnings has come from its TD-SCDMA network handicap and lack of an iPhone. Both those (related) disadvantages will disappear in the 4G era.

In the meantime the company has delivered another reminder that customer-friendly innovation isn’t in its toolkit.

Innovation, China-style

Here’s an insight into how Chinese leaders think about innovation.

Xi Guohua, China Mobile chairman and one of the country's most influential ICT officials, believes the digital divide between China and the rest of the world is growing.

That’s interesting, but just as revealing is his solution. No, it’s not to help private firms access bank loans or to revitalise the IPO market, or further deregulate the economy.

Xi's solution: more committees.

He called on the government to emulate the successful atom bomb and aircraft carrier programmes with national hi-tech projects in “core technologies” such as  electronic devices and high-end chips.

Speaking in Beijing last week, Xi urged the Communist Party to strengthen the country’s top ICT policy body, the party 'informatization leading group’ ('informatization’ is local jargon for ICT adoption) and for central and provincial level governments to put ICTs high on the agenda.

Xi's views may not be universally supported but they are doubtless influential. Until two years ago he was vice-minister and ranking party member of the Ministry of Industry and Information Technology (MIIT).  His current post heading up the giant mobile carrier is a position reserved for senior party officials.

A World Bank report issued 12 months ago called for liberalisation and urgent structural reforms to break out of the middle income trap. Xi neglected to mention any of those, nor any of the difficulties faced by startups and other businesses, such as red tape, unhelpful banks, state-owned monopolies, and the heavy burden of the Great Firewall.

Xi said the ICT gap between China and developed countries had widened since 2007, and that the country was not internationally competitive in developing core technologies. He also called for more efforts in cyberspace security and development.

Xi isn't the only ex-MIIT official fretting about the digital gap. Former MIIT boss Li Yizhong last week made the same point, noting that Chinese spent just $192 a year on information services, compared with $3,400 by Americans.