Chinese Consumers Not Warming to WAP Internet Phones

Shi Lin-lin, a 20-year-old university student, wants to go online any time she needs to but she's unimpressed by the latest technology - WAP phones - that will allow her to do so.

"If I have enough money, I'd rather buy a computer. Most people I know feel it's enough to have a home computer," Shi said.

Shi's views mirror those of many consumers in China.

Despite the excitement generated six months ago by the debut here of WAP-enabled mobile phones - the first that allowed mobile Internet access in China - analysts said sales have been disappointing.

To date, there are only about 50,000 WAP phone users in China, a tiny fraction of the country's 60 million mobile phone subscribers, said Jasmine Koh, an industry analyst for UBS Warburg in Hong Kong.

"Most people buying them just want the latest thing, not because they really plan to get online," said a saleswoman at a Beijing mobile phone store, Hua Shin Tong, which sells only about 30 WAP phones a month compared to 40 to 50 regular mobile phones a day.

WAP phones are equipped with Wireless Application Protocol(WAP), which enables users to access the Internet and other data such as real-time stock quotes and information on weather and sports.

China has one of the highest mobile phone penetration rates in the world, while home computer ownership is still low.

The cost of a home computer at around 700 US dollars is still much higher than the 126 dollars for a regular mobile phone and 327 dollars for the cheapest WAP-enabled phone.

Those factors and the fact that China's Internet usage rate has been skyrocketing in the past year are causing IT and telecom companies to salivate at the potential of the mobile Internet business in China.

But analysts said the experience with WAP shows that while mobile Internet phones have great potential in the market, they will not take off until technical problems are worked out and infrastructure developed.

It could take years before mobile Internet is widely used in China, they said. Many Chinese consumers crave the convenience of being able to access stock, forex quotes, news and other information by mobile, but they are shrewd enough to wait for better technology.

"Consumers don't want technology for technology's sake. They want services and content that means something to them," said Joe Sweeney, research director of US-based Gartner Group's Asia office.

Connection speed on WAP phones is a key problem - with mobile phones only able to reach about 9.6 kilobytes per second or slower, compared to 56 kilobytes per second on ordinary telephones.

The postage stamp-size screen also prohibits the display of large volumes of data or charts.

Cost is another concern. While China's mobile phone operators are charging only telephone call rates for now, they will soon start charging online access rates and those will likely be higher than fixed-line rates.

Analysts said WAP is only meant to be an interim solution, and will be replaced by faster and fancier third generation technology expected to come out in a year or two.

In the long run, WAP will be used for non-content related services, such as serving as a digital wallet for e-commerce, they said.

Internet portals and e-commerce companies are nonetheless rushing to offer a WAP-version of their online services. China's three top Chinese-language portals, Sina, Sohu and Netease are all offering WAP content. E-commerce companies are following close behind.

So what's the rush?

"Primarily because Internet stocks have crashed and burned. People are looking for the next piece of hype, the next big thing to invest in," said Sweeney.

Matthew McGarvey, an analyst for International Data Corp. in Hong Kong, agreed.

"It's a huge buzzword right now. For a public company to not talk about it, it says to shareholders they're not on the cutting edge anymore," McGarvey said.

Sohu's CEO Charles Zhang said the Chinese people's love affair with mobile phones will help mobile Internet become widely used eventually. He says he is confident Chinese consumers will choose mobile Internet phones over mini portable computers which are popular in the United States.

Since launching WAP content six months ago, Sohu has seen the average daily viewing reach only 35,000 WAP pages in the nine provinces where it is offered.

Promoters of mobile Internet in China predict a majority of the usage will evenutally be in e-commerce or stocks trading.

Analysts said until infrastructure drastically improves, that won't happen.

"A lot of people are saying mobile phone users will be shopping on their phones. No it's not going to happen soon. If e-commerce were to take off, it already would have taken off by regular computers," Sweeney said.

China lacks the infrastructure to make e-commerce work, analysts said. Few people have credit cards, most companies are not set up to handle e-commerce transactions and many consumers lack trust in shopping online.

For example, an online auction site in Beijing has set up a physical showroom for buyers to check out the products.

But if nothing else, WAP is serving as a good testing ground to study what people want out of mobile Internet phones, analysts said.

"It's worthwhile for companies to convert Web content to WAP because you need to figure out how to package services for small screens," said Ted Dean, an analyst at BDA Consultancy China Ltd. in Beijing.





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