Friday, February 09, 2007

China, mobiles and a new Vista

My blog has been “off the air” since the end of my last semester teaching at Surrey but now that the second semester course at Portsmouth on The Economics of the Internet is about to begin again it is timely to look at a few important current developments.

First, we have seen some recent figures published on the growth of the Internet in China. Information from the China Internet Network Information Center (CNNIC) show that the number of people in China connected to the Internet grew by 23.4% in 2006 taking it to about 137 million, which is about 10.5% of the population. This puts China in second place behind the United States (210 million) in terms of the number of people with online connections, and assuming that the rapid growth continues China will overtake the US in 2009 or 2010. Furthermore the majority of these are broadband connections (about 104 million). Another feature to note is that around 17 million Chinese connect to the Internet via their mobile phones – a development I return to next. There are still huge issues of censorship and government control relating to the use of the Internet in China, but however you look at it what goes on in China is going to be very important for the future of the Internet.

Turning now to the issue of the growth of mobile Internet use, according to the Mobile Data Association (reported by the BBC) UK mobile phone users connected to the Internet around 15.9 million times in December 2006. The MDA predicts that this will rise quite rapidly now as there is a large installed base of Internet-capable mobile phones that will itself grow because of improvements in pricing models. So far most connections have been for news, sport and weather updates but other applications such as music and video downloads are also increasing. People are also uploading pictures and video blogs to social networking sites such as MySpace and YouTube.

The latest 3G mobile phones are not just limited to mobile telephony and SMS texting, but can also provide digital camera and video capability, wireless Internet connectivity, radio and TV reception, GPS and even e-money functions. They are rightly viewed as multimedia devices. These changes go hand in hand with the convergence of TV, telephone (landline and mobile) and broadband Internet services and the bundling of all four services together under a single subscription by providers such as the new Virgin Media company (formed recently between NTL and Virgin Mobile). It was also interesting to see Miles Flint, the President of Sony Ericsson, arguing recently for a flat rate fee for all these combined services “Moving to flat rate charging is the key to unlocking the value of the mobile internet” (quoted in Tim Weber’s BBC report).

The appeal of flat rate charging also seems to be coming under consideration by the music companies. John Kennedy, the head of the International Federation of the Phonographic Industry, has said that he is willing to talk to ISPs about a blanket license approach, where users pay a fixed subscription charge and get in return unlimited downloads. Royalty payments and fees to copyright holders would then be passed on by the ISPs.

Finally, anyone with a computer will be very much aware of the recent launch of the new Windows Vista operating system (and Office 2007 that goes with it). Microsoft spokespeople have been busy emphasizing its benefits in terms of improved security, a new onscreen look (the Aero interface) and better 3Dgraphics (important for games and videos). But the pricing strategy has been heavily criticised (in Europe we are going to find ourselves paying about twice as much for it as our US colleagues). And it has also been criticised for renewing the problems for which Microsoft was heavily fined by the European Commission back in 2004 because it too closely ties operating system functions with those of applications. A group called the European Committee for Interoperable Systems (ECIS) – which includes IBM, Nokia, Sun Microsystems, RealNetworks, Oracle, RedHat etc. – has claimed that Microsoft is attempting to impose its own Windows-dependent standards and extend its monopoly further into the Internet. As Microsoft has still not fully complied with the earlier EC ruling this is likely to be an issue that it can’t suppress by simply going on about innovation.

[1] Internet Use in China Soars. Tim Gray TechNewsWorld 24th January 2007.
[2] China net use may soon surpass US. BBC News 24th January 2007.
[3] Is the web going mobile at last? Tim Weber. BBC News 17th November 2006.
[4] NTL renames itself Virgin Media. BBC News 8th February 2007.
[5] Mobile internet ‘upgrade’ launch. Rory Cellan-Jones, BBC News 16th November 2006
[6] Vodaphone, MySpace Team on Mobile Social Networking. Tim Gray, TechNewsWorld 7th February 2007
[7] Has the music industry warmed to fee-based downloads? Victoria Shannon, EcommerceTimes, 27th January 2007
[8] Vista illegal in EU, charge Microsoft Rivals. Chris Maxcer. ECommerceTimes, 26th January 2007.
[9] Can Vista reanimate the PC-based gaming market? Walaika Haskins, TechNewsWorld 8th February 2007


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