Data from Ministry of Information Industry of the People's Republic of China shows the total number of mobile subscribers in China has exceeded 42 million, which means tremendous business potential in the market. At the same time, the Average Revenue per User (ARPU) of operators is declining constantly with an increment in competition and a fall in mobile phone charges. In addition to voice service, operators begin to cultivate more value-added services. Location Based Service (LBS) is believed to be one of the most profitable value-added services by operators.
Compared to individual application mode, enterprise application mode and the potential customer are clearer but still require further development. Enterprise application will have a good prospect along with the improvement of location precision and the reduction of terminal cost. Potential LBS customers of enterprise application may mainly include logistics industry, traffic police and police. Requirements vary among different industries or different branches. Operators and SP work out solutions, procedures and related charge systems according to customers' requires.
Customers of Enterprise Application
There are about 4 million LBS subscribers in China in 2005, among which individual customer 3.7million and vehicle customers 0.3 million; the number of LBS subscribers only accounts for 1 percent of the total mobile phone subscribers.
It is forecasted that LBS subscribers will be more than 22 million in 2008 most of which will still be individual subscribers and the percentage will reach 4%. It can be seen from the above analysis that further development is required in China's LBS market particularly China's vehicle LBS customer market.
Statistics and Forecast of China's LBS Subscriber, 2003-2008
China's LBS operators' profit margin in 2005 is over 20 million (RMB). In the following years with an increment in mobile subscriber and increasing demand in location service, LBS market scale will continue expanding. It is estimated that China's market scale will be 153.6 million (RMB) in 2008.
China Mobile carried out an LBS experiment based on Cell-ID in Fujian province in 2001. Currently much attention has been paid to enterprise customers, such as city's traffic management, medical emergency service centre and police; meanwhile individual customer market is gradually expanded. China Mobile launched its Mobile Phone Map to Beijing, Tianjin, Liaoning and Hubei. Up to June, 2006, China Mobile has extended its LBS to more than 20 provinces and cities except for a few areas such as Heilongjiang, Inner Mongolia, Ningxia, Gansu, Qinghai and Guangxi.
China Unicom started a location service called Caring Program in Dec, 2003 to provide security to the children and the old. Feb, 2004, China Unicom cooperated with Qualcomm Incorporated, mobile phone manufacturers and application suppliers to organize an activity named U-max, Location Desire to promote location service.
ZTE is authorized to be China's only communication manufacturer by signing a contract with Qualcomm Incorporated in April, 2005. According to the contract, ZTE is permitted to set up gpsOne location system based on CDMA2000、WCDMA and GSM worldwide, which indicates that Chinese enterprise will compete globally in high-tech field. Therefore new variability is brought to the layout of global industry.
China Netcom Corporation (NCN) Qingdao launched a Small Smart (Personal Access Phone System) location service called Caring Kid in the second half year of 2005.
Following China Mobile and China Unicom, another strong operator, China Netcom Corporation (NCN) enters the location service market. Thus GSM, CDMA, PHS are all commercialized and location service is accelerated by entering a wider fields other than logistic management, traffic management, medical aid and geographic exploration.
By the end of July, 2006, Caring the Kid service has covered south and north district of Qingdao, Sifang District, Licang District, Laoshan District and the economic-developed zone covered by Small Smart, ect.
Possibly the following fields will exist in LBS industry chain: terminal user, mobile operator, location platform operator, platform supplier, location terminal supplier, GIS engine supplier, service carrier and content supplier. A certain company may involve in one or more than one fields. For example, if one company provides both map platform and map data, it involves more than one field in the industry chain.
The terminal user can be divided into individual user and enterprise user. Currently in China the latter is the main user. Since the terminal user is the final user of location service and the key supporting factor, only satisfaction from the user and the related fee is charged can the profit from the fields in the chain be ensured. Therefore great effort is needed in cooperation with each other to survey the customer's demands and to develop more applications to meet the demands.
Today, people are living in an open than ever society and more and more uncertainty and variability exists in space, which brings boundless market chance to location based service.
It is widely believed that location based service has a great prospect among value-added services. Generally speaking, it is still at very initial phase and the market capacity needs to be further cultivated.
China's market conditions for LBS are all good from macroeconomic angle. Increasing investment to LBS is ensured with the stable enhance of China's macroeconomics; quality of LBS will be upgraded with continuously improvement of 3G net construction and location tech; and customer's consumption concept will be further developed to stimulate more service desires.
Mobile operators are in the core position of China's LBS industry chain. The operators should get a solution to share the profit and to cooperate better in a large area to get a win-win result in operation.
In recent years, great demands in both vehicle and individual LBS due to the 2008 Olympic Games. This is good news for mobile terminal companies. Accordingly, multifunctional products with competitive prices should be available to meet such demands.
For content suppliers, a good combination of pure location service with traditional mature value-added service should be done, for instance to send the location message to the terminal equipment through SMS or to add multimedia service such as cool rings and pictures to location messages. In addition, content suppliers should have their own features to avoid service repetition with their rivals.
In a word, great potential lies in China's LBS market. As long as the right decision is made, a big profit can be counted.
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