Opinion     

WeChat to be a crossroads for China's Internet service

China.org.cn, April 4, 2013

• China's Ministry of Industry and Information Technology (MIIT) said on Sunday that WeChat, a mobile web-based messenger software operated by Chinese technology giant Tencent, might require payment in the future. MIIT Minister Miao Wei said telecom service providers (SP) are reasonable to demand such an extra payment.

  The public has widely interpreted Miao's remark as the authorities' preliminary but official response to an earlier dispute and contention between Tencent WeChat and the country's three major telecom operators – China Telecom, China Unicom and China Mobile.

  If WeChat becomes a paid service, its users will ultimately cover the fees. Once that really happens, China's Internet service will reach a historical crossroads – the end of free service.

  The debate on whether WeChat should demand extra payment (other than mobile data fees) has been going on for some time, during which emerging social media providers out-maneuver traditional telecom operators and nibble away at their profits.

  Reportedly, WeChat and similar Over-the-Top (OTT, content delivered by other means) services in 2012 have brought down China's per capita texting volume by 9 percent, causing an aggregate loss of several billion yuan to dozens of billion yuan to the three major operators.

  In its defence, Tencent has argued that telecom operators have already collected users' data fees, and an extra charge on using its software will be repeated billing. Also, Tencent accuses such operators of profiteering on their monopolies.

  Tencent has noted that OTT is rapidly replacing traditional telecom services, and the government should not subsidize obsolete technologies. Tencent also fears it will be difficult to pass on additional fees to its users, who have long been used to free services. Changing this relationship will likely create huge losses for the company.

  But will WeChat users in China really agree to pay for this service?

  One good tradition honored by China's Internet service is no additional charges, with which Chinese users have long been addicted. Many OTTs have collapsed during the past decade because they tried charging their users.

  But one cannot rule out the possibility that there will be users willing to pay to continue using WeChat. A poll that surveyed 25 WeChat users showed that only 10 people (40 percent of the sample) said they would stop using WeChat on their phones if they were forced to pay a monthly charge of 10 yuan (US$1.6).

  WeChat has a fairly large group of users and it is still expanding rapidly. Users' loyalty will likely ease Tencent's difficulty in collecting the additional fee, given the rate is reasonable and acceptable.

  Once Tencent succeeds in pioneering the payment plan on WeChat, the entirety of China's Internet service sector will likely follow.

  The ripple effect will include the following five outcomes: First, telecom operators will follow suit and start charging for other OTT services including Sina Weibo; second, WeChat and Weibo will start splitting the cake of operators' fee collection, and consequently enhance their parent companies' profitability in OTT R&D; third, China's three telecom companies will further develop network infrastructure, prompting Chinese mobile networks to upgrade their service capabilities; fourth, network service providers will shift their focus to mobile Internet from traditional Internet platforms; fifth, Chinese Internet users will have to pay more for OTTs, making them more prudent in downloading APPs, which in turn will help certain APPs stand out in a crowded marketplace.

  The author is a chief research fellow at Communication University of China

  The article was first published in Chinese and translated by Chen Boyuan. Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.

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