Latest technology gets people talking

'No reason to charge'

In mid-March, rumors began to spread in the media and on the Internet that China's "big three" telecom operators - China Mobile, China Unicom and China Telecom - are likely to start charging Tencent for hosting WeChat and that Tencent could charge WeChat users in return. One rumor, on Sina Weibo, said that from July 1 mobile users will have to pay 0.05 yuan to send a text message via WeChat and 0.10 yuan for a voice message.

Although Tencent has repeatedly denied that it will charge for the use of WeChat, its share price slumped to HK$250 ($32) on April 12 after it reached a record high of HK$286 on March 11. So far, Tencent Holdings Ltd has bought back 6.64 million shares for about HK$1.63 billion during 14 consecutive trading days.

"Telecom operators have no reason to charge users to send messages through WeChat because they have already paid for the data traffic. But the operators might collect fees from Tencent because the volume of traffic on WeChat is particularly high," said Xiang Ligang, secretary-general of the 3G Innovative Applications Forum.

The operators have now realized that the rate they set for WeChat to rent the telecom network was too low. Initially, they had not expected the service to take up a large amount of signaling resources, according to Xiang.

"Users will pay the charges eventually," he said. "Although Tencent dares not charge WeChat users for fear of losing customers, it will find other ways to generate revenue - for example, by offering value-added services."

Some information technology and telecommunications industries experts and professionals are worried that the case will set a precedent for other over-the-top, or OTT, services and hamper innovation.

"Will telecom operators charge commission whenever a successful product appears on the market?" asked Kai-fu Lee, former head of Google China, on Sina Weibo.

It is widely believed - especially among users - that Tencent has taken a significant amount of traditional voice and text-messaging business away from the telecom operators, which has caused them to retaliate.

"As a result of technical innovations, OTT services provide telecom operators with an opportunity for data traffic growth, but they have also become a substitute as well as a challenge to text and multimedia messaging services and even voice services," according to a China Mobile spokesperson in an e-mail to China Daily.

According to the China Mobile's annual report, its wireless data traffic hit 1.04 trillion megabytes in 2012, an increase of 187.6 percent from 2011. Revenue from the wireless data traffic business increased by 53.6 percent to 68 billion yuan ($11 billion).

By contrast, revenue from voice services, which accounted for 66 percent of China Mobile's total operating revenue, increased by just 1.1 percent. Revenue from short message and multimedia messaging services fell by 4.8 percent.

"Monopoly is the essence of the fight between the telecom operators and Tencent," said Du Zide, secretary-general of the China Computer Federation. "If we have full market competition in the telecommunications sector, each company will make great efforts to improve its own service capacity, rather than trying to increase its revenues by adding a new charge."