RDVP Seminar: Hong Lu, UTStar (4/13/2005)

Hong Lu, the CEO of UTStar, (and a member of Time Magazine's Cyber Elite) came to speak about expansion of telecom services in China, the technology, and the impact. The PAS system allows "traditional" (copper/wired) telecom providers to provide mobile service in a metro region. The service goes for $5-6/mo in China, compared to $6-8/month for Unicom, and $10-12/mo for China Telecom. A 1 minute phone call is less than a penny (I just got charged $.45/"over plan minute"...). There are about 66M PAS subscribers in China, with UTStar controlling about 60% of that market.
Hong talked about a series of predictions they had made that had come true, and seem like ground truth today, though were speculative at the time they were made:

1. All copper / narrow band will become fiber
   
2. Communication will move from circuit-based to packet-based
   

He talked about some of the developments in the telecom market, specifically comparing it to the US market:

	China	US
Fixed	300M	250M
Wireless	330M (+9M/mo)	170M

In 1995, it cost $3,000 to register for a cell phone in China, the purchase price for the phone itself was another $3,000. At that time, the monthly salary for an engineer was about $50.

Today, that same engineer makes several thousand per month (GDP in Shanghai is $6,000/capita, with talented, experienced managers breaking into 6-figure salaries). The 1,000 parking spaces they planned for their 5,000 employees are going quickly, and the black market is discounting the official exchange rate for the US dollar. Internet usage has grown from 620,000 in 1997 to 94M last year, and Hangzhou is starting a campaign to have fiber to every home within a year.

Hong also talked about the possible expansion to data-carrying service. Currently only about 5% of the revenue in China is related to data, compared to 20% in Japan. Although some technical details remain to be worked out, he suspected that TD CDMA could support 1-2 Mbps, charging $100/mo and being very profitable for both the mobile and wire carrier, in contrast to the $100/mo that is currently charged for DIALUP in some markets.

He also had some interesting charts comparing teledensity (ratio of fixed and cell lines to population) to the GDP, showing a correlation. Stuart asked whether he meant to imply causation as well as correlation, and Hong said yes. Although it was not perfect, it did seem to bear up. US and Canada had about 62% (must have been for fixed line only) while China had about 50%.