Not smart enough

Little Smart: for those that like chats as cheap as their cigarettes

For generations, overly-precocious English children were berated by parents for being “too smart for their own good”. Conversely a telephone service in China – called ‘Little Smart’ – simply isn’t smart enough, according to the nation’s bureaucrats.

The low-cost wireless phone service that once boasted 100 million subscribers will be phased out to clear the airwaves for China’s much-anticipated (and much smarter) homegrown 3G wireless service, TD-SCDMA. According to the Ministry of Industry and Information Technology (MIIT), Little Smart is now “taking the 1900-1920 MHz frequency band that interferes with the TD-SCDMA transmission.”

Many Little Smart users were outraged by the government’s latest move. Shi Yuchen, a Little Smart loyalist, has gone so far as to take MIIT to court for cancelling the Little Smart service without a public hearing. In Shi’s indictment, he chastises the government for infringing his rights as a mobile user, and declares that the fate of a product should be decided by the market and not at the whim of an administrative department.

Netizens quickly took to the net to express their fury too. On Sina.com, a popular internet portal, an angry Little Smart subscriber in Guangdong wrote: “The government has telecom operators’ interest before ours. Where is the justice?” Despite the public outcry, the low-cost mobile service – which costs as little as Rmb9 ($1.31) per month in Hunan – has been steadily losing market share in recent years. According to government figures, Little Smart lost 16 million users in 2007 and 2008. The main reason for the decrease is cheaper mobile phones and lower service charges from the mainstream mobile operators. Furthermore, Little Smart technology has lagged its competitors. It was also quite restrictive: it only allows subscribers to make and receive calls in their own city. And you can forget ‘smarter’ data services. Little Smart is about as sophisticated as two paper cups connected by a piece of string.

The Little Smart service is operated by China Telecom and China Unicom, but both are more interested in developing their 3G networks. And, even without the government’s latest intervention, many analysts forecast that Little Smart would have faced extinction within three years.

Although in its official announcement MIIT claims that shutting down Little Smart is to clear the bandwidth for TD-SCDMA, the government’s decision is seen more as a move to bolster domestic demand for 3G. By shutting down Little Smart, the current 70 million subscribers will have no choice but to upgrade. Perhaps some of them may even opt for 3G mobile services?

For the time being, industry observers reckon that China Telecom and China Unicom will put a lot of effort into convincing the current Little Smart users not to move to other operators.

But don’t expect the dominant mobile carrier China Mobile to sit on the sidelines. Even though China Mobile doesn’t offer the Little Smart service, many expect the telecom giant to capitalise on the opportunity to lure users from its competitors. A poll at Sina.com suggests that 31% of the 225,289 Little Smart users who were surveyed would subscribe to China Mobile, whereas 41% were undecided on their choice of operator. Only 28% of the respondents say they will stay with the current service provider.

The winners in all of this are the handset manufacturers. No matter which operator the 70 million Little Smart users opt for, they will need to purchase new handsets. With the cheapest models in the market priced around Rmb300 ($44), this should generate at least Rmb21 billion in additional sales for the industry. In this sense closing Little Smart will boost domestic consumption, something that should please the government.

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