Beginning in March people can send short messages between mobile phones and fixed-line units after China's Ministry of Information Industry decided to allow inter-network SMS, the Xinhua news agency reported.

With this policy breakthrough, users will be able to send messages from fixed phones to 268 million Chinese mobile phone users -- the largest mobile phone subscriber base in the world.

"If the new policy significantly boosts the number of fixed phone short message users, it's hopeful that more companies will design content for the platform and the business could enter an upward spiral," said Zheng Jianping, a spokesman for Shanghai Telecom Corp, which launched fixed phone short message services in 2002 with aggressive marketing campaigns.

The company charged 8 yuan (96 US cents) per month for this service. Every self-composed message is priced at 0.08 yuan.

One fixed phone model by Guangdong Province-based BBK Electronics Corp Ltd sells for 398 yuan (US$48). It also features more buttons and a larger liquid crystal display.

Similar models without the fixed line SMS function cost about 250 yuan (US$30).

"Very few people buy it, as its special function makes it more expensive and there aren't many people they can send short messages to," said Wang Zhangli, a shop assistant in Shanghai's largest telephone store.

She said the shop sells about 20 such units a year.

Chinese people's explosive spending on mobile short messages gave fixed-line operators a nudge to offer their own message service.

Hong Kong-listed China Mobile (Hong Kong) Ltd and China Unicom Ltd both reported skyrocketing increases in short message services since its emergence in early 2001.

China Mobile said its users sent 40.7 billion messages in the first six months of last year, 3.2 times higher than 2002. There is little evidence that the momentum is losing steam.

During the Spring Festival Chinese mobile phone users sent about 10 billion messages.

In comparison, Hong Kong-listed China Telecom Corp said its voice telecom service, which accounted for 46.8 percent of its total revenue, edged up only 5.5 percent to 18.48 billion yuan in the first half of last year.

But China Telecom's short message business for fixed-lines generated little sales and is not mentioned in its financial report.

"The market response to this service has been sluggish so far, as very few companies develop message content for fixed phones," Zheng of Shanghai Telecom said. "This is the bottleneck of the business."

He said this type of service proved to be popular in Japan with housewives using the home phone to download receipts, shopping information and TV program lists.

"We have followed that model, but ... maybe the market environment is different in Shanghai," Zheng said.

Besides the market environment, the difference of the two platforms is significant, said Mao Haiyan, spokeswoman of the short message business of Netease.com.

"Designing messages for fixed phones is entirely different from mobile phones, as we have to consider privacy," said Mao.

Netease, an Internet portal, generated large profits from mobile phone message services.

"Unlike mobile phones, fixed phones cannot be carried around and is often considered to be used by every family member. That means many of our current messages are not suitable, because they are too personal," Mao said.

"We will not put any resources into this project unless the fixed telecom operators have a clear new scheme for such services (with the introduction of the new policy," she said.

To Zhang Ying, a telecom analyst at Analysys International, China's fixed-line operators are the most profound obstacles to fixed phone short message services.

"Major Internet portals have been working with them much earlier than with mobile operators. But mobile companies designed a good revenue-sharing program with these Internet companies, that's why mobile message content boomed," zhang said.

"Given the vast fixed telephone user base, if they shouldered some of the cost for a new telephone set, it would be easier to reach the critical mass for the new service," he said.

(Shanghai Daily February 23, 2004)