One, continuous incremental demands of the operators

With the development of China's economy and the increase of the citizens’ income, the user penetration rate of the communication market has been increasing continuously. The evolution of communication technology, the intensified competition in the industry and cross-industry competition from the Internet enterprises all force telecom operators to continuously reduce the tariff substantially to obtain customers. At present, the three major operators in China all have introduced "unlimited Internet package" and "unlimited localized package" characterized by unlimited traffic. By June 30, 2017, the total number of mobile phone users hit 1.36 billion in China, which is almost the same as the number of China's population. In the end of 2017, the subscriber scale further expands and may exceed the number of China's population. Due to the low growth rate of population and high development speed of Internet of things, the proportion of new subscribers gradually declines, while competition for existing users will be the main feature of the market in the future.

According to the information disclosed by the three major operators, the ratio of data service revenue has surpassed traditional voice service and became the main source of revenue. Although the revenue and profit of telecom market have dropped sharply due to the declined package tariffs and launch of "unlimited packages", it supported the expansion and extension of the Internet applications. The operators have entered fierce competition in data service through expanding the subscriber scale and improving the user DOU and brand loyalty. Although the telecommunication market has entered operation era of existing subscribers, it’s also objective demands to develop new subscribers faced with the doubled data traffic market every year. With the limited growth space of subscribers, there is no doubt that new competition will form.

Two, the inevitability of competition for the second SIM card

China has developed 1.36 billion mobile phone users, of which subscribers of China Mobile is 866 million, accounting for 63.7% of the total number. China Mobile has developed 593.7 million 4G subscribers, accounting for 66.9% of the total 888 million in China, while the number of China Telecom and China Unicom is even less than half of China Mobile. Despite of the huge difference in subscriber scale, the towers are shared after the operation by China Tower since 2014, the network capacity of the three operators further converged and they are almost on the same network. Faced with China Mobile’s 4G subscribers, China Telecom and China Unicom must try to solve this dilemma.

Nowadays, the mobile phone number has been tightly bound with online shopping, payment, social activities, travel and other Internet applications, the identity authentication mode of main mobile phone number is accelerating to form and stabilize, which makes the cost of changing mobile phone number increased. However, the users’ demands for data service and low tariff packages continue to increase, the second SIM card oriented to traffic service becomes an alternative choice. Therefore, providing the customers with a new mobile phone number becomes the competition focus of the operators, in fact, all the three major operators have realized significant increase of new subscribers.

Three, killer of the second SIM card slot

Taking traffic as the breakthrough, China Unicom has first launched the "unlimited Internet package" with Internet enterprises, such as Tencent SIM card. In the competition through low tariff and unlimited traffic, China Unicom tried to release the users’ demands for traffic, improve the DOU and enhance the user engagement, on the other hand, it also tried to expand user scale by developing new subscribers and attracting existing subscribers from other operators. When using the main SIM card of another operator, it can still use the China Unicom SIM card to connect the Internet, China Unicom hopes to attract and develop subscribers by providing such traffic cards. Afterwards, China Unicom and China Telecom cooperated with Alibaba, Baidu, Didi, Youku and other mainstream Internet enterprises in launching directional packages, trying to compete with China Mobile.

As a strikeback, China Mobile changed the custom device programs with the vendors, which further strengthened the China Mobile networking characters, the custom devices of China Mobile can only connect 2G network when using China Telecom and China Unicom SIM cards, which directly stopped China Telecom and China Unicom’s intension in developing subscribers. In addition, China Mobile launched the "unlimited localization package", which further seized the users and their network demands.

However, will the demand for second SIM card be so strong after the launch of a large number of "unlimited packages"? Why bother use two SIM cards when one card is enough. As a result, the competition for second SIM card may be sole playing of China Mobile, after all, the user scales are much smaller in China Unicom and China Telecom. Although China Unicom’s effort brought certain new subscribers, it is hard to continue. Even the "unlimited package" is not the killer of the second SIM card, the operators need to change their minds on the competition and develop new subscribers by digging new demands of the users.

Four, competition direction after the "unlimited package"

With the launch of "unlimited packages" and no binding of the second SIM card, excessive competition and vicious competition will be hard to avoid. A sharp decline of tariff will be caused by vicious competition, which will further compress the industry value and enterprise growth, what’s more, the 4G network could not bear that pressure. When 4G network is quickly occupied by increased traffic, the network speed will be greatly decreased. No matter which operator, as long as it has the most unlimited package users, its 4G network speed is basically the slowest and user experience will also be poor. At last, the users will change their minds and choose another operator for better network experience.

Therefore, under the double competition with unlimited packages and the second SIM card, operators should form new competition resources in advance, namely the network advantage and perception advantage. However, the network capacity and bearing ability could hardly be enhanced significantly before the commercialization of 5G. How to improve the network speed and enhance user experience remains a question. Obviously, it is difficult to improve the speed of the whole network, but will it be an option to achieve differentiated network speed improvement? By classification of the SIM card slots and users, as well as the application scenarios, it may improve the user experience. At this stage, in order to support the market development and adapt to the development requirements of mobile Internet industry, the operators need to accelerate the development of network management system and IT system supporting ability.

With the sharp decline of tariffs, the industry has to face the problem that the top 20% data traffic users consume 80% of the whole network bearing, but only contribute to 10% of the revenue. Because not all subscribers of the low tariff packages are high value customers, that is to say the high DOU is not necessarily equal to high ARPU. In addition, the greatly increased traffic in the network, especially the video traffic, is not basically of high value (according to the estimation and definition of traffic value, text value > picture value > video value). This is a problem requiring answers from all the operators, the revelation brought by the book Free: The Past and the Future of a Radical Price, we haven’t truly used it yet.

As a result, will it return to the differentiated service era by different brands like the China Mobile GoTone and Easy own? Anyway, it is at least a new way worth trying.