In China Mobile's 2007 annual report, each of the company's data points were up or stable year-on-year, with only the growth rate of the company's wireless value added service (WVAS) revenue showing a distinct downward trend. Check out the chart below for WVAS revenue and growth rate (Note: for non-Chinese readers; the pink line is the growth rate for WVAS revenue).

When thinking about all of the issues facing the WVAS industry, including some of the recent negative things that have befallen listed service providers (SPs), such as Kongzhong's share price drop or Hurray's failed merger, I can only wonder, "What's the problem with the WVAS industry?". I think China Mobile's heavy-handed management of SPs has lead to the current predicament. When it comes to SPs, normal market rules are distorted from the very beginning. In early 2005, I attended a monthly Monternet (China Mobile's wireless value added services platform) new services conference. In that meeting, three poor China Mobile officers had to sit around for a whole day listening to pitches for new services they had never heard of and watching PowerPoint presentations full of product mock-ups lifted from who knows where; they then had to rate each service, which would determine if it be allowed on Monternet. The total process for each service lasted less than five minutes.

After a service goes online, loose, unfair and arbitrary supervision and bureaucracy handicap the market and service providers. The only way for most SPs to survive is to go into the industry's grey areas: SMS spam, near-pornographic content and misleading service sign-up tactics. China Mobile, despite its best efforts, cannot provide and control all value-added services like it does basic phone service, which has led to the WVAS industry to lose steam over the past few years. On the other hand, China Mobile also does not want to only be an access provider and fee charging channel like Internet service providers have become.