SHANGHAI: The trend towards integration between telecommunications and the Internet is going to change the landscapes of both industries, participants at the just-concluded first Internet Conference of China held in Shanghai said.

"Telecommunications and the Internet have reached a crossroads in China. They should become more dependent upon each other as well as complementary and integrated," said Wu Hequan, vice-dean and a member of the Chinese Academy of Engineering.

After a painful period of consolidation, China's Internet industry has "squeezed out the bubbles and embarked on a rational path of development," said Liu Hongqi, general manager of the Internet Department of China Information.

But both dotcoms and telecom operators need new growth points and are seeking ways to satisfy the increasing demand for fast, convenient multimedia information and communication services.

The broadband and IP technologies that link the Internet with telecommunications, and the massive use of wireless devices, especially mobile handsets, has accelerated integration, participants said.

China has 54.4 million Internet users, 209 million fixed-line phone users and 196 million mobile phone subscribers. Integration will bring great opportunities but tremendous challenges.

To keep up with the trend, telecom operators should begin with the networks.

The traditional way that operators build one network for each business is costly and time-consuming, but the next generation network will enable operators to conduct all parts of their business via one network, Wu said.

China United Telecommunications Corp has built such a network linking over 300 cities in China that will be able to transmit voice and data by phone, the Internet and multimedia services.

The company aims to have this network carry its CDMA services, said Liu Yunjie, vice-president of China Unicom.

Interaction between mobile phone services and the Internet has shown strong growth momentum. For mobile operators, the Internet could help them offer more value-added services. Meanwhile, dotcoms have already tasted the sweet success of being part of telecom services.

An increasing number of mobile users connect to the Internet with their handsets, while more people send text messages to mobile phone users via the Internet or download graphics from the Internet to their handsets.

"The Internet is a kingdom offering almost unlimited freedom and mobile telecommunication is a kingdom for the individual. When the two merge, the most dynamic kind of kingdom can be created," said Liu Xiangdong, deputy general manager of China Mobile.

China already has the largest number of mobile subscribers in the world. As a handset is the most convenient terminal for accessing the Internet, connecting to the Net through handsets will become a driving force in China's Internet development, Liu said.

China Mobile's Internet value-added website, Monternet, has formed partnerships with some well-known Chinese websites. Such co-operation brings in over 10 million yuan (US$1.2 million) per month for each of Monternet's top five partners, Liu said.

Individuals paying for services generate about 51 per cent of the total revenue of Sohu.com, one of China's three largest portals - all of which are listed on New York's Nasdaq.

Furthermore, the majority of that paid-service income is contributed by mobile-related services, said Gu Yongqiang, the company's chief operating officer.

Mobile-related services helped all three listed portals - Sohu, Sina and Netease - escape from the red in the third quarter of this year, analysts said.

The total Internet market was estimated to be around 7 billion yuan (US$843 million) last year in China, including 4.69 billion (US$565 million) in Internet connection fees and an Internet advertising revenue of 530 million yuan (US$63 million), according to Su Jinsheng, director general of the Telecommunications Administration Bureau of the Ministry of the Information Industry.

Therefore, the potential for value-added services is still largely untapped, mainly due to technological bottlenecks.

Telecom operators and dotcoms will see more opportunities with the applications of new technologies, such as multimedia messaging services, wireless connections, the 2.5 generation mobile services (including GPRS and CDMA), and third generation mobile services, participants said.