APPENDIX 28
Memorandum submitted by Vodafone UK Ltd
(S48)
1. Vodafone is an international mobile communications
company established and still headquartered in the UK, which is
a major focus of our operations.
2. In total Vodafone has over 112.5 million
proportionate customers world-wide in 28 countries Vodafone serves
over 12 million customers in the UK.
3. Vodafone believes that competition must
be the prime driver of new service roll-out including fixed and
mobile broadband (3G) services in rural area, including rural
areas of England. We would urge that other drivers of roll-out
(such as public subsidy) should not be considered until it has
become clear how much national coverage will result from developing
competitive dynamics.
4. This approach has been highly successful
in the UK mobile environment to date. Competition, rather than
regulation, has led to a set of highly positive (although not
widely recognised) public policy outcomes for both consumers and
small businesses.
5. In particular, there is no poverty-related
"digital divide" in mobile. By this Vodafone means that
virtually all English consumers who now wish to have access to
a mobile phone are able to afford this either on a new or on a
second hand basis at relatively low cost. Indeed mobile access
often now represents the most affordable method of connecting
to the telephone network for consumers on low incomes and/or in
short term accommodation. This outcome applies equally in urban
and rural areas of England.
6. Beyond this outcome, rural areas have
also benefited significantly from the national basis of price
competition in mobile. Like other industries mobile operators
incur relatively high costs of supply in rural areas: that is
costs are higher in rural as opposed to urban areas as measured
by the number of subscribers served. However, commercially mobile
operators have chosen to apply national pricing schemes so that
competition bears down equally on rural prices at the same pace
as urban. This distributional outcome is not generally matched
by other competitively provided goods or services available nationally.
This is a highly positive outcome for rural mobile customers.
7. More generally, competition on quality
in mobile centres around the ability to make and receive calls
wherever a customer is: in other words on network coverage and
capacity. This competitive dynamic means that it has been in mobile
operators' interests to extend coverage in rural areas beyond
the level which would be justified by local demand alone.
8. This is why each of the four established
mobile network operators now typically covers some 98% of the
UK population; and furthermore, as individual network footprints
are not identical, actual aggregate national mobile coverage is
closer to 99% by population. This dynamic is continuing and, for
example, Vodafone is currently expanding its rural coverage in
England, for example, in rural Derbyshire.
9. Vodafone anticipates that similar competitive
dynamics will apply to a large extent to higher bandwidth mobile
services as these are launched and become widespread. However,
it will take a number of years for the Government, industry and
other stakeholders to be able to assess accurately the final extent
of mobile broadband (3G) coverage that will result from market
competition, over and above the 3G licence obligation of 80% population
coverage:
— Until this time it would be inappropriate
for public funding to be provided for any broadband roll-out into
rural areas which might undermine incentives for 3G roll out.
— In assessing options for providing
broadband coverage to rural populations beyond the final level
of "competitive" coverage, Vodafone believes that mobile
broadband (3G) is potentially the most effective technical approach.
Therefore Vodafone believes that mobile broadband (3G) technology
should be a strong candidate at the time when this question is
addressed.
— At the appropriate point going forwards,
Vodafone would readily participate in a debate and process for
deciding how best to subsidise broadband roll-out to the remaining
areas.
10. Where mobile broadband (3G) services
do become available in rural areas, Vodafone expects these to
be on commercial terms which reflect the general commercial propositions
of UK mobile operators across other parts of the country.
11. In terms of obstacles to the commercial
roll out of higher bandwidth mobile services, Vodafone would identify
the following:
— Regulatory action on service pricing
which reduces the commercial attractiveness to an operator of
a customer seeking to upgrade to a new handset with wider service
availability. Mobile operators, such as Vodafone, will increasingly
offer handsets which will provide access to a range of higher
bandwidth services as well as existing services such as voice,
text and picture messaging. It will be in the interests of widespread
broadband take-up for those customers with a clear or latent propensity
to use broadband services to be offered handsets with broadband
capability on attractive terms.
— Premature government action, under
a banner of industrial or rural policy, which might undermine
the basis of returns on higher bandwidth mobile investment or
which might act to favour particular technologies or operators.
An example here might be an attempt to "pick winners"
from competing technology approaches and to support these through
broad public subsidy ahead of the point in time when the industry
stakeholders have greater confidence in predicting the level of
coverage that commercial competition will deliver.
Vodafone UK
11 March 2003
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