Select Committee on Culture, Media and Sport Written Evidence

Memorandum submitted by Hutchison 3G UK Ltd

  Hutchison 3G UK Limited ("H3G") is the UK's fifth mobile network operator, having won the 3G licence reserved for the new entrant in the 3G spectrum auction. H3G has been instrumental in both increasing competition in the UK mobile phone market and in driving the migration to 3G technology which delivers a range of mobile broadband services including television services. Operational since 2003, H3G is the fastest growing mobile network provider in UK history and already offers service to well over three million customers. H3G has national coverage for traditional voice services and has 87% population coverage for its mobile broadband services. This is greater than any other UK mobile operator.

  H3G has been interested to note during the ongoing "Analogue Switch-Off" inquiry the direction of questioning the Committee has taken during its various evidence sessions. Whilst there are many technical issues arising from the switchover timescale, it occurs to us that there are several directly comparable issues which could be equally raised in relation to the mobile sector. We note that, while the technologies and services within the broadcasting and mobile sectors have been converging rapidly, the policy approach to those sectors remains resolutely "unconverged" and contradictory.

  The following table may be instructive:

Digital Broadcasting Mobile Broadband 3G
Reliant on allocation of spectrum for delivery YesYes
Provides multiple audio and video services using digital encoding YesYes
Provides news and information services in video format Yes—to a fixed locationYes—to the individual
Universal availability important for social inclusion Yes—provides a base line access to news and information at low cost Yes—provides lowest cost access to broadband services
Increasingly using interactive elements YesYes
Replacement for existing more limited technology with related competition concerns YesYes
Customers22 million households once migration complete 60 million individuals once migration complete
Revenue as % of GDP



(Mobile voice and data)
Migration planDetailed and extensive government intervention with clear dates for switch off and public information on this process, Government involvement in managing the many public and private sector stakeholders involved Ofcom has no view on the optimal speed of migration from 2G to 3G.

  Despite these many similarities it is clear that there is no standardised process to monitor and deliver migration across technologies. Whereas Ofcom has been empowered to take an interventionist approach in relation to the switch from analogue to digital broadcasting it has no explicit statutory requirement with regard the migration from 2G to 3G mobile broadband. Although all of the 3G licensees have an obligation to reach 80% 3G coverage by end of 2007, an obligation that H3G has already met, the performance of the other operators in delivering 3G migration has been much slower. To date this has prompted a limited and inconclusive response by Ofcom.
OperatorNumber of reported 3G Subscribers
Vodafone438,000 (September 2005)
OrangeEst: 300,000 (January 2005)
O2No official numbers
T-MobileNo official numbers
H3G3,200,000 (August 2005)

  It is also our belief that with the advent of television on mobile the emergence of 3G as a technology platform may be of equivalent or even greater significance than the digital broadcasting switchover. If licence commitments are properly enforced by Ofcom (and it is our express view that they Ofcom should act against those operators who fail to meet their 3G roll-out targets) over 80% of the population will have the potential to access mobile broadband services using their existing mobile provider, by 2007, five years before the completion of the digital broadcasting switchover.

  For consumers to fully enjoy the benefits of 3G technology it is essential that a critical mass of users connect. For example video calling only becomes attractive when there are a large number of people with 3G video enabled phones. The value of network services such as video calling rises with the square of the number of people connected. Similarly for new content services to be rolled out on to 3G (including government information) there needs to be a large base of 3G enabled customers that are capable of accessing this information. Just as leading media content providers, such as the BBC, have helped to pioneer the migration to digital radio and television platforms, we would welcome them playing an equivalent supportive role in the development of 3G.

  There is no doubting that there are significant commercial implications in migrating existing customers from 2G to 3G. Incumbent operators have low financial incentives to switch already retained customer contracts to a new platform that requires increased investment in both network and handset. Without any incentive, or enforcement to do so, one of the initial objectives of the 3G licensing, to drive technology innovation through competition, will not be met. With the 2G to 3G migration, as has been the case with the broadcasting digital switchover, both the imperative of incentives and the provision of content should be addressed.

17 January 2006

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