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
| Yes | Yes |
| Provides multiple audio and video services using digital encoding
| Yes | Yes |
| Provides news and information services in video format
| Yes—to a fixed location | Yes—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 |
Yes | Yes |
| Replacement for existing more limited technology with related competition concerns
| Yes | Yes |
| Customers | 22 million households once migration complete
| 60 million individuals once migration complete
|
Revenue as % of GDP
(2004) | 10.1
(TV)
| 12.3
(Mobile voice and data) |
| Migration plan | Detailed 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.
| Operator | Number of reported 3G Subscribers
|
| Vodafone | 438,000 (September 2005)
|
| Orange | Est: 300,000 (January 2005)
|
| O2 | No official numbers |
| T-Mobile | No official numbers
|
| H3G | 3,200,000 (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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