Memorandum submitted by Hutchison 3G UK
Limited ("H3G")
1. INTRODUCTION
1.1 H3G is pleased to respond to the Select
Committee inquiry. The notion of technological convergence is
much discussed, but rarely considered in practical detail. H3G
is pleased that the Select Committee is pursuing this line of
inquiry as H3G believes the resolution of these issues will allow
for a better informed debate and better decision making.
1.2 This submission is complementary to
that of the Mobile Broadband Group (MBG) of which H3G has been
a member since its inception. In addition to fully supporting
the MBG submission H3G have taken this opportunity to emphasise
its own position as the leading operator in mobile broadband and
media convergence.
2. ABOUT H3G
2.1 H3G operates in the UK under the
brand name "3" and is owned by the Hong Kong based Hutchison
Whampoa (HWL) group. HWL currently serves over 20 million mobile
phone customers worldwide and is the first international provider
of 3G video mobile services. HWL has an impressive history of
adopting new mobile technologies early and leading the roll out
of those technologies. HWL has been successfully operating 3G
networks and equipment in the United Kingdom, Italy, Australia,
Sweden, Denmark, Ireland and Austria since 2003.
2.2 H3G is the UK's fifth mobile network
operator. In the 3G spectrum auction of 2000 it won the 3G licence
specifically reserved for the new entrant to increase competition
for the benefit of the consumer.
2.3 H3G paid £4.38 billion to the UK
Treasury for its 3G licence. In total the Treasury received £22.2
billion as a result of the 3G auction.
2.4 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, internet access and new content
services.
2.5 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 88% population coverage for its mobile
broadband services. This is greater than any other UK mobile operator
and well ahead of the obligation accepted by all operators at
the time of the auction—80% coverage by end 2007. To date
only H3G has met this obligation.
3. THE IMPACT
OF RECENT
AND FUTURE
DEVELOPMENTS IN
DIGITAL CONVERGENCE
AND MEDIA
TECHNOLOGY
3.1 As the first and leading mover in mobile
broadband, it is clear to H3G that the successful and ongoing
deployment of 3G networks is in itself one of the most important
developments driving the use of mobile broadband services.
3.2 Mobile broadband has created an important
further distribution mechanism for digital content, and this has
given a head start to the UK creative industries by having a home
market for these new services. In the early stages of development
H3G established innovative partnerships with handset providers—as
would be expected—but also with content editors such as
BBC Technology. In so doing H3G was at the forefront of establishing
a significant British 3G skills base to enhance UK competitiveness
as the new technology took root. According to the Official Charts
Company (OCC), since the beginning of 2006 53% of all mobile audio
downloads in the UK took place on H3G's network.
3.3 3G is the natural next step in the development
of mobile communications. The reality behind this is a digital
revolution which has made high speed data transfer a reliable
option for literally millions of commercial and private consumers
alike. At the end of 2005 ABI Research placed the number of worldwide
3G subscribers at 42 million, a 142% year on year increase.[13]
3.4 With the realisation of mobile broadband
delivery, H3G notes that considerable changes have occurred to
the choice which consumers have as to both the means and nature
of how they access information and entertainment.
3.5 To date consumers have chosen to "snack"
on the mobile content offerings made to them. Choosing content
they need in bite size chunks and downloading it to the handset.
News bulletins, comedy sketches, music video downloads are all
examples of mobile "snacking". These consumer preferences
are stimulating a demand for non-traditional content production.
Meanwhile consumers using their 3G device (handset or datacard)
as a modem will notice little difference in speed when compared
to a broadband ADSL fixed line connection—and have far greater
versatility of location and mobility than any combination of fixed
service and wifi "hot spots".
3.6 However, modes of, and motivation to,
access mobile content are already changing and content production
is changing accordingly. Whereas it was once the case that existing
content was adapted and edited to fit the 3G format and emerging
technology, today content is being developed and commissioned
specifically for 3G viewing platforms. Indeed, such is the potential
of the market that, together with St Martins College of Art, H3G
is running a special course dedicated to making music videos for
mobile. The future is "off the shelf" applications which
the consumer will themselves have the power of choice over rather
than to respond only to limited edited content originally intended
for other platforms.
3.7 In addition, H3G is proud to have pioneered
the development of user generated content in the UK. This unique
model permits customers the opportunity to generate and supply
their own content which, after review by H3G to ensure standards
compliance, is then published and made available for other H3G
customers to view and publish. For each download the contributing
customer receives a small payment.
3.8 Whilst in its early stages this service
has proved extremely popular and offers the prospect of genuine
"citizen journalism" video reporting. The development
of personal and community weblog services is an important one.
There have been over four million downloads of user generated
content since launch and such downloads are running at a rate
of over one million downloads per month. H3G has paid out over
one hundred thousand pounds to these new citizen journalists.
4. THE EFFECTS
OF UNAUTHORISED
REPRODUCTION AND
DISSEMINATION OF
CREATIVE CONTENT
AND WHAT
STEPS SHOULD
BE TAKEN
TO PROTECT
CREATORS
4.1 From the start H3G has been mindful
of the need to protect the interests of the content creators and
the value of the content. To this end H3G has pioneered a "walled
garden" environment to ensure that all content available
to our consumers passes strict standards and has particular value
to H3G's subscribers. Other than user generated content, third
party downloaded content from our servers is retained securely
on the customer's handset (through a digital rights management
technology called "Content Forward Lock") and is not
"forwardable" to others.
4.2 To date H3G is not aware of any major
incidence in which there has been unauthorised reproduction of
our content. In this regard the development of an entirely new
platform for content does not indicate a corresponding read-over
in terms of piracy problems which have beset other platforms at
similar stages in their development. Digital rights management
technologies have been used from the outset.
4.3 It is also important to note that 3G
as a new distribution platform has significantly increased the
potential value of content. Some artists have chosen to pre-release
pop-videos as downloadable 3G content prior to general release,
others have chosen to increase their viewing audience without
going to the expense of hiring a larger physical venue by using
3G access to the live concert. In this manner 3G has enabled a
wider audience and created greater value to the content creator.
This month H3G launched a video single by "Massive Attack"
exclusively on its mobile broadband network. Increasingly mobile
broadband will replace existing forms of content distribution
with direct digital distribution to the consumer's handset or
other mobile device.
4.4 It is our belief that sufficient legal
safeguards already exist—in terms of copyright protection
for example—that respects the rights of the content creator
and thus makes further, or mobile specific, regulation unwarranted.
4.5 However H3G does seek clarity in two
key areas. Firstly clarity is needed as to where (producer, broadcaster
or aggregator) the mobile rights for established content formats,
like highlight clips from broadcast TV or clips from footage not
shown on either terrestrial or non-terrestrial TV, actually sit.
Secondly, there needs to be clarity on who has the right to licence
new formats built around a TV property but which does not include
footage included in the actual broadcast. It is possible that
the lack of clarity may delay the development of a dynamic fully
content rich environment in mobile.
4.6 Given the difficulty in agreeing precise
and meaningful definitions around the many different content categories
it would seem that "windowing" in reproduction rights
is the most appropriate means of resolving rights ownership issues.
5. THE EXTENT
TO WHICH
REGULATION SHOULD
BE APPLIED
TO CONTENT
ACCESSED VIA
NON TRADITIONAL
MEDIA PLATFORMS
5.1 It is clear that at this stage in the
development of mobile broadband the existing platforms, such as
terrestrial television and music distribution, will provide the
basis for the first mobile content offerings. It is also substantially
the case that the consumer is familiar with these formats. Regulation
in this area has traditionally grown only in response to evidence
of risk or actual consumer harm, and in the case of taste and
decency diminished in response to changing common community standards.
5.2 In response to consumer demand, there
is substantial overlap in the content now available on the move
with that provided by the traditional forms of content distribution.
This does not mean however that there is a new entity which is
therefore in need of regulation as some aspects of the amendments
to the Television without Frontiers Directives seem to imply.
The similarity of content does not in our view justify the same
imposition and regulatory intervention causing mobile content
to be regulated in a similar way as traditional broadcast content.
This would be inappropriate.
5.3 Regulation in each of the traditional
media was established because of the specific circumstances of
those media—for example in the terrestrial television limited
spectrum availability and the special role of public service broadcasters.
Mobile broadband does not raise the same regulatory concerns.
It is still essentially a "pull" media in which individuals
request access to specific content to their own receiving device.
There is no risk of being inadvertently exposed to material that
has not been requested and viewing is not a shared experience
as it is for television.
5.4 The choice to purchase mobile content
is entirely an individual one. Provided there is adequate information
on the nature and cost of the content, and there are appropriate
safeguards and controls in place to restrict access by minors
to inappropriate content, then the need for formal regulation
is not compelling as it is for broadcast content. There is no
accidental or unintended viewing of mobile content.
5.5 Even where the consumer opts to view
live or streamed content over and above restricted content he
or she will have had to have made a conscious decision to view
such content over and above other content (games, music, ringtones,
sports downloads etc) in a manner that is altogether different
to switching on a television where the choice is merely between
watching one channel or another.
5.6 As the submission by the Mobile Broadband
Group makes clear, there is certainly no compelling case for the
regulation of other content that is not of a live or streamed
nature given that the mobile industry has proven itself willing
to develop self or co regulatory models where appropriate
in order to address concerns around access by minors or pricing
transparency.
5.7 New forms of content on mobile devices
are still very much in an embryonic stage of development. However
the direct relationship which the network has with its consumers
has ensured that the mistakes of early mass access to internet
services have not been repeated on this platform. To impose regulation
this point in time runs the risk of stifling this dynamic market.
6. WHERE THE
BALANCE SHOULD
LIE BETWEEN
RIGHTS OF
CREATORS AND
EXPECTATIONS OF
CONSUMERS IN
THE CONTEXT
OF THE
BBC'S CREATIVE
ARCHIVE
6.1 H3G does not have a closed view on the
issue of how content rights should be acquired, transferred or
traded. However the BBC's archive is in a unique situation and
the issue of the use of material acquired at public expense before
technical advances such as the internet and mobile broadband had
taken place is a difficult one. A balance needs to be drawn between
the legitimate interests of content creators and the public interest
in this unique situation.
6.2 H3G will and does buy rights to content
from whichever source it can. For the benefits of 3G technology
to be fully realised it is essential however that a critical mass
of users connect in order to justify the largely fixed cost investments
in new content. The minimum efficient scale for developing certain
types of content for mobile may be large.
6.3 In essence a "virtuous circle"
can be created where improved content increases the attractiveness
to subscribers which in turn makes content providers more interested
in producing new content for the 3G platform. The greater the
3G penetration, the greater the scale of operations and downward
pressure on costs—which drives ultimate benefit to consumers,
and thus reinforces the "virtuous circle".
6.4 Similarly for new content services to
be rolled out on to 3G (including access and interaction with
government services or information) there needs to be a large
base of "3G enabled" customers that are capable of accessing
this information.
6.5 Just as leading media content providers,
such as the BBC, have helped to pioneer the migration to digital
radio and television platforms, we feel there may be a greater
role for public service content providers to play an equivalent
supporting role in the development of 3G. There should certainly
be no bar on public service operators providing content to new
digital platforms.
6.6 It has been the experience of H3G that
the attitude of the BBC towards providing content has been thus
far mixed at best, and contradictory at worst. Provided that BBC
content is bundled along side other video content—to ensure
that no particular charge for a channel or programme is made—there
should be no problem in the BBC making content available.
6.7 For commercial broadcasters the situation
is stacked very much more in their favour. They may pick and choose
which particular content is to be available and when, and as such
their rates obviously vary accordingly.
29 March 2006
13 "3G Telephony is coming on", www.3g.co.uk;
24 February 2006. Back
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