Regulatory Environment for Future Mobile Multimedia Services-- The Case of Hong Kong SAR and China

Xu Yan HKUST Business School xuyan@ust.hk

Country Case Study Prepared for the ITU New Initiatives Workshop on the Regulatory Environment

for Future Mobile Multimedia Services

Mobile Multi-media Services in Hong Kong

Highly competitive mobile market: 11 2G licenses + 4 3G licenses + 7 MVNO LicensesMarket restructuring in past 12 months

Poor usage of SMSThree trends in the 3G era

Mobile/media ConvergenceSynergy of Corporate Resources and StrategiesFixed/mobile Convergence

Mobile/media Convergence

Mobile + TVMobile + RadioMobile + NewspaperMobile + Internet Portal

Synergy of Corporate Resources

Shared channel by NOW and PCCW Mobile

Fixed/mobile Convergence

Intern

et

WS Mobile Video Surv App Server

Internet / IP Access

Video Streaming

WAP Access Servers

Web Access Servers

Broadband Modem

Router (Wired/ Wireless)

Home / Office/Retail WiseWatch Platform Mobile Operator

WiseWatch Wired Camera

WiseWatch WiFiCamera

• Server Authentication Security• Automatic IP adaptation• Automatic screen sizing• Motion detection

View from Mobile Data

GPRS / EDGE / 3G Data

3GPP Video Streaming

View from PCInternet / IP Access

Video Streaming

2G/3

G

Mob

ile

Dat

a

Net

wor

k

Mobile Multi-media Services in China

Duopoly MarketChina MobileChina Unicom

Impressive Growth of SMS

440 607540400

103000

172600

249609

0

50000

100000

150000

200000

250000

300000

Mill

ion

Mes

sage

s

2000 2001 2002 2003 2004 2005

Revenues from China Mobile’s New Services (RMB Millions)

4,23710,704

16,38024,671

1,343

3,093

6,723

12,451

3155

4139

8548

13,065

0

10,000

20,000

30,000

40,000

50,000

2002 2003 2004 2005

Voice VASNon-SMS Data ServicesSMS

China Mobile’s New Services Revenue and

Contribution to Total Revenue (RMB Billion; %)

8,73517,936

31,651

50,1876.10%

10.00%

15.50%

20.60%

0

10000

20000

30000

40000

50000

60000

2002 2003 2004 20050.00%

5.00%

10.00%

15.00%

20.00%

25.00%Revenue from New Services

Revenue from New Services/TotalRevenue

Technology Neutrality

Hong KongConsistent policy stance vs. Government’s preference to cdma2000

ChinaNation’s economic return vs. company’s financial return: The case of TD-SCDMA

Spectrum Policy

Hong KongInnovative royalty auction of 3G licenseConsistency of renewed 2G licensesUrgency for flexible trade of spectrumSpectrum regulation for Digital Terrestrial TVComprehensive frequency policy review:

Asymmetric regulation between mobile &. fixed technology?

ChinaIs the benchmarked unit price of spectrum objective?

Regulatory Framework

Hong KongCommunications Authority (CA): Merger of Telecommunications Authority (TA) and Broadcasting Authority (BA)The industry don’t see any urgency of mergerInfrastructure may suffer from content-related political controversies

ChinaControversies over Mobile TV Licensing

Policy level merger may be more critical

DRM and Copyright

Hong KongDRM Version 1 is used for music downloadAgreement with records companies and CASHCopyright is not a significant issue when using streaming technology

ChinaSimilar to Hong KongMobile operators have more and more bargain power

Unsolicited Electronic Messaging (Spamming)

Hong KongNone of current legislations, code of practice and technology can tackle spamming effectivelyProposed new legislation:

Opt-in vs. opt-outdo-not-call registers by governmentFreedom of speech, innovation

ChinaSunshine ∙ Green Network Program

re-register subscribers in their real namesOpt-out is adopted for Internet spamming regulationRegulation for mobile spamming is under drafting

Harmful Content Regulation

Hong KongOne size fits all regulation

Control of Obscene and Indecent Articles Ordinance (Cap. 390) Prevention of Child Pornography Ordinance (Cap. 579)

No subscription contract with childrenThe role of parents

ChinaService specific regulation: Internet, mobile network, movies, newspaper, …

Network Interconnection

Hong Kongmobile always pay fixedTraffic-basedUnder review: peering

ChinaOrigination party pay terminating partyTraffic-based

Market Competition and Network Access

Hong KongUsing MVNO license to facilitate competition3G licensees must open at least 30% of their 3G network capacity for use by non-affiliated companies to operate as MVNOs and/or content providers

ChinaMVNO license is not listed in the license categoriesContent and application providers have weak bargain power in accessing mobile networks

Pricing, Affordability and Transparency

Hong KongPricing should be user friendlyAffordability may not lie in service but terminals

ChinaOfficial pricing flexibility since May 2006SMS is actually an economic solution for affordability

Privacy

Hong KongPersonal Data (Privacy) Ordinance (Cap. 486) is insufficientThe Case of Bus UncleOFTA’s 3G licensing term regarding location-based service

ChinaNo privacy law yetThe “Law of the People's Republic of China on Administrative Penalties for Public Security” prohibits people from conducting peep, taking photo stealthily, eavesdropping and distributing the privacy of the others

Governance on Misconduct of Content Providers

The Case of ChinaGovernance on misconduct of content providersMisleading subscription confirmationLocking subscribersPricing transparency

Conclusion

Mobile Multi-media services have challenged traditional regulatory framework regarding spectrum management, network interconnection

Mobile Multi-media services needs new or revised legislation regarding content, privacy, etc.

Terms of license can supplement legislation

Policy level convergence is critical

Regulation should extend beyond operators

Thank You!