2 Mobile telephony

This chapter aims to provide a brief overview of mobile telephony. It is meant

to make the reader familiar with the ingredients that are relevant when answer-
ing the RQs introduced in Chapter 1. We start with a general introduction.
Rapidly developing mobile technologies have contributed to a variety of
capabilities and functionalities that are becoming standard applications in
mobile phones and other communication devices. The mobile phone, for
example, has evolved into a platform that offers multimedia interactive expe-
rience to its users. We attribute the mobile phone’s rapid evolution to two
distinguishing features: its ability (1) to connect people and (2) to empower
the user. The first distinguishing feature of the mobile phone, i.e., to connect
(communicative element), is a significant element when considering the grow-
ing need for society to stay in touch, to communicate, and to have access to
information ‘anytime, anywhere, anyhow’. However, we are also seeing a
changing trend in the way the society is connecting. We are no longer using
the mobile to talk but we are also using the mobile phone as an empowering
medium (see below) to play, to share, to view, to update, to invite, to consult,
to message, and to conference.
In relation to having access to information ‘anytime, anywhere, anyhow’,
this is observed in the provision of a variety of mobile audio-visual contents
and services either without charge (free) or for a fee via premium-rate services.
Three types of content may be provided: (1) mobile customisation content (ring-
tones, logos, and wall papers), (2) content of informational value (news, sport,
weather, and financial market update), and (3) entertainment content. Some
examples of entertainment content include a short movie and music clips, and
mobile games. In order to take advantage of the mobility and portability of
mobile devices, a number of other services have also been developed for the
mobile platform. These take the form of dating services and location-based
informational services.
The second distinguishing feature of the mobile phone is that it empowers
the user, by placing the user in control. The user controls (1) how he can be
contacted, (2) when he can be contacted, and (3) the type of content and
services he wishes to have access to. The control that the user experiences in
a mobile environment outweighs by far the control he has in a fixed environ-
ment. Although, similar content and services are readily available in the fixed
environment, the increasing demands and requirements for these new forms
of wireless communication have propelled the development and evolution
28 Mobile telephony

of mobile technology and with it, mobile content development to satisfy the
ever growing demands of the user.
The chapter starts with a brief discussion of the development of mobile
communication technology (Section 2.1). Section 2.2 contains a brief overview
of Hong Kong’s mobile telecommunications infrastructure and its players. The
introduction of mobile content is dealt with in Section 2.3. The chapter con-
siders the delivery of mobile content over various platforms in Section 2.4.
We conclude the chapter in Section 2.5.

2.1 THE DEVELOPMENT OF MOBILE TECHNOLOGY

Mobile devices have evolved significantly over the past fifteen years. The
earlier generation mobile phones stayed relatively close to their original
objective of providing vocal communication. They were neither designed to
display pictures, graphics, and short video clips, nor to have the capability
to play music, capture still images, and access and send e-mail. However, the
mobile phones have evolved to incorporate greater user friendly applications.
Their size have also become smaller and their weight much lighter.

Three major generations

Historically, there are three major generations of mobile telephony with fast
wireless data transmission. The 1st generation mobile phones, for example,
were analog based. The 2nd generation (2G) mobile devices were based on
the GSM (Global System for Mobile Communication). The data speeds of 2G
mobile phones were between 9.6 kilobits per second (Kbps) to 14.4 Kbps.1
Shortly thereafter, an improvement on the GSM came in the form of the GPRS
(General Packet Radio Service) 2.5G service. The GPRS transfers data at 27
Kbps.2 Further development of mobile technology saw the introduction of
3G technology. With 3G, UMTS (Universal Mobile Telephony System) was used.
In comparison to earlier technologies, 3G provides faster data transfers at
speeds of 128Kbps to 384Kbps.3 This enables mobile users to access the Inter-
net, to download files, and share videos. It also provides users with the expe-
rience of the fixed Internet platform. With 3G, mobile phone screens have
become larger with full vibrant colours. Furthermore, storage capacity has
increased to take on the experience of a variety of audiovisual content of the
Internet.

1 Ahlert, C., Nash, V., and Marsden, C., (2005), Implications of the Mobile Internet for the
Protection of Minors, Preliminary Report of the OII-led Working Group on Mobile Phones and
Child Protection of EICN, April 2005; available at http://network.foruminternet.org
2 Supra.
3 Supra.
Chapter 2 29

Emphasis is on applications
However, from the user’s point of view, the differences between the later and
earlier generations of mobile phones are characterised by the applications
which the mobile phones facilitate.4 We observe that it was only with the
introduction of 2G digital cellular technology that we had the integration of
voice and data communication. Thus, the first application of SMS (short messag-
ing service) and MMS (multimedia messaging service) were provided by 2G
mobile phones. The application remains the best known application of 2G
mobiles and is still a common form of text communication between mobile
phone users. SMS application is popularly used to personalise a mobile phone
to reflect a mobile user’s identity and fashion sense by downloading ring-tones,
logos, and wall papers. With 2.5G mobile phones, the availability of entertain-
ment content increased and became more varied to include graphic, photos,
music, and games download. Communication via messaging became more
personal and interactive with MMS. However without doubt, we observe that
the mobile world ‘opened up’ with the introduction of 3G technology. 3G
provides a full range of broadband applications available, including audio
and video streaming, video capture, on-line gaming, and a host of other
applications. Richer content, higher quality graphics, and greater interactivity
is what distinguishes 3G from earlier generations of mobile phones.5 Indeed,
the next evolutionary step in mobile phone development is the introduction
of smart phones seen in the form of for example, Apple iPhone, Blackberry,
and Palm Pre. Possessing enhanced features such as Wi-Fi, web-browsing,
MP3 and movie play-back, the smart phones are experiencing a rapid rise in
consumer sales.6

Experience of new technologies

Although mobile technology and wireless communication are continuously
evolving together with other standards that are recently developed, such as
(1) WiFi and Bluetooth (2) WiMAX technology, and 4G, this chapter does not
intend to focus on these technologies. The reason is that the more recent
technologies and the mobile devices are currently not available in terms of
(a) cost of service, and (b) cost of hardware, to children and young people.
We are of the opinion that when the devices incorporating the later standards
and technology, become increasingly available to the younger generation under
competition driven economies, the potential hazards and risks raised in Chap-
ter 3 will become even more pressing to both governments and communities.

4 Supra.
5 Alhert, Nash and Marsden supra n.1.
6 Lohr, S., (2009), Smart phones rises fast from gadget to necessity, The New York Times, Techno-
logy, June 9, 2009, available at http://www.nytimes.com/2009/06/10/technology/
10phone.html?_r=1; see also Perez, M. (2009), Smart Phone will be the next phone for many,
Information Week, June 12, 2009, available at http//www.informationweek.com/news/
personal_tech/smartphones/showArticle.jhtml?articleID=21780102
30 Mobile telephony

2.2 TELECOMMUNICATION INFRASTRUCTURE IN HONG KONG

Having considered the various mobile technologies, this section will briefly
deal with Hong Kong’s telecommunications infrastructure (Subsection 2.2.1),
telecommunication services, and mobile operators (Subsection 2.2.2). The
telecommunications services in the section are restricted to mobile telephony
services and do not include services such as fixed line telephony or Internet
Protocol telephony. Moreover, we address the open access strategy (Subsection
2.2.3).

2.2.1 The infrastructure: mobile phone services

Licenses for mobile services were first issued in 1987 for analogue service.
This was rapidly followed by the issuance of digital GSM service in 1992. We
observe that competition remains keen in the mobile services sector. As at
August 2008, there were fourteen digital networks operating: four in the 800/
900 MHz (of Megahertz) bands, six in the 1700 -1900 MHz bands, and a further
four in the UMTS bands.7
The telecommunication infrastructure in Hong Kong is well established.
With a population of just over 7 million, Hong Kong has over 3.8 million fixed
telephone lines and approximately 8.8 million mobile phone subscribers. The
number of registered mobile subscribers was recorded at 11,230,499 in August
2008.8 This represents one of the highest penetration rate of about 160.8%.
It can be compared to 10.98 million in June 2008 and 9.3 million at the end
of February 2007; this represents an increase from 123 mobile phones per 100
inhabitants at the beginning of 2006.9 As at the end of August 2008, out of
the 11,230,499 subscribers, 2.961,460 are 2.5G and 3G mobile service sub-
scribers.10 In addition to voice services, popular applications and data services
enjoyed are SMS, mobile internet, download services, multimedia, video, and
mobile TV. Further with the current 3G network in the process of being
upgraded with high speed downlink packet access (HSDPA) technology, 3G
mobile-service users can experience higher speed data download of up to
3.6Mbps. In fact, the successful upgrade has led the increase in the number
of 2.5G and 3G data-service users from 2.66 million in July 2006 to 2.94 million

7 Hong Kong: The Facts-Telecommunication, available at http:www.gov.hk/en/abouthk/

factsheets/docs/telecommunications.pdf
8 The number includes digital, PCs and pre-paid SIM subscribers. See Key statistics for
Telecommunications in Hong Kong, available at http://www.ofta.gov.hk/en/datastat/
eng_wireless.pdf
9 As at July 2007, the mobile penetration rate is 139.8% with registered mobile subscribers
standing at 9,674825. The number of 2.5G and 3G subscribers as at the end of July is
2,657,736. See http://www.ofta.gov.hk/en/datastat/key_stat.html
10 See Key Statistics for Telecommunication Services in Hong Kong as at August 2008; available
at www.ofta,.gov.hk/en/datastat/eng_wireless.pdf
Chapter 2 31

in July 2008.11 As of July 2008, 26% of mobile-service users in Hong Kong

have subscribed to data services. We believe that the statistics provide a
relevant indicator in that with the increasing number of 3G users, it is conceiv-
able that the consumption of mobile content services and the exposure to
inappropriate materials will likewise increase.

2.2.2 The players

Having briefly described the infrastructure for mobile services this section deals
with the players in a mobile telecommunication sector. In this respect, we
regard mobile network operators (MNOs) and mobile virtual network providers
(MVNOs) as the two main players.

A: Mobile network operators (MNOs)

Mobile network operators (MNOs) are assigned a radio spectrum through which
public radio communication service is provided. In Hong Kong, as an MNO
means a holder of the following: (1) a mobile carrier license, (2) a public radio
telephone services license, or (3) a personal communication services license.
There are six licensed personal-communication-service-licensed operators in
Hong Kong. The six personal-communication-service-licensed operators are
also licensed MNOs. We provide details of the licensed MNOs in Appendix A,
where we also provide two Figures. Figure A1 illustrates the market share
of the respective MNOs in Hong Kong as at early 2005 and Figure A2 shows
the mobile market in Hong Kong as at early 2006. In Appendix B, we illustrate
by way of a case sample of CSL New World Limited Ltd via its brand name,
One2Free. The case sample provides the typical mobile content that an MNO
might offer to mobile phone users in Hong Kong.

B: Mobile virtual network operators (MVNOs)

In so far as Mobile Virtual Network Operators (MVNOs) are concerned, we
note that the establishment of MVNOs is a fairly recent phenomenon. In Hong
Kong, an MVNO is an entity that “provides mobile telecommunications services
to customers through interconnection with and access to the radio-communica-
tions infrastructure of a Mobile Network Operator (MNO)”.12 Thus, an MVNO

11 OFTA Trading Fund Report 2007/2008; available at www.ofta.gov.hk/en/trade-fund-report/

0708/pdf.full.pdf
12 See Office of Telecommunication Authority at ww.ofta.com.hk. Other definitions of MVNO
have been provided by International Telecoms Union and U.K.’s Office of Communication.
ITU defined MVNO as “an operator who provides mobile communications services to users
without its own airtime and government-issued licenses” whilst OFCOM defines MVNO
as “an organization providing customers with mobile phone services without owning any
airtime”. See a brief description on different types of MVNO in http://web.si.umich.edu/
tprc/papers/2006/513/dewenter_haucap_workingpaper.pdf
32 Mobile telephony

does not have its own infrastructure. Rather, it uses the infrastructure of an
MNO.
The first MVNO was UK’s Virgin Mobile in 1999. MVNOs have been viewed
positively since (1) they stimulate competition, and (2) are able to target niche
markets. MVNOs promote competition as (a) they enable new entrants to enter
the market without the large network building costs required, (b) they bring
down prices and keep MNOs honest by expanding consumer choices, and (c)
they promote the use of excess network capacity.13 MVNOs provide an attract-
ive complement to the MNOs by focusing on content creation and distribution.
Examples of MVNOs include Disney Mobile, Mobile ESPN, and Vivendi Uni-
versal Music Mobile.14
Given the popularity of MVNOs in Europe, and with the view of opening
up the telecommunication services sector, the Hong Kong Telecommunication
Authority has provided for their establishment of MVNOs in Hong Kong. Thus,
MVNOs provide mobile services to customers by access to, and interconnection
with radio-communications infrastructure of MNOs.15 The issuance of a public-
non-exclusive-telecommunication (PNET) licence to provide MVNO services was
part of Hong Kong’s liberalisation efforts to open the telecoms market by
allowing companies which does not have their own networks to participate
in the operations and the provision of local mobile telecom services.16 This
is in accordance with the Telecommunications Authority’s (TA) obligations
on open network access. TA’s open access strategy is described in the following
subsection.

13 Srivastava,. L., (2006), The Regulatory Environment For Future Mobile Multimedia Services,
Issue Paper 2006, Document number MMS/03v2; available at
www.itu.int/osg/spu/ni/multimobile/presentations/ITUsrivastava_mobilemultimedia.pdf
14 Disney Mobile is a collaboration between U.S.’s Sprint and U.K.’s O2. The service will offer
Disney branded mobile phones with restricted calling and internet access as determined
by children’s parents. Children between the ages of 8to14 year olds will be targeted. See
www.disney.go.com/disneymobile/. Vivendi Universal Music offers speciality music
applications (including previews of new releases , music news, CD buying capabilities.
15 Note MVNOs are different from resellers. Resellers merely resell the service of the MNO
without establishment and maintenance of any means of telecommunication. The services
are marketed using the reseller’s own brand and billing function. See Leung, M., (2002),
Mobile Virtual Network Operators in Hong Kong, April 2002, available at www.swedish
trade.se/ittelekom/static/MVNO.pdf
16 In this regard, as far as MVNOs are concerned, the telecommunications system of a MVNO
interconnects with a 3G network within the meaning of “interconnection” as provided for
and required under section 36A of the Telecommunications Ordinance. A MVNO which
satisfies minimum criteria has access to numbering resources.and mobile network codes.
As qualified MVNOs may seek the Telecommunication Authority’s intervention under the
open network access regime.
Chapter 2 33

2.2.3 Open access strategy

The open network policy provides for licensed 3G network operators in Hong
Kong to open 30 % of their network capacity to ‘non-affiliated’ service pro-
viders.17 Non-affiliated service providers include MVNO, and content or service
providers (CSP).18 The open access strategy encourages capable, small, and
medium enterprises to design and provide creative mobile applications. It is
also envisaged that content providers will have the opportunity to provide
new services over the networks at a fair price.19Thus although MVNOs do not
have the right to the radio spectrum, mobile services are provided via the
infrastructure of a MNO. In addition, MVNOs operate their own switching,
billing, and database.20 As such, an MVNO provides the same services to
customers as if it is an MNO but without owning a radio spectrum.
We observe that Hong Kong’s open access strategy is non-discriminatory
in that (1) it enables service providers, whether MVNOs or content service
providers (CSPs), to have access to the same transmission and supporting
capabilities as the host MNO when it serves its own customers, and (2) there
is no difference in treatment of traffic associated with non-affiliated service
providers that use the network. We note that the terms of access between MNOs
and MVNOs including the minimum committed quantity of traffic volume over
a minimum committed period of time are normally reached through
commercial arrangements. In the event that agreement to provide access is
not reached between the parties, the Telecommunication Authority may
intervene. The intervention of the Authority where necessary, ensures greater
competition at content, application, and service levels.
With a brief background of the policies and the regulations for the tele-
communication sector, we proceed to consider why content has become an
important factor in the provision of telecommunication services. In Section
2.3, we aim to consider the platforms available for mobile content delivery.

17 This is Special Condition 12 of the mobile carrier licence. Special condition 12 is normally
incorporated as a clause in the MVNO network capacity licence agreement. See a sample
of the agreement by HK CSL Limited, one of the Hong Kong’s licensed MNO at http://
hkcsl.locusin.com/wwwhkcsl/mvno/Reference_Network_Capacity_Agreement_publication_
version.doc. In fact, a MVNO may seek access to network capacity of more than the 30%
offered under the open network access obligations. This can be done through negotiations
and commercial agreements between the MVNO and the MNO.
18 MVNOs and CSPs will buy access capacity at tariffs decided by the MNO. For example,
the tariff set by CSL is calculated by the maximum mega bits per second (mbps) per month
committed by CSL multiply by HK$65 million: http://hkcsl.locusin.com/wwwhkcsl/mvno/
3G.html. The Telecommunication Authority would only intervene if the published tariffs
are (1) unfair, (2) discriminatory, or (3) anti-competitive: Special condition 12.4 of the licence.
19 Leung supra n. 15.
20 Supra.
34 Mobile telephony

2.3 MOBILE CONTENT AS NEW REVENUE

The promise of providing broad mobile multimedia experience was sufficient

for telecommunication companies and government alike to see mobile content
as a new revenue stream. Globally, this led to mobile network operators
investing heavily in the infrastructure required for the provision of new
generation networks, particularly for the spectrum rights to run 3G services.21
Furthermore, studies have indicated that the average rate per user (ARPU) is
decreasing. Thus, in order to re-coup their investment on infrastructure net-
works and to increase revenue from reduced ARPU, content has become an
important driver in the take-up rate of mobile technology. Consequently, in
order to maximize their immediate profits and drive customer adoption of
mobile data services, network providers will have to focus on developing and
launching certain types of data services.

2.4 PLATFORMS FOR DELIVERY OF CONTENT

Technological advances in mobile communication have spurred the develop-

ment of new business models to take advantage of consumers’ demand for
mobile content. A diverse range of content and services are available on the
mobile devices. Some services are new in that the services have been tailored
to suit the mobile environment whilst some services have migrated from fixed
environments such as the television and the Internet. We have seen examples
of content that have been re-figured from websites and news media such as
(a) news, (b) weather, (c) sport results, (d) financial news, and (e) interactive
games in the sample case of One2Free. In view of the variety in the type of
content and services offered, business models can take three forms (1) network
operators offering their own content, (2) network operators allowing third
parties to provide content, and (3) network operators providing open access
to the Internet.22
Thus content delivered by these platforms will be briefly examined in the
following subsections. Subsection 2.4.1 will deal with content produced by
MNO and Subsection 2.4.2 will deal with content produced by a third party
in partnership with MNO. The third platform dealing with content provided
over the Internet will not be examined since we assume that all readers are
familiar with the nature and availability of such content.

21 For example, the U.K. spectrum auction in March 2000 was recorded to be the largest
auction in history, raising £22.5 billion thus valuing the U.K. spectrum at U.S. $107.2 per
person.21 This is approximately three times more than the Italian spectrum, four times
more than the Dutch spectrum and fifty times more than the Swiss spectrum.21 All Italian,
Dutch, and Swiss spectrums were auctioned in the year 2000. In total the European spectrum
auctions raised £60 billion.
22 Supra.
Chapter 2 35

2.4.1 Content produced by MNO

A number of the content-producing services are delivered to mobile users by

the network operator using SMS and MMS. Depending on the nature of services
and the content delivered, the services and content are normally charged at
premium rate. Much of the content delivered would be suitable for the general
mobile user. However, content may be developed to appeal to a particular
segment of society. Examples of such content include adult content (including
adult ring-tones), violent games content, and gambling content.

2.4.2 Content produced by third party in partnership with MNO

Mobile content may be developed and provided in partnerships with content

providers and network providers. In some cases, the network provider may
only provide ‘carrier service’ for the delivery of content to its users. Where
content provision involves a partnership between content developers and
network providers, it will invariably involve striking the right balance of
involvement of the partners in the corresponding value chain. This is seen
more specifically for example, in (1) sharing the development cost of content
and applications, (2) sharing the risk amongst the partners involved, and (3)
revenue sharing.23
As with most business partnerships, differences between partners and
challenges will arise in the pursuit of the business venture. In such circum-
stances, to reduce potential conflicts, guidance might be sought from successful
mobile business models. One example of a successful business model is the
experience of Japanese operators. A high degree of success can been achieved
with an efficient business model like the Japanese business model. The Japanese
business model provides a number of key factors which contributed to its
success. The factors include (1) a high degree of flexibility, (2) an openness
to content providers, (3) a functioning value chain, with operational control
over most of the value chain from server to handset dealer, (4) a transparent
billing system, (5) ease of content integration, (6) mass market availability of
handsets, and (7) excellent marketing.24 Although there is little evidence of
conflicts arising between MNOs and content service providers (CSPs) in Hong
Kong, being mindful of these factors will go a long way to help foster a better
relationship between the parties.

23 Review of the Regulation of Content Delivered over Mobile Communications Devices, Call
for Submissions, Department of Communications, Information Technology and Arts,
available at www.dcita.gov.au
24 A prime example of a successful business model being NTT DoCoMo. See also McKinsey,
Comparative Assessment of the Licensing Regimes for 3G Mobile Communications in the
European Union and their Impact on the Mobile Communications Sector, available at http://
ec.europa.eu/information_society/topics/telecoms/radiospec/doc/pdf/mobiles/
mckinsey_study/final_report.pdf
36 Mobile telephony

2.5 CHAPTER CONCLUSION

On the basis of this brief overview of mobile technology in Hong Kong, we

may conclude that the mobile telecommunication sector is responding well
to the demands on modern society in (a) the continuous development of mobile
devices (hardware), (b) the innovative creation of mobile applications, and
(c) the establishment of business models. However, what is necessary for us
is to venture further and to examine whether, and to what extent regulatory
arrangements are in place to ensure that children and young people are
protected against inappropriate mobile content provided over these delivery
platforms. These are the tasks we set ourselves in Chapter 6.