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GidaByte and ComNewsGroup Special HK Telecom Market Coverage: Interview with Dr. Tony Seeto, Director of Business Development, CSL New World Mobility [24.01.07]

Andrey Gidaspov: Finally Russia is on the verge of the 3G technology -- three 3G licenses will be awarded in April 2007. While the hype is there, many questions exist as well.  What will the 3G take-up be? What will the killer application be? And many other challenges. Hong Kong has already tasted the fruits of the new technology. Could you please comment on your company’s experience in this regard?

Tony Seeto: Our company’s experience has been very positive. First of all, we have a very good 2G network at CSL. It is a finely tuned, operationally reliable 2G network, which is one of the best in Asia. Basically, with such an excellent 2G network, there were no compelling reasons for us to transfer ALL of our customers to 3G, and, hence we do it gradually, upon the customers’ needs. Naturally, customers want to enrich their experience, and that is quite a large difference in experience due to higher speed, higher speed of downloads, better quality video and so on. And therefore, our strategy was to migrate our customers to 3G when they have the need for 3G services.

But if our customers are only interested in voice, then, there is not much point in migrating them to 3G, they are better off sticking to 2G, which offers lower tariffs, etc. So 3G for us is to be able to offer more data service, provide more VAS to the customers. And so far, we have been quite successful in doing that. If you look at our customers who are already using 3G --- they have higher ARPU, basically paying more for more services, they are also more active users of VAS and data service, compared to 2G. So summarizing, we are gradually migrating customers from 2G to 3G upon their needs. We do not want to push everybody to 3G, we only want those people who actually like to experience 3G, and we think that they would enjoy 3G services too.

We don’t deliberately subsidize more handsets. We go as customers go. We are obviously marketing 3G and the network that offers better experience, higher speed of music downloads, better quality video, faster internet browsing, so generally people become interested. That is what makes us upgrade them to 3G, but if they don’t have that much interest in 3G, if they are interested in just voice and SMS, there are no reasons for them to go on for 3G. And thus, we maintain that balance.

AG: Do you segment your customers on business and entertainment clients?

TS: Yes, we do. In fact, in CSL we have three brands. We have one brand, which is called 1010. And it is primarily targeting the business segment, high value business users. And then we have the One2Free brand, which is a lifestyle brand, appealing to the younger generation of subscribers, who are interested in modern music and entertainment. And finally, we have the third brand. That is connected to our recent merger with New World Mobility, and it appeals to the mass market and family category.

CSL recognizes early that mobile is for everyone, but customers look for different things in mobile services, even though common services are voice and SMS. For many years ringtones, MMS, and wallpapers were among the most popular applications. And they appeal to different groups of the population. Naturally, for example, older people are not very interested in pop songs or any fashionable items, but rather prefer to listen to the content of their own interest, their own history.

And if you are offering something to the younger generation, you see that they are more computer literate, interested in ring tones, they like professional, modern music and cool games. That’s why we have different brands to appeal to different customer segments, so that they can actually associate themselves with that One2Free brand. And they do, you know, our younger subscribers become proud of being a part of the group, that is One2Free group.

“1010” business customers are totally different. There we focus on business news, financial information. With HK being a financial centre, roaming is very important, because business people travel quite often outside of HK, and people communicate a lot. So we offer a different set of services, because that is what they need. That is what helps them in work.

AG: What will be your advice to Russian operators? What is the cornerstone of your success? What is the key point? In marketing, advertisement, in right technology packaging, where is that point?

TS: Well, I am not familiar with the Russian operators, their margins, and networks, etc. but I can say that we at CSL have a very good quality 2G network. And hence, there is no rush for us to move our customers to the 3G network, we also have what we call an integrated network; in other words, our 2G and 3G are quite seamless, they are actually one network, just in different spectrum and providing different functions. However, my point is that the handover from 2G to 3G is very smooth for the customer. We work very hard on mobile technology to make this happen.

If the operator has a good 2G, they must have customers prepared to use 3G and will be selling value of 3G. Naturally, you might want to look at the market segments, which of the market segments are more appropriate for 3G services, then you should market accordingly. That’s, I think, quite appropriate for us, because for the last 3 years, the 3G network and handsets are in its early development stage. So during that time there is still a lot of initial “teething problems” including handset issues. Three years ago, 3G handsets are more expensive; they are a little bit bulk.y. Now I think that the situation is changing very rapidly. Now 3G handsets have evolved, their design, size and price have all improved. And they are similar to 2G, so the next phase of our development will be the 3G take up acceleration. So we’ve passed the stage of what we call “early adopters”, those technology-aware customers. 3G in the next three years will be suitable for mass adoption, because technology has matured, and the price of handsets has come down while they are still not that cheap as 2G handsets, the gap is closing. Certainly, the form factor (the size and so on) is comparable to 2G.

AG: I understand that all operators in HK are using FDD bandwidth, while TDD is left untouched, and this is where TDSCDMA technology comes with its offering. And there are the first TD-SCDMA testing grounds at the HK Wireless Development Centre. Can you comment on this technology?

TS: Yes, mobile operators in HK use what we call wide-band CDMA or FDD as you mentioned, which is a worldwide standard for 3G. Now TD-SCDMA is a Chinese standard, which they have published. Although they have not yet issued any license in mainland China for that standard, everybody expects at least one license will be issued before the Olympics in Beijing. HK is so close to China, that all the operators in HK will need to at least understand how that technology can interwork with our own 3G network in HK. Because there are a lot of Chinese visitors to HK, invariably when there will be the TD-SCDMA handsets used by visitors in HK, and we will need to work out how they can log onto our networks for roaming services, and that’s the minimum of our interest.

So, the testing is generally for inter-working as a minimum, and as the standard evolves, we need to understand what it is the best way of working with the Chinese networks. And we can take those handsets, so that they can roam onto our network.

Our other interest is looking at applications and contents, which are operational on the WCDMA standard, and we would see how that may also apply to TD-SCDMA and vice versa.

AG: As you know, HKWTIA is helping to popularize the 3G take-up in HK via various events and marketing activities, for example, the 3G Fair, which was quite a success. Could you please comment on that? Did it help to bridge that gap between users and non-users?

TS: All these activities are positive and initiated to develop awareness of 3G services. Despite advertisements and promotions, 3G for the general public is still a very new concept, new technology. People still have to understand what 3G can do for them as a user. And we have many means to communicate this idea to the public. In addition to our own promotions and advertisements, the 3G Corner at the HKWDC helps to showcase what 3G technology can achieve. People come there and learn about the opportunities 3G enables them to have. They can see a different channel. It will be an essential part of educating the public about the 3G. The 3G Corner is supported by all HK operators, and we at CSL welcome this initiative, because at the end of the day, we all win from that.

AG: Can you tell us more about your MobileTV service? Is it the first in HK?

TS: Yes, it was the first in HK. But the concept is quite interesting, because we actually offer Mobile TV on the 3G network, which is quite different than other operators. People talk about Mobile TV as a separate standard, and we are not talking here about DVB/DVBH standards. We are actually talking about Mobile TV, which is essentially a video call on the 3G mobile network. It is a really interactive service that talks to customers, conveying the main meaning – you CAN use mobile handset to watch video information, which is like watching TV and the handset becomes your remote control. You can change channels very quickly, just like on your remote control. And you can have very simple access: just dial the simple access code, *888, that everybody can remember. Once you are there, you can get access to something like 30 channels, and all you have to do is press the number on your keypad on your mobile phone and then you get to your channel.

AG: What kind of channels do you have now?

TS: We have news, financial news, daily news, movie trailers, music videos, even horse racing. There is a drama channel. Also, we have mobisops, specifically altered for the mobile use. And we actually work with the production people to create this content. I should say that while we have both international and local content, local content is more popular.

So this is very simple and easy: MobileTV, simple interface, quality content offering, and good service.

AG: Which are the most popular services? What prevails, English or Chinese content?

TS: News is always popular. Then, sports, we have European football broadcast, and various ESPN sport channel offerings. And of course, we have horse racing – our national “gambling sport”. In addition, there are movie trailers, music and mobisops – these are the leaders. Most content is in Chinese. But there are some English channels.

So probably, news is No. 1, and sports comes second. Also, drama series are very popular, each episode lasts for about 2-3 minutes. We don’t have drama everyday. We produce typically ten to twenty episodes of about 2-3 minutes each, and one episode per day, so that it lasts 2-3 weeks. People like to watch it.

AG: Any user generated content?

TS: Yes, we are beginning to have some user generated content. We’ve just launched a mobile blogging service, where subscribers submit their content to our site. It is becoming popular. 

AG: Do you censor any of USG content?

TS: Yes, and no. Not in a big way. We monitor and delete any obscene or inappropriate content, so that people don’t go overboard. You don’t want to offend other people.

AG: What is your current ARPU level?

TS: As of June 2006, our ARPU was HKD 340 (42 USD)

AG: Are you the only operator who has launched this kind of video service?

TS: Well, in terms of user interface via the 3G network -- yes, we are. Some other operators have WAP-based video which is different. Subscribers go to a WAP-page and then they stream video. We also have this service. But the MobileTV service that we have has a very unique interface and you are able to change the content as you wish.

AG: What is the main advantage of your MobileTV compared to a WAP video? What are the three most important elements?

TS: The main advantage is a simple user interface. The key is that our customer can easily change channels. Then the customer can interact with the service. And in fact, there is a lot of interaction in it. For example, if you are listening to the music video, you can actually buy the ringtone, while you are listening. You can press the certain code. Here I’ll show you. (Dr. Seeto pulled out his mobile and started pressing the buttons, showing various channels).

See, pressing the numeric keypad 1, you can get to the news channel, and press 2, and then you will get drama channel. Press 5, and here is the music videos. And all these are connected to the live network. Basically a user can go up and down channels, say you press # 15, and you get right to the BBC network. And that’s a real ‘live’ BBC channel. Basiaclly the keypad become your remote control.

AG: Are these channels all custom-tailored for this service?

TS: Some are and some are not, some are coming directly from the TV station. Some are from the customers, but they all have been produced in the mobile format. And the actual mobisops are stored on the server, they are prepared specifically for mobile use.

AG: Finally, Dr. Seeto, I will ask my last question – what is your secret of success?

TS: #1 rule for success is to understand what your customer wants, understand your customer’s behavior. And my role is to make use of technology, find out what the trends are and marries them together. How can we use technology to serve the customer better? I never lose sight of what my customer wants.