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Sixt sense: the world of mobile broadband - as seen by Frank Sixt, Hutchison

Under fire in the UK, mobile operator 3 had to perform well today under the watchful eye of Canning Fok, here from Hutchison Whampoa, in Hong Kong. He's actually Canning Fok Kin-Ning, Group Managing Director, Hutchison Whampoa Limited.

After the speech from Canning Fok - an extempore explanation of the world as seen from the Far East, where Hutchison has many times been accused of getting it wrong, and has many times made a shedload of money, the stage was handed over to Frank Sixt, Group Finance director. It's not his job to justify the performance of 3 UK, but to say where he wants to go.

Here's his explanation of what he wants to do, and where mobile broadband should be. Of particular note is his condemnation of the "3" approach to an Internet connection - the "walled garden" - which, he says, is not the way forward.

 Thanks Canning. We have indeed waited a long time to be able to do this.

We are bringing the world of broadband internet for the first time into people’s mobiles. Not by way of a data card in a lap-top or a PDA. Not by way of something you have to sit in a hot-spot to do. In your mobile: the thing that people have with them, in their pockets, all the time.

Our networks were designed to do this.

So we see what we are doing as a natural next step for our businesses: delivering the internet, mobile, to people.

We start by delivering, in this X-Series, the first ever suite of core broadband internet applications available on a mobile. These are not "products". They are things that give people the ability to use their mobiles to do things that they already love to do …but until now could only do in front of their PC’s, TV’s and AV kits at home.

To do this, we have worked with the very best people in the Internet: Skype, Yahoo, Google, MSN, Sling Media, E-bay, and Orb networks, along with Nokia and Sony-Ericsson. All of these people are huge leaders in their own right. They are here with us today, which is unprecedented in the mobile world. Why? Well I think it is because they believe that what we are creating together is something that their customers will value.

And frankly, to make that true, we as a mobile operator have had to look long and hard at our own values.

People want choice, so we are changing the business model for delivering mobile media and internet products. Essentially, we are tearing down the walls around the garden and, as a dear friend of mine likes to say, going naked into the big world outside.

And people want to be treated fairly, which is to say knowing for certain what they are going to pay and what they are going to get for it. So with the X-Series, we are setting a course that will take us away from the per minute, per message, per click, per event and per megabit charging universe we live in today, and towards one simple but compelling proposition: IT’S FREE WHEN YOU USE IT.

The Applications

 Let’s talk a little more about the X-Series applications we are launching today.

They are not futurology. They will be available through our own stores, our web-sites and our partners’ websites, starting in the UK in December and in 3’s other markets in Q1 next year. They are here for you to try, live, today. And I hope many of you will join us in final user trials leading up the launch here in the UK in December.

They are also not static. As with all internet products, this is just our first X-Series.

Each of the product categories will evolve new functions and features which will extend into mobility in future X-Series’ as appropriate.

And we will also be tackling new function and content categories from the internet to be launched in the second X-Series in 2007

So what is the X-Series today? What does it do for a customer that his mobile doesn’t do today?

• Voice: An X-Series user will be able to make and receive unlimited Skype voice calls with Skype PC users anywhere and Skype 3 mobile users in countries where we operate networks. Making Skype calls will be free.

We are all very privileged to have Niklas Zennstrom, one of the co-founders of Skype, with us here today, and he will be talking about Skype’s revolutionary move into full mobility with 3.

• Chat/IM: An X-Series user will be able to chat using unlimited text instant messages to or from a Messenger, Yahoo or Skype IM contact on a PC anywhere, or to another 3 X-Series user in countries where we operate networks. Sending and receiving text instant messages will be free...

• Open Internet Access: An X-Series user will be able to search the internet using a Google or Yahoo search engine, depending on their choice and country of residence; browse the internet without limitation; and shop on E-Bay real-time. Searching and browsing and bidding will be free. What you buy on E-bay depends on what you bid!

In a few moments you will be hearing directly from David Thevenon at Google, Sharon Bailey from MSN and Dominique Vidal from Yahoo, all of whom are here in person to tell you about their products as showcased in the X-Series, as well as their roadmap for future mobile broadband evolution. We also have a couple of important messages from Meg Whitman and Terry Semel who couldn’t be here in person, but send their love, for which I am personally very grateful.

And if that isn’t enough, the X-Series is also bringing "place shifting" into mobile. As you know, "place shifting" is probably the most important thing that has happened in the media world since the tape recorder, the VCR and the TIVO box introduced "time shifting" into the industry vocabulary. So how about this:

• Your TV where you are: Not very long ago Blake Krikorian and his colleagues invented something called a Slingbox. I’m told this was so that he and his friends could watch their favourite baseball games on their laptops when they were stuck in hotel rooms.

Now, an Slingbox X-Series user will be able to watch anything he is able to watch on his own TV, at the same time, on his mobile. Blake is with us here today and I’m sure you will love talking to him about Sling Mobile… or sports.

• Your PC where you are: Thanks to an equally inspired idea, Joe Costello and Luc Julia created a marvellous internet product called Orb Media for accessing and managing the digital stuff on your PC.

Joe and Luc understood that as you own the stuff on your own hard drive, it stands to reason that you should be able to have as much access to it as technology can deliver.

Now, an X-Series user can access all the digital content… music files, playlists, digital photos, videos and so forth… that are stored or accessed on his own PC at home… but on his mobile using Orb Networks.

Of course, as I said before, none of this works except on the best of handsets, and none of it would ever have worked except with the close collaboration of the world’s smartest handset manufacturers. We are very proud to have here with us today two of the very best: Dr. Kai Oistamo from Nokia and Miles Flint from Sony- Ericsson.

In a nutshell, our vision for the X-Series product suites is that 3 together with the best partners in the business should always bring people more of the best can be offered in mobility, and we should always do it faster and in a better way than our competitors.

Business Model

In terms of business model we are as I said leaving the "walled garden" behind us.

This is not just a slogan.

As you know, quite apart from the X-Series, Hutchison’s 3 Group companies already offer some of the best in mobile TV, mobile Music, Mobile Games and Mobile communities through our Planet 3 portal offerings around the world. Of course we want our customers, including our X-Series customers, to like… and buy what they like… from the shelves of Planet 3. But with the X-Series, our customers will be empowered to choose from competing products wherever they can find them on the net. And the searching and browsing that get them there will be free.

As I said before, our networks were designed to deliver mobile broadband.

We think forcing people into a walled garden of content and services in a mobile broadband world is simply wrong. Entrapping people with a view to forcing product choices on them… at high prices… is unacceptable. And it is not acceptable to make choice so expensive that it is no choice at all. We believe that more choice, which is the hallmark of the internet, is as inevitable a trend in mobility as it has been on the net. This isn’t a tide we want to hold back, In fact, this is the wave we’ve been waiting for. Surf’s up.

A New Charging Model

Finally, the last important step we are taking with the X-Series is to lay the foundations for the mobile broadband charging models of the future.

You will have noticed the word "free" popped up a lot in my description of the X-Series products.

That was not by accident. In the world of broadband internet, you pay for your connection, for your bandwidth, your hardware and your software and for your proprietary content. But you don’t pay to make a Skype call. You don’t pay to chat with buddies by way of instant messaging. You don’t pay to search and browse the net. You don’t pay to listen to your own MP3 files or watch the TV channels you have already paid for. Why?

Because the broadband Internet is based on a completely different economic model than that of most mobile today. As internet and media technology have evolved, customers can do more for less money. So more and more, it makes sense to attract customers on the Internet… or on cable or satellite… by enabling greater and greater choice, and higher and higher usage levels, at fair, simple and transparent prices.

Contrast this with the world of traditional mobile phone operators: we charge per minute, per message, per click, per event and per megabit …per unit of everything. We often make more money if users do less. Why? Because up until the advent of mobile broadband, we thought network capacity was our scarcest asset, and so had to be rationed and sold at the highest possible per unit price.

We believe it is natural that this charging model should begin to change. With the rapid development of all IP mobile networks, HSDPA and HSUPA network upgrades, peer to peer technologies, and a host of efficiency improvements in every aspect of a mobile operators’ business our economics are beginning to change. As a result, the cost of enabling internet and media applications in mobility will decline just as it has in the broadband world. Rationing is ending.

Where that is the case, we also believe in sharing the benefit of these changing economics with people. That is why we think our charging model for the X-Series should start to look more like the internet. As mobile broadband evolves, we will benefit more from more people talking more, messaging more, and searching and browsing and streaming and downloading more on our networks, rather than from fewer people doing less at a higher price. That is why X-Series customers will only be charged flat access fees for mobile broadband. In the early days, those fees will be somewhat higher for high bandwidth consuming activities like Sling and Orb. But in all cases, we will follow the principle that WHAT IS FREE WHEN YOU USE IT ON THE INTERNET OUGHT IN PRINCIPLE TO BE FREE WHEN YOU USE IT IN MOBILE BROADBAND.

That is why Skype calls, text instant messages, internet searches, browsing chat, and other features will be free from the outset for X-Series customers who pay modest access fees. And even with higher bandwidth products like Orb and Slingbox, use of which will be subject to higher access charges, their use will be free when you use them. There will be fair use limits, not unfair limits on usage.

We believe that giving people the benefit of the favourable economics of the broadband world will lead to more people giving us the benefit of their custom! That is the proposition that as a Group we will be putting forward in all of our markets under the X-Series offerings.

So there you have it: Free phone calls forever to Skype users. Free instant text messaging to your buddies. Access to anything you want to access on the net using unlimited search. Your TV where you are. Your PC on your mobile. Your life where you go. Welcome to the X-Series from 3.

Biography, Frank J Sixt Group Finance Director, Hutchison Whampoa Limited

Mr. Sixt is currently Group Finance Director for Hutchison Whampoa Limited, to which position he was appointed on 1st January 1998. He is the Chairman of TOM Group Limited and TOM Online Inc. He is also an Executive Director of Cheung Kong Infrastructure. Holdings Limited and Hongkong Electric Holdings Limited and a Director of Cheung Kong (Holdings) Limited, Hutchison Telecommunications International Limited, Hutchison Telecommunications (Australia) Limited, Partner Communications Company Ltd and Husky Energy Inc.

Mr. Sixt was formerly a senior partner of the law firm, Stikeman Elliott in Canada specialising in taxation and corporate law. Born in Montreal, Quebec in 1951, Mr. Sixt holds a BA degree and an MA degree from the McGill University, and a Bachelor of Civil Law degree from the University of Montreal. He is a member of the Bar and of the Law Societies of the Provinces of Quebec and Ontario, Canada.

He has been resident in Hong Kong since 1983, and is married with a son.