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Third-generation mobile communications
Though nearly all the Member States have now issued "third-generation" licences, the deployment of mobile third-generation (UMTS or "3G") services is slower than expected and is running into a number of difficulties. This communication gives an overview of the situation in the sector. It also identifies the main challenges which will need to be addressed in order for 3G services to fulfil their role in the implementation of a competitive and dynamic information society.
Commission Communication of 11 June 2002: "Towards the full roll-out of third generation mobile communications" [COM (2002) 301 final - not published in the Official Journal].
BACKGROUND AND OBJECTIVES
Third-generation mobile services (UMTS or "3G") are only gradually becoming a commercial reality in Europe. Their roll-out - initially expected in 2002 - is taking place more slowly than originally planned and the great expectations associated with their introduction contrast starkly with the difficulties facing the sector.
This communication provides an overview of the situation in the 3G sector and examines the main challenges posed by the deployment of 3G services from a financial, technical, commercial and regulatory perspective. It also looks at the various lines of action being taken to support the deployment process and enable the Union to remain at the leading edge of technological progress, as recommended by the eEurope 2005 action plan.
FACTORS CONTRIBUTING TO THE DELAY IN THE ROLL-OUT OF 3G SERVICES
The roll-out of 3G services entails a complex interaction between different players: users, manufacturers, operators and software/content providers. Moreover, this divergent web of interests is highly dependent on general economic, technological and service trends, because of the wide range of activities resulting from the anticipated broad service range on offer. In this respect, the roll-out of 3G services will be far more complex than the deployment of the second generation (2G) of mobile communications.
A financial factor
The telecommunications market is still performing better than the general economy, with market growth of around 10% in 2001, to which the mobile sector contributed 40%. Despite this encouraging performance, the sector has nevertheless been facing increased pressure from the financial markets. Recently, operators in fact decided to make huge investments - notably in acquiring market shares and in future businesses such as 3G - leading to a sharp increase in their debt level and consequently a downgrading of their credit ratings.
The availability of investment funds was therefore significantly reduced, at a time when the physical roll-out of networks required significant financial resources. In this difficult financial environment, operators have had to give priority to re-balancing their finances. Logically, this trend has negatively affected the 3G roll-out.
A technological factor
Technical difficulties relating to 3G technology have been reported, particularly dropped calls, glitches in the terminal software and insufficient battery capacity. However, these technical difficulties are normal when introducing new products of considerable technological innovation.
Compared with 2001, considerable progress has been made as far as handsets are concerned, with the transition from prototypes to the development of the first 3G models ready to be marketed on the European market. Moreover, several manufacturers have announced the launch of 3G terminals with a "dual-mode" capability (2G + 3G) for the second half of 2002. This type of terminal will be essential for European consumers who are accustomed to a 2G service environment, especially since 3G coverage is expected to grow only gradually.
A regulatory factor
At the beginning of 2002, all the Member States had finalised or at least started 3G licensing procedures, as foreseen under the European Union's regulatory framework. The 3G licensing procedures revealed various trends:
- four Member States (France, Belgium, Greece and Luxembourg) did not succeed in attracting a sufficient number of interested parties to issue all available licences. In these Member States, part of the amount of spectrum made available for 3G therefore remains unused;
- the roll-out obligations came under scrutiny in those countries where early coverage obligations proved to be incompatible with the availability of equipment or the realistic possibility for operators to roll out networks. In the case of Spain, Portugal and Belgium, this led to the deadlines for the roll-out of networks being postponed;
- in other Member States (Sweden and Finland), operators complied with roll-out obligations, albeit by setting up minimal network configurations used for experimental purposes rather than for a commercial service.
LINES OF ACTION
The Commission identifies three lines of action to support the 3G services sector and to demonstrate its commitment to achieving the goal of a full roll-out of 3G.
Stability of the regulatory environment
The mechanisms of the new Community regulatory framework are adapted to evolving markets and technology. They should therefore promote the creation of a supportive environment for the roll-out of 3G.
The Member States will be responsible for ensuring essential adaptations to licensing conditions as well as the clarification of regulatory aspects relevant to new trends (such as network infrastructure sharing).
Short- or medium-term measures
A certain number of difficulties have been identified in the short or medium term, in respect of which a proactive, supporting or stimulating role at Community level is seen as beneficial.
Operators face considerable difficulties when deploying the physical networks. Obtaining the authorisation for installing base stations has become a real challenge in a number of Member States, and there is a risk that this will impact on the planned roll-out schedule and increase costs.
These difficulties are due to environmental concerns relating to the installation of new 3G masts, as well as to the uncertain consequences on health of electromagnetic emissions from base stations. Longstanding efforts have been taken at EU level to protect the health of 3G users and to harmonise the levels of emissions considered as safe. Nevertheless, this harmonisation at Member State level is taking a long time, which is not only hampering the sector but also creating confusion for consumers.
At the same time, the Commission has undertaken to develop technical specifications for safe mobile equipment. These specifications, which are already available in the form of harmonised standards for mobile terminals, are in the process of being finalised for base stations. The Commission reiterates that scientific research has shown that the normal use of mobile equipment which complies with the existing safety exposure limits does not seem to have adverse health effects.
Moreover, the Commission attaches great importance to continued research efforts to accompany the current development of 3G services and their future evolution. Some of the activities carried out under the Sixth Framework Programme for research will therefore be useful in the roll-out of 3G services. Finally it will be necessary for the Commission to identify the new regulatory obstacles relating to the introduction of 3G services. For example, the anticipated use of mobile terminals and in particular 3G services for micro-payments has raised the question of the extent to which regulation applicable to the banking sector is relevant to the mobile sector.
Community action plays an important role in ensuring the timely and effective availability of harmonised spectrum bands for 3G operations. In this context, the Commission has already launched a planning process with a view to making sufficient radio spectrum resources available.
A more flexible framework for handling rights of use of spectrum is necessary in order to promote investment in the radiocommunications sector. Using the mechanisms provided for by the Radio Spectrum Decision, the Commission plans to establish a dialogue with industry and national regulators on secondary trading of radio spectrum and its implications. This dialogue would focus in particular on the harmonisation of spectrum trading conditions and the timetable for implementing these harmonised conditions in the Member States.
The Commission concludes that it is best to let the market drive the process and to allow a competitive environment to generate new products. Nevertheless, public authorities can contribute to the creation of a climate of confidence by ensuring a predictable and stable regulatory environment.
In the immediate future, they can facilitate the physical deployment of networks by harmonising conditions and accelerating procedures. In the longer run, harmonisation in licensing conditions and assignment would avoid market distortions and uncertainty in the sector.