Third Generation Mobile Phone Licensing in Europe

The 15 member states of the European Union (EU) are rushing to meet a January 1, 2002, deadline for the launch of third-generation (3g) mobile services.

Each member state is planning to issue between four and six licenses this year. National regulators must decide the initial amount of spectrum to offer (in total and per license), the number of licenses to offer and the process by which those licenses will be awarded.

In terms of a process, national administrations need to choose between auctioning off parts of the radio spectrum or selecting "winners and losers." European regulators have the luxury of studying the U.S. experience as they make this decision. Certainly they are influenced by the fact that, in the United States, the Federal Communications Commission (FCC) raised some $30 billion for the national treasury between 1994 and 1998, the result of 16 auctions and the assigning of nearly 6,000 licenses. Auction proponents argue that, among other things, this method of spectrum licensing ensures that the spectrum is sold at market value, prevents "stockpiling" of spectrum for future use and protects the process from political influence. On the other hand, there is concern that auctions do not take into account the public interest and propagate a market dominated by only a few big players, the latter reinforced by the number of new-to-market bidders in the U.S. 1996 C-block auctions that have now defaulted on their payments. (TIA maintains that spectrum auctions should not be a substitute for sound spectrum assignment decisions or used solely as a means of revenue generation.)

For terrestrial-based 3g services, Europe has assigned 155 MHz located in the 1900-1980 MHz, 2010-2025 MHz, and 2110-2170 MHz bands. (The International Telecommunication Union [ITU] had identified this spectrum, plus an additional 15 MHz, as the best location for International Mobile Telecommunications-2000, or IMT-2000, terrestrial-based services during the 1992 ITU World Radio Conference.) Europe also has assigned the 1980-2010 MHz and 2170-2200 MHz bands for satellite-based 3g services, for a grand total of 230 MHz of 3g spectrum.

The European Conference of Postal and Telecommunications Administrations (CEPT) has recommended that at least 40 MHz of paired spectrum (2x40 MHz) be made available to operators by the start of 2002. CEPT also has recommended that each licensee receive, at a minimum, a 2x15 MHz block for synchronous applications and one 5 MHz (unpaired) block for asynchronous applications, such as video streaming.

First 3g Licenses in Europe
Finland was the first European country to issue 3g licenses, handing out four in March 1999. (See the table below for a roll-out schedule of seven major European markets.) Three of those went to incumbent carriers Radiolinja, Sonera and Telia Mobile, and a fourth went to newcomer Suomen Kolmegee, a consortium comprising 41 regional carriers of the Finnet Group. The Finnish government opted to award licenses on the basis of the applicants' merit (that is, by a "beauty contest"); in all, 15 groups applied. The Finnish operator Alands Mobiltelefon Ab has chosen Ericsson as the supplier for the 3g system. This is the fourth operator to have selected Ericsson's 3g system.

In March, Spain was the second country to award 3g licenses. As anticipated, the licenses were awarded to Telefonica, the Airtel group substantially owned by Vodafone, Retevision Movil, and newcomer Xfera. The winners were selected through a beauty contest and were sold for 125 million euros ($121.5 million) each. The licenses are good for 20 years and cover two 15-megahertz-paired spectrum blocks, plus 5 MHz of unpaired spectrum. The 3g services will be available in major cities in August of 2001.

The United Kingdom held an auction that began on March 6 and lasted through 150 rounds of bidding. The 13 bidders each had to pledge an initial $82 million just to enter. The auction spiraled out of control, eventually raising $35 billion for the U.K., way beyond the expected sum of $5 billion. In the end, the five contenders left were TIW, Vodafone, BT, Orange and One2One. TIW is the only new entrant into the U.K. market and will pay $6.9 billion for the choice spectrum of license A. Vodafone paid $9.4 billion for license B, which is the largest spectrum allocation available to an incumbent operator. BT3g paid $6.3 billion for license D and One2One paid $6.3 billion for license E. British Telecommunications (BT) and One2One have complained about the terms of payment for the licenses because Vodafone and Orange are delaying their payments until after they have become separate firms, which could save them approximately $393 million in interest payments. Since the awarding of licenses, at the end of March, Vodafone sold Orange to France Telecom for $37 billion.

Germany's auction for up to six 3g licenses began on July 31. Bidders include T-Mobile (Deutsche Telekom), Mannesmann Mobilfunk, Viag Interkom, Debitel and E-Plus Hutchinson (backed by KPN and NTT DoCoMo.) Competing companies are bidding over a total of 60 MHz of spectrum divided into 12 blocks: 4 licenses of 2 x 10 MHz will go to incumbents and 2 licenses of 2 x 5 MHz will go to new entrants. Bidders can also bid for three frequency ranges per license instead of two. Deutsche Telekom AG and Mannesmann AG have both said they are interested in buying three frequency bundles. The other companies have not stated whether they are interested in two or three bundles.

Italy has decided to combine the auction and beauty contest options to award its 5 licenses; the initial bidding for each would-be winner is set at $1.97 million. Licenses are expected to be awarded in November or December. Italy's four main contenders are Telecom Italia Mobile (TIM), Omnitel, Wind and Blu. It is estimated that at least five other groups will be fighting for the final license. The groups that have voiced interest thus far are Andala, Dix.it consortiums, Deutsche Telekom, and a consortium linking Spain's Telefonica and Rome utility Acea.

France recently decided not to auction its licenses and will instead conduct a beauty contest for five licenses, to be awarded in the first half of 2001; the service will be launched by January 1, 2002. However, licensees will have to pay a fixed charge to obtain the license, along with an additional annual fee for the continued use of the spectrum. France's three main operators that have expressed interest are France Telecom, (after purchasing Britian's Orange, which has a license in the U.K.), Vivendi's Cegetel and Bouygues Telecom. Suez Lyonnaise has stated its plans to bid with Spain's Telefonica, and Deutsche Telekom will also be bidding. TIW, another winner of U.K. license, said it would also bid.

Portugal will publish a tender for the award of four UMTS licenses at the end of third quarter 2000. The results of the contest will be published at the beginning of 2001 with operators launching services in January of 2002. Some companies that have already announced interest are TMN, a subsidiary of Portugal Telecom; Telecel, a subsidiary of Vodafone; and Jazztel in partnership with Deutsche Telekom.

The Netherlands awarded 5 licenses on July 24 in an auction that ended rather abruptly. Expected to raise $8.26 billion, it ended up raising less than a third of that. Libertel and KPN Mobile walked away with the higher capacity A and B licenses, paying $666.8 and $664.3 million respectively. Dutchtone, British Telecom's Telfort, and 3g Blue (a consortium of unlisted Ben with Deutsche Telecom) purchased the other three licenses for $960m, $947m, and $870m respectively. The prices dropped dramatically due to lack of competition after bidders dropped out to form alliances that cast combined bids.

EC 3g Requirements
In 1998 the European Commission (EC) stipulated that member states reserve at least one 3g license for the Universal Mobile Telecommunications System (UMTS), for which the European Telecommunications Standards Institute (ETSI) was developing a standard. The U.S. government expressed concern to the EC that this mandate would preclude the use of any of the other "flavors" of standards created within the IMT-2000 process at the ITU, in part because Europe was rushing to license 3g services in advance of final IMT-2000 recommendations. The EC maintained that its mandate only endorsed adherence to the "basic concept for the UMTS radio interface" (which is now referred to within IMT-2000 as W-CDMA) among all 15 EU member states. In the face of a possible major trade dispute since then, the EC appears to have backpedaled somewhat, leaving it up to member states to decide licensing terms. At this point, those terms appear to be technology-neutral, but U.S. industry and government are monitoring this closely.

ITU-Coordinated Technical Work
Fortunately, the 3g technical work at the ITU has already been completed. This work will be remembered as perhaps the most difficult challenge to address in the deployment of 3g services because of the competing commercial interests involved. Task Group 8/1 of the ITU -- Radiocommunication Sector (ITU-R) submitted its final recommendation, which was accepted and approved by Study Group 8 and is on track to be formally approved at the Radiocommunication Assembly in May 2000.

The specifications contained in the standard, dubbed IMT-2000, will actually describe five distinct radio interfaces. These interfaces will support evolution from today's various 2G systems to global 3g networks that enable universal roaming across networks based on the interfaces.

TIA Input to IMT-2000
TIA Committee TR-45, Mobile and Personal Communications Systems, has played a key role in the development of two of the radio interface specifications, cdma2000 and Universal Wireless Communications (UWC)-136. TIA's Engineering Committee TR-46, Mobile and Personal Communications, also contributed to work at the ITU-R and was successful in having a common packet channel included in the 3g specification. This will lead to significantly improved high-speed wireless data transmission and Internet access up to 2 Mbps for wideband packet-CDMA (WP-CDMA), a harmonized proposal offered jointly by TR-46 and Committee T1, sponsored by the Alliance for Telecommunications Industry Solutions. Additionally, TR-34, Satellite Equipment and Systems, was heavily involved in the evaluation of satellite proposals for IMT-2000.

The Next Step for 3g
With the standardization work well under control, manufacturers must now focus on system design, which means anticipating the kinds of services will be in demand as networks start rolling out and the types of functions to build into the handsets themselves. Because the handsets will need to support roaming across several different radio interfaces (not all of which will operate within the same frequencies globally), engineers are looking at ways to package more hardware without making the handset too cumbersome for the end user.

Also, it is not clear what level of demand will exist for 3g services once they roll out in Europe in 2002. Currently, operators in the United States and Europe are preparing to deploy technology solutions that provide a less-costly intermediate step to 3g, commonly referred to as "2.5G". These solutions offer mobile data transmission rates greater than the current 14.4 kilobits per second (kbps), but less than the 384 kbps rate required for 3g mobile packet data transmissions. For GSM carriers in Europe, general packet radio service (GPRS) is that next step, with a 115 kbps data rate. GPRS is essentially a data overlay to the voice network, however, not an evolutionary step to W-CDMA, which means that carriers upgrading from GPRS to 3g will face more expensive network upgrades than CDMA carriers. (Today's 2G CDMA networks offer a relatively simple evolutionary path, called "1XRTT," offering speeds of 144 kbps. TDMA carriers are merging enhanced data rates for GSM evolution (EDGE), their 2.5G solution, with GPRS.) The fact that these 2.5G systems will be developed and deployed in a matter of months also puts into question the long-term market potential for wireless application protocol (WAP)-capable cellular phones, which display "stripped-down" Web pages over today's 14.4 kbps 2G mobile systems.

Some experts anticipate that, even though 3g networks are due to go into commercial service in Europe in 2002, a mass market is unlikely to develop before 2005. Ultimately, consumers' awareness -- or lack of awareness -- of the many options that are now becoming available, both in Europe and in North America, will determine the fate of the winners and the losers. In the meantime, the mobile revolution continues on.

The creation of third generation (3g) mobile networks goes beyond providing better quality mobile phones. 3g links will be used to carry a range of multimedia applications including video-telephony (Orange is already working on a project), video-on-demand and other forms of broadcast media.

But 3g is like a horse race with rival competing technologies vying for the lead, and the likelihood that some entrants may prove to be non-runners.

Take 3g infrastructure technologies. The 3g version of GSM has been christened UMTS 2000 (Universal Mobile Telecommunications System). An agreement has been reached between existing GSM equipment suppliers, mostly European, and Japanese manufacturers, that W-CDMA (Wideband CDMA) should form the basis for 3g/UMTS. However, a series of compromises have been worked out by the ITU (International Telecommunications Union). This leaves Korea and North America with an alternative option in the shape of CDMA2000 (a 3g version of the existing CDMAOne).

There is also a third 3g option based around Edge (Enhanced Data rates for Global Evolution) a technology that aims to enable existing digital networks (ie 2G) to mutate into 2G+ networks. The 3g version of EDGE is now known as GERAN (GSM/Edge Radio Access Network).

Where does this leave us in late 2000? The major telecoms providers are struggling to demonstrate that W-CDMA technology is already out of the R&D labs and is making an appearance in real life. That's a good thing considering the large sums already spent in countries like the UK, Netherlands and Germany just for the right to build a 3g network. The cost of rolling out the necessary 3g infrastructure is additional. In the meantime intermediate (2G+) technologies are filling the technology vacuum.

The first step in this direction is GPRS (General Packet Radio Service) which works over GSM networks. GPRS provides for an IP based, 'always-on' connection in contrast to existing data over GSM links which are dial-up. So GPRS is effectively the mobile equivalent of ADSL versus a modem connection.

In the UK BT Cellnet has already introduced a trial GPRS service using handsets provided by Motorola and data speed enhancement software produced by Bluekite.com. Consequently with such a setup it is feasible to conduct a full-on (56 Kbit/s alike) HTML browsing session via GPRS. The catch is you need a Windows 98 laptop. And GPRS phones do not roam abroad like GSM handsets do.

There are alternatives to GPRS -- the most obvious being HSCSD (High Speed Circuit Switched Data) which Orange already offers in the UK through Nokia. Nokia has developed a means of allowing data to travel over existing GSM networks at 14.4 Kbit/s (as opposed to the standard 9.6 Kbit/s). With HSCSD, the user aggregates or combines more than one telephone call session.

This technology has allowed Orange to combine two calls, resulting in a 28.8 Kbit/s session while three calls can potentially offer 43 Kbit/s. Coincidentally although GPRS was initially touted as providing 115 Kbit/s, most equipment providers now say 40-50 Kbit/s is a more 'realistic' expectation. The disadvantage with HSCSD is that Nokia only offers it via a PC Card. A handset with an infra-red port would be far more useful.

A glimpse into the future of 3g can yield a terrifying array of acronyms and competing standards. But really the future's simple -- the consumer just wants to switch on their phone and get great service

The road to 3g is, most experts agree, a journey worth making -- bringing us multimedia phones with huge and exciting potential. But as with all roads to promised lands it will be strewn with rocks and hazardous hurdles. Significant among these is the need to roll out an entire set of standards to bridge the voice data divide, leaving many questioning what the alphabet soup of standards will mean for 3g.

The 3g standard that has been agreed on for Europe, Japan, China and the rest of Asia is UMTS (Universal Mobile Telecommunications System) and it is hoped it will follow in the footsteps of the current mobile standard GSM (Global System for Mobile)

GSM can rightly pat itself on the back for being a standard that works, and works well. While committee upon committee battle to find agreeable standards for DVD, digital music and a host of other technologies, GSM has quietly united the majority of Europe under one mobile communication umbrella. Perhaps the best thing about GSM is the fact that it is one of few European technological innovations to leave our American buddies green with envy. It has given Europe a huge head start over the US in mobile developments.

An agreement thrashed out in Istanbul in May by the International Telecommunication Union (ITU) saw the ratification of five world standards for 3g. The meeting was heralded by government ministers as a historic step towards the brave new world of multimedia mobile communications.

Secretary-general of the ITU Yoshio Utsumi described the ratification as the result of "ten years of considerable intellectual and engineering efforts by an entire industry determined to leapfrog the fragmentation which prevailed until now in the wireless world".

Paul Read, spokesman for the ITU, believes that implementing Europe's standard -- UMTS -- will go as smoothly as GSM before it. "I think that the activity of 3g builds on the success of GSM which proved that it is possible to take a particular technology and apply it around the world," he says. So far Read claims there is a "good dialogue" between players and is optimistic that standards will be agreed upon.

But others question why the world needs five different 3g standards. With 2.5G -- a necessary evil in the move to 3g -- there are going to be a huge number of standards that need to be supported. "Handsets are going to need to support multiple standards, so an average handset will have to support GSM, GPRS, Edge [a 2.5G standard] and HSCSD [the 2.5G standard endorsed by Orange]," says Russell Inman, 3g system design manager for infrastructure provider Crown Castle. "This plethora of standards places quite a demand on manufacturers," he says.

Inman believes the need to support several standards poses serious problems for handset manufacturers. They face, he believes, two choices. Neither are consumer-friendly. "Potentially it could mean more expensive handsets or bigger handsets. The phones will need bigger batteries to cater for all the standards so it will be a trade-off -- less talk time or bigger phones," he says.

Read agrees: "The challenge will be with the manufacturers to build systems and terminals in a realistic and reliable way," he says.

Unsurprisingly manufacturers are quick to dispel concerns: "Everything we build is built to a standard. We have championed open standards more than anyone," says Mark Squires, business development manager with Nokia.

Nokia's head of 3g market positioning Joe Barrett believes the real battle for standards lies in the nitty gritty of putting networks together. "Operators have to have open interfaces," he says. Put simply, this means that all equipment needed to get base stations communicating with the network need to have open standards. "It is critical to operators that they can use equipment from any supplier. That ensures lots of competition and keeps prices down."

While we wait for UMTS, the next big standard buzz is coming from GPRS -- the European 2.5G standard, necessary to bridge the gap between current voice-centric phones and the data-rich mobiles of 3g. According to Nigel Deighton, analyst with GartnerGroup, GPRS could suffer a backlash similar to the WAP experience. He claims that speeds are unlikely to go above 28kbps. "That is as far as GPRS will go. People will be disillusioned by the fact the speeds are below what is hoped for," he says.

Inman is also wary of what first generation GPRS can do. "Expectations are placed high based on technical ability which is in excess of 100kbps, but there are two issues stopping it getting to that rate," he says. "The first of these is that handsets will never support such high data rates and the second is that networks will need additional infrastructure to support higher bandwidth."

As operators compete to get the highest speeds possible out of mobile phones, other standards will also be thrown into the pot as alternatives to GPRS or even for UMTS. Perhaps the most interesting of these is Edge (Enhanced Data for GSM Evolution), which some commentators believe will not only be favoured over GPRS but will be used by some for 3g networks.

Deighton thinks that Edge may become a very attractive 3g alternative for operators who cannot afford to buy into the increasingly crazily priced auction of 3g spectrum. "Edge may rise like a phoenix from the ashes. It will be viable for operators who didn't get licences. It makes much more economic sense to upgrade to Edge rather than GPRS," he says.

Others see Edge merely as the natural successor to GSM and a partner for UMTS. Chris Pearson, vice president of marketing at UWCC (Universal Wireless Communications Consortium) believes UMTS and Edge will work in partnership as we edge towards a 3g world. "UMTS will be deployed in major cities and Edge in outlying areas," he says.

AT&T, though, has already announced its intention to use Edge for its 3g networks, claiming it will deliver a maximum data rate of 384kbps. Experts point out that this is a generous estimation, based on the ideal scenario of one person using the network standing next to a base station.

Inman agrees that Edge will deliver rates of around 384kbps and while he admits this is straying into the 3g realm, he remains unconvinced it will be seen as a viable 3g option for many operators. In the end, whether Edge is chosen over GPRS, will come down to cost: "GPRS utilises the existing network whereas Edge requires new base station equipment which is a major capital outlay."

However rocky the journey to 3g there is one thing all the experts agree on -- it is going to be huge. Research firm Yankee Group predicts that there will be 60 million wireless data devices in America alone by 2005.

The road to 3g has already been tentatively trod in Japan, where Nippon Telegraph and Telephone (NTT) have introduced DoCoMo -- meaning "anywhere" in Japanese -- its mobile computing service provider. In February DoCoMo launched its GPRS i-mode service which now has seven million users in Japan.

The rest of the world is about to follow suit and while it is almost certain that the plethora of standards will continue to plague developers and committees, it is worth pointing out that consumers do not care about acronyms.

Pearson reminds us that whatever standard wins through is completely irrelevant to consumers. "Consumers don't care too much about technology," he says. "In the end the consumer just wants to turn on his/her wireless device and get great service."

The first mobile phones let us talk to one another on the move, the second enabled us to actually hear one another, while the third generation promises to revolutionise our lives. Peter Guthrie reports.

You'll have heard about the much-pub-licised auction of the frequencies that will carry third-generation signals to mobile phones. You may also know about some of the potential of either UMTS or 3g, but how does it work, when will it arrive and what can it do for you?

For those that are wondering what hap-pened to the first and second generations, there's not much to it: the first generation were analogue mobile phones (those ones that had to be carried round in a suitcase) and the second generation saw the birth of the digital mobile phone and finally con-sistent signals and reasonable voice qual-ity were introduced.

The introduction of digital and pre-pay really started the explosion of the today's mobile phone industry. Today, around 70 percent of the UK population owns a mobile phone, with some people carrying two or three.

The third generation, or UMTS, is the next stage in the evolution of the mobile phone and promises to be every bit as influ-ential. 3g promises broadband connec-tions to mobile devices, and more than just the connectivity, it promises a new type of handset -the integrated PDA. Vendors talk about 'liberation' from slow connections, a reduction in the number of boxes we need to carry around and a freedom from fixed points of access, so it all sounds .rather revolutionary.

Of course, like many 'new' develop-ments, there's nothing really revolutionary about 3g. The underlying technology, W-COMA (Wideband Code Division Multiple Access) is based on technology developed by the US military decades ago and these new devices are simply evolutions of what we already have. It is true, though, that we'll be using our devices for applications undreamt of using current hardware.

The magic word for our unwired future is convergence. Having been a buzzword for the last decade, it's finally starting to happen in a usable way for the mobile com-puting user. The Nokia 9110i (or commu-nicator) offered an integrated package, but it's too slow, and black and white doesn't deliver on a desktop scale, While the Communicator is a convergent device, and has won plenty of fans, it came a little too soon, But as soon as next January when Ericsson's communicator platform lands at the same time as GPRS services, we will see the beginning of a new generation of 'useful' convergent devices.

As technology evolves, we will be able to do that much more with the bandwidth we have. It's very difficult to predict how we will use a 3g level of bandwidth until it's been available for a period of time. Videophones, entertainment and hosted applications are all possibilities but some development will depend on experience. An example voice recognition. While the software and hardware has been around for desktop computers for some time, it has been a fairly young technology and it didn't work all the time (especially if you weren't American). Ver the last couple of years, though, voice recognition has evolved alongside neural networking advances to create a far more workable system. The next step is system that could conceivably replace a keyboard in the next year or two for people on the move.

Though it will initially be targeted at business, experts almost unanimously agree that the third generation will be one dom-inated by personal communications. In the first place, mobile phones became popular in the first place on the back of this, and there's no reason why this should change. 3g promises to introduce a visual element into the way we communicate, and it is widely agreed that visual stimuli are far more important than audio.

Currently, Orange has a video phone using the relatively slow HSCSD (High-Speed Circuit Switched Data) technology. And Psion and Motorola have revealed pro-totype videoplayers. Clearly the technolo-gy exists, and comprises one awaiting the bandwidth necessary to fully exploit its pos-sibilities.

WHY DO WE NEED 3g?

Current mobile phones use the GSM system for sending and receiving data. Anyone who's used it will tell that it's slow and unreliable. GSM is set on ISDN rules and running on old ISDN standards capable of 64kps/channel, each of which is split into eight channels per line. This means that end users get a maximum of 9.6kpps, one quarter the speed of 'slow' desktop modems.

It's hoped that the GPRS system will give you at least 57kbps each way, plus speech on top. UMTS promises to increase that to as much as 2mbps - more than thirty times faster than your modem, and, of course, its wireless and portal.

At the same time, with the development of the ASP (Application service Provider) concept, whereby the applications you run reside on a remote computer rather than on your computer or handheld, the importance of bandwidth is diminishing.

"ASP technology means that the client devices we hold in our hands can be increasingly thin, with all of our core data, such as credit card details, held on the secure server of our service provider. It means that the security will be greatly enhanced in every respect and credit card details, as an example, never need to trav-el over the airwaves," said Mark Squires of Nokia Mobile Phones.

The first move towards this future, m-commerce -doing business on your mobile phone -will start to become prevalent in 2001. We'll have to wait and see what impact it will make. Businesses increasingly want to carry out the work over the web, but it will largely be the brave and the very large that make the immediate tran-sition to m-commerce.

TIMING IS KEY

We know that UMTS will be with us some-time in 2002. The network infrastructure is already being built and the devices capa-ble of using WCDMA are not too far away. What is almost certain, according to Mike Caldwell, Director or Corporate Communications for Vodafone, is that "things will almost certainly be targeted at businesses to start with. It happened that way with the first and second generations of mobiles and will probably with the third also. It's mainly a cost factor, but the real consumer applications won't really be ready on UMTS until about 2005."

Technologies such as GPRS (General Packet Radio System) will become avail-able from next January and will extend the capabilities of GSM creating greater band-width and much of the basic services of UMTS. Other technologies such as EDGE will also add to the services, but cannot deliver the bandwidth of UMTS.

"The medium-term, 21/2 Generation future will also be very exciting. Most of the services that will be available in the third generation will also be available with GPRS, but at lower speeds. We're expect-ing to get most of the services online in the first quarter of 2001 and full m-com-merce at the end of 2001. The introduc-tion of packet switching into the network infrastructure means that we can offer much higher bandwidth to consumers with a UMTS style serv-ice," explained Craig Tillotson of One-2-0ne.

Third-generation services will mean access to the internet, intranets, extra nets, VPNs, video conferencing and even Application Service Providers, all from what we now see as a mobile handset or PDA. The beau-ty of the technology is that it won't be limited to those employees that spend their working lives on the road, but will create the possibility of implementing new flexible work-ing practices that can evolve to suit the company and individual. It means that people can travel without losing contact with the office, and actually expand their working capabilities through the technologies.

Craig Tillotson of One-2-0ne says that for businesses, "the most important thing is to move applications to intranet and web-based front ends. A web front end will give you maximum flexibility to deploy email, information and applications over these technologies. In the next few months, you need to be talking to your accounts sup-plier, email supplier, web supplier, etc. to make sure you are geared up to use the web for each aspect of your business."

THE BOTTOM LINE

Lars Dergendahl is UMTS Programme Director for Ericsson UK and feels that UMTS will help level the playing field between big and small business. "One of the great things about UMTS is that it won't matter how big your business is. If your systems are integrated and electron-ic, all the information and applications will be at hand and available from anywhere.

"Smaller businesses will benefit from a huge variety of tools and services, mostly based on having broadband internet in your hand. Because you can also use packet switching, so you can use applications at any time, just like a PC -from anywhere, and over the air," he continued.

Despite some reservations about the UMTS services (namely whether consumers will want them), it will be a very exciting time with lots of convergent technology appearing more or less the same time. It will certainly mean a great deal to the way we conduct our business in the medium term, if only from the perspective of reduc-ing costs and improving contact with mobile personnel.

From a business perspective, the ben-efits are clear and very attractive: access to business information anywhere is a very promising proposition. With UMTS, that information can be rich and func-tional. Such technology can make business more responsive and efficient, more flexible and tolerant and also save money. "We see that the whole business model may change towards technology. Higher transfer speeds and thinner clients means that you no longer need to keep upgrad-ing resources, or suffer downtime due to upgrades or training. In the end the client access device becomes irrelevant and the applications are the important aspect with UMTS," concluded Mark Squires.

The term '3g' has been bandied around a lot, but what will you actually end up buying and using?

With third-generation networks two years away, manufacturers have yet to announce precise plans for the devices they're planning to ride the 3g wave with. The big three, Nokia, Motorola and Ericsson, have been active in whetting our appetites with concept units, even if they'll probably be more expensive than the phones we use today.

So what will we be getting for our money? Consensus suggests a similar array of designs and concepts to today's mobiles -- there will be the fun lifestyle devices, with the usual array of money making, while others will provide more features than today's personal digital assistants (PDAs).

Devices will fall into four categories. "The simplest 3g phones will be used mainly for talking and will store all their information on the network, while the second type of mobile device will support video-streaming, and will provide the user with news and web content," explains Mark Squires, Nokia business manager.

"More sophisticated models will be information centres which let users download information from the Internet and store data on the device. Top-end devices are likely to still contain a keyboard, which might be wireless and detachable, and will offer all the features of today's high-end PDAs." The more sophisticated 3g devices will contain memory and run either Symbian or another capable operating system.

Even though they will be far more powerful than today's GSM phones, UMTS devices are also likely to be smaller, according to Ben Richardson, online media manager at Orange. "Peripherals such as IBM's miniature hard drive are already available to make very small phones, so 3g phones will be smaller and lighter. However, because a small screen isn't very useful we might find that devices fold up or roll up."

Tim Sheedy, telecommunications analyst at IDC, thinks that users will carry several Bluetooth gadgets wirelessly linked to a single 3g transmitter. "You might have one 3g device attached to your belt or tie, which would transmit information to your Bluetooth headphones and Walkman."

And while all units will include calendar, email and messaging, the function most people are looking forward to is video streaming. This will be supported by those devices able to operate at speeds between 384Kbps and 2Mbps.

Richardson believes voice recognition will have come of age by the time 3g arrives, negating the need for keyboards on units that double up as a PDA. "All of a user's data could be stored on the network, and would be accessed by voice command."Without a keyboard, the more simple devices could be very small indeed," he says.

Dominic Stowbridge, director of Motorola's application development network agrees: "With a voice browser, you'll talk to the Internet and the Internet will talk back. This is theoretically possible today, but with 3g we'll see many technologies developing to make use of the new potential."

As with today's phones, messaging will be a killer application. Rather than just allowing messages of 160 characters, 3g users could attach a picture to create an email postcard. High-end devices will allow video-conferencing and could even employ a tiny digital video camera. Users will have information constantly beamed to their phones, which could include the latest news and sports action. "Rather than simply being told that a goal has been scored, a fan could watch an action replay within seconds," explains Squires.

Orange is already planning to supply personalised news from Ananova within 12-18 months.

3g phones will also be constantly monitored by the network so operators will roughly know a user's location, enabling location-based services. This could help locate a restaurant, for example, or the closest cab company.

Stowbridge believes 3g phones will even have features we haven't considered yet. "People could buy smelly phones, which could attach a scent to an email." This would be a benefit for e-commerce, as well as for personal communications.

Despite the current shortcomings of WAP, companies are confident that users will be impressed with what 3g offers. Peter Bodor, public relations manager at Ericsson, argues the failure of WAP is down to the mismanagement of public expectations, but doesn't see a problem moving forward with 3g.

"WAP's disappointment was caused by industry failure to manage expectations, and the main problem was its slowness. This won't be a problem with 3g. The 3g Internet experience will be as good as surfing from home, with the added benefit of location-based services making the experience more personal."

Stowbridge believes the design of 3g phones will be an important factor in their popularity with users. "Mobiles have gone from being a business tool where appearance didn't matter, to a lifestyle choice where looks are important. It's crucial that users are able to personalise the look, the style and the Internet experience of their 3g device. The service provider that offers this will win!"

Despite the amount of money invested in 3g licences, Stowbridge doesn't believe users will be charged much more for the 3g experience. "People won't be prepared to pay too much more. Manufacturers will have to squeeze their margins and networks offer large subsidies, so as to ensure an attractive price", he said.

Because the phones will always be connected, users can expect to be charged for the amount of data they receive and Sheedy is not convinced 3g will cost the same as GSM.

"Early handsets will come at a premium, but then I expect they'll drop to a level similar to the cost of GSM models in the last year. The market is likely to be segmented, with voice-centric devices available on 'pay-as-you-go' deals. Regular users will probably pay a fixed charge for services, such as £2 per month for traffic reports, £10 per month for video-conferencing, or £30 per month for full, unlimited access and services."

Bodor believes 3g opens up new business models. "Users might choose a service from MTV which would be heavily ad-driven. Perhaps loyalty points collected from a certain petrol station could be used to get free traffic reports," he suggested.

It seems likely that third-generation phones be available sometime in 2002 to coincide with the completion of the UMTS networks. However, technologies like GPRS and Edge, due out soon, will provide greater bandwidth. As Stowbridge points out, "The rollout of third-generation networks will be a progression not a fixed date. 3g phones could be out before the networks are operational, with early applications running through GPRS."

In the world of mobile telephony, the saying goes: scratch a fixed-line user, and you'll find a wireless user just waiting for the right priced service. While mobile operators have a pretty solid basis for touting the universal desirability of wireless – growth rates for cellular technology over the last 5 years average 36% year-on-year – there's long been a missing link which has helped push up wireline traffic levels and keep the wolf from the door of fixed-line providers.

That missing link is data, the one area where cellular phones, with their puny 9.6kbps standard transmission rates, can't hope to compete with the world of 64kbps-plus copper twisted pair. With the number of mobile users already having outstripped fixed-line connections in some countries, the phenomenal uptake of the Internet and emerging converged services which blend the worlds of Web and broadcast television have served as a source of comfort for traditional, fixed-line telcos. Data traffic has fast become the driving force for network growth and revenues – and they have the only show in town. Or did have. Thanks to development efforts within the ITU and throughout the wireless community, mobile telephony is about to get a whole new look. Get ready for wireless data. Get ready for mobile Internet and wireless videotelephony. In short, get ready for 3g.

Three What?

Third generation mobile – 3g to wireless operators and equipment makers – represents the next iteration of today's digital mobile systems. First generation systems were the old analogue-based brick sized phones sported by pinstriped executives and showbiz personalities way back in the early 80s. Second generation systems, which introduced digital technology on top of traditional telecoms circuit-switching, were introduced in most industrialised nations in the early 1990s. These systems, which comprise four main standards – GSM, Digital AMPS (D-AMPS), CDMA and PDC – now dominate wireless networks, with a total of more than 300 million users worldwide in contrast to a dwindling few still connected to first-generation analogue systems. With many countries now actively closing down their analogue networks, it won't be too long before the wireless world is a digital-only domain.

Just as the introduction of digital technology into mobile networks paved the way for new services such as SMS (Short Message Service), Caller ID, closed user groups (as in a local area PABX) and the like, so the introduction of third generation systems will revolutionise the way we use mobile networks. For a start, 3g systems will be fully digital – that includes packet-based transmission and seamless compatibility with a range of digital systems, from gaming consoles and computers right up to Web-friendly digital TV. Because 3g systems support transmission rates as high as 2Mbps, operators are already envisaging a wide range of new services, from real-time fast Web access to dial-up, on-line games and even personal videoconferencing over specially-designed large-screen handsets.

Indeed, the difference between second-generation and third generation networks will be so radical that most equipment manufacturers don't even talk about 3g equipment in the same way. Expect today's simple mobile handsets to metamorphose into new kinds of 'digital personal communicators' or 'personal communications devices' – compact, take-anywhere units which will be as indispensable as your wallet, keys and credit cards. In fact, if handset manufacturers and on-line content designers have their way, your new phone could actually become your wallet, keys and credit cards.

What Drives Demand

When mobile services first came on the market, there was a lot of talk – and most of it was the largely voice-only traffic which once dominated the world's telecoms networks. The staggering growth of the World Wide Web since 1994 has changed all that. Today, data traffic has already outstripped voice in markets like the US and the UK, and is expected to do so throughout the rest of the developed world in the very near future. As an increasing amount of information becomes available on-line, more and more people are using the Web and proprietary on-line services as the first port of call for everything from the latest stock prices and weather forecasts to finding the answers to the most arcane questions. But on-line information is just the beginning. As the number of Web connections continues to double every year, the climate is right for the long-awaited explosion in electronic commerce. Reach that critical mass of on-line shoppers and the sky's the limit for telcos, who'll see network traffic – and revenues – soar.

While it's true that for the foreseeable future, at least, wireless speeds will always play second fiddle to the speeds achievable with a souped-up wireline connection, the 2Mbps promised by third generation systems should be ample for mobile Web access and complex multimedia services, right up to full motion personal video-conferencing. While wireless systems are not likely to replace wireline any time soon, it seems likely that manypeople, especially in the industrialised world, will soon be using their home wireline service almost exclusively for fixed connection to the Web through a PC or a high-end digital TV. For the rest of their telecoms needs, from simple voice to high-speed file transfer, Web surfing and integrated messaging, they'll use a lightweight, large-screen, mobile communicator based on third generation technology.

Incompatible Standards

Aside from speed, one of the biggest problems with today's digital mobile systems is the existence of competing, incompatible standards in different parts of the world. While Europe and parts of Asia and the Pacific are devotees of GSM (Global Standard for Mobiles), in the US the so-called PCS (Personal Communications Services) 1.9GHz networks use a mix of cdmaOne (or IS-95), D-AMPS (Digital Advanced Mobile Phone Service, or IS-136) and GSM 1900, depending on the operator. Japan also has its own standard – PDC (Personal Digital Cellular). And none of these systems is interoperable with the others – bad news for business users, who find their mobile phone no longer keeps them in touch when they're travelling, but also a headache for equipment vendors and larger operators, who lose the ability to effect economies of scale through the need to simultaneously manufacture and support a wide range of different technologies.

For all these reasons, the vision for third generation mobile systems has always been of a harmonised, global standard which would finally deliver on the promise of seamless, anytime, anywhere communications. Now, through the work of the ITU and its member organizations, that vision is set to become a reality through the adoption of the IMT-2000 standard.

A Solution at Last – The IMT-2000 Concept

Work on developing the new global standard which would underpin third generation networks began under the auspices of the ITU back in the mid 80s and was boosted by the decision of the World Administrative Radiocommunication Conference held in Torremolinos in 1992 to identify harmonized worldwide radio-frequency spectrum for IMT-2000 services in the 2GHz band. The IMT-2000 concept broadly describes a range of technologies (see the box on A Global Vision), including both terrestrial and satellite systems, with a flexible, and, most importantly, common core functionality which facilitates seamless interworking across different networks.

Hard Slog

For the ITU Radiocommunication Sector, development of the IMT-2000 standard has been a lengthy and arduous process involving not only years of consultation with the world's equipment manufacturers and operators, but complex co-ordination with a wide range of other standards bodies and ITU Telecommunication Standardization Sector groups working in inter-related areas, from signalling and protocols, transmission and network management to security, multimedia technologies and even tariffing structures.

IMT-2000 standardization work reached a crucial point in March this year with the meeting in Fortaleza, Brazil to determine the technology which would provide the crucial underlying 'air-interface' – that is, the part of the system which carries the call from the base station to the user's mobile handset. The meeting was called upon to choose from a broad range of proposals, submitted by administrations, regional standards bodies and individual operators, which had been under evaluation since October 1998. Recent decisions in ITU provide essentially a single flexible IMT-2000 standard with a choice of multiple access methods that include CDMA, TDMA and combined TDMA/CDMA, to embrace the many different mobile operational environments around the world. Further development of the more detailed IMT-2000 radio interface recommendations within the ITU is being pursued with the aim of minimising the impact on users of flexibility within the IMT-2000 standard, through maximising commonality and ease of digital implementation in a hand-held mobile unit. IMT-2000 radio interfaces should include the capability of operating with both of the major third-generation core networks currently under development.

Recent decisions in ITU provide essentially a single flexible IMT-2000 standard with a choice of multiple access methods that include CDMA, TDMA and combined TDMA/CDMA, to embrace the many different mobile operational environments around the world. Further development of the more detailed IMT-2000 radio interface recommendations within the ITU is being pursued with the aim of minimising the impact on users of flexibility within the IMT-2000 standard, through maximising commonality and ease of digital implementation in a hand-held mobile unit. IMT-2000 radio interfaces should include the capability of operating with both of the major third-generation core networks currently under development.

For the ITU and its Sector Members, the task ahead involves harmonizing these multiple-mode systems so that, despite some technical differences, the resulting third generation networks nonetheless conform to the IMT-2000 goal of unified global access and functionality. To this end, IMT-2000 recently accepted a range of proposals designed to enhance interoperability which were developed by the Operators' Harmonization Group, an independent affiliation of some 35 operators and 12 major equipment manufacturers. The first release of the standards for IMT-2000 radio interfaces are due to be formally adopted by the next major IMT-2000 meeting, scheduled from 25 October to 5 November, in Helsinki.

Coming to an Operator Near You!

The process of issuing third generation licences is already well underway in Japan and Europe, particularly in countries like Sweden and Finland, which already boast very high levels of mobile penetration. For the rest of the world, licences will be up for grabs over the next 1-3 years, allocated either via an auction, as is planned in the UK and US, or through a 'beauty-contest' whereby potential 3g operators present their network proposals to the government, which then makes its choice based on criteria such as speed of implementation, population coverage, range of services and so on. Some countries, like Japan and South Korea, will give priority to existing second-generation licence holders; others, including the UK, will adopt a clean slate approach and select licensees purely on the strength of their proposed networks.

In addition to selecting new 3g network operators, administrations will also need to make radio frequency spectrum allocations for new networks. While some countries will set aside new spectrum for 3g, others will overlay IMT-2000 systems onto the spectrum used for existing digital mobile services, in order to ensure a seamless migration of customers onto new networks without the need to re-jig existing spectrum allocations or find additional spectrum in already-crowded radiofrequency bands. Users in Japan can expect to access third generation services as early as 2001, with Europe and parts of Asia and Pacific coming on-line in 2002 and the US bringing up the rear shortly after that.

Europe, which has to deal with an environment comprised of many different nations, has moved fast to ready itself for next generation mobile. It already has a well-defined plan for 3g implementation following strategic guidelines defined by the European Commission and regulations adopted by the European Parliament. In the beginning, multi-mode handsets will be the rule, giving early adopters access the power of 3g services on their home networks while maintaining normal second-generation functionality when they roam in an area where third generation networks are not yet in place. Just as analogue and digital systems have co-existed for a decade, so third generation systems will live in harmony alongside their older cousins, giving operators time to upgrade equipment and get the most out of investments in 2G infrastructure and ensuring existing users get the same high-quality service they enjoy today.

Back to the Future

Even as the ITU puts the finishing polish on the set of standards which will define IMT-2000 third generation networks, talk is already afoot of fourth and even fifth generation systems. What can we expect from such futuristic technology? At the moment, it's really anyone's guess. The few certainties, in an industry which continues to transform itself at an astonishing pace are these: faster speeds, more functionality, and a cheaper, increasingly personalized range of services.

Third generation (3g) mobile phone networks could be operating sooner than expected, because operators want to raise revenue to start recovering the high cost of operating licences as soon as possible, according to Nick Davies, director of 3C for network infrastructure specialist Crown Castle.

The high cost of the licences to operate the next generation of mobile phone networks makes a slower rollout unappealing. Davies says that with the move from mainly voice-based services to wireless multimedia, this will accelerate the process of separating the underlying networks from the services running on them. "It was thought initially that 3g deployment would start inside the M25 and gradually move out," he says. "But with the amount that they've spent on the licences, the operators are increasingly looking for a fast rollout."

3C will bring support for faster wireless data. "Voice on 3g is like wheels on a car, says Davies. "What differentiates it is multimedia and content, we can already see this happening with 2C, for example on WAP. The market dynamics of 2C were quite different from the Internet. But if you are convinced that 3g will be driven like the Internet, and we are, then you understand that 3g is going to be conten tdriven." For the 2G operators this poses a problem. There are only four of them in the UK today, making it a far less competitive environment than the Internet. The danger is that they will simply become carriers, competing to deliver cheap bandwidth, while others reap the rewards of 3g by selling the services that people actually want to use.

"The mobile Internet is everything the Net is going to become, but any time, any place, anywhere;' says Davies. "Mobility is the ability to consume on the move, but it's also the ability to consume anywhere."

He says that 3g operators could buy in their network infrastructure from Crown Castle on a wholesale basis, leaving them free to focus on developing and delivering services. This would he cheaper for them, he says. "To build a 3C network from scratch would cost £2.8bn, plus £450m a year to run. Sharing the cost of the infrastructure could save a new operator £1bn. Much of that cost would go into acquiring the number of sites needed to cover the UK, which Davies puts at a minimum of 12,000, or from 20,000 to 30,000 for TV-level reliability. Yet sites are shareable, as is the costly equipment installed. One of the first outsourced 2G networks in the UK was built by Crown Castle for One 2 One in Northern Ireland. According to Davies, the world's first 3C network will he built for Manx Telecom by NEC and Siemens with project management, installation and commissioning by Crown Castle. 3g uses a new radio system called Wideband CDMA, but the network planning process is much the same as for GSM.

"3g services will have profoundly differ ent traffic patterns and that affects how you build and deploy the network," Davies says. "2C is a predictable model, but that's not true with 3g. How much revenue will you get from voice, advertising, sponsorship, etc? Where and how will you build your network? 3C will be fast moving, like the Web, and you need to understand the business models."

The extravagant promises of the next generation of mobile services - people e-mailing photos, downloading music from the Web, playing games and more with their wireless phones - would take years to materialise, experts said at a recent seminar. Some people believe a tsunami of third-generation (3g) technology will hit Hong Kong next year after the government auctions off 3g mobile phone service licences to local operators. Many nations in Europe have already established their 3g network licences, and countries in the Asia-Pacific region have begun to follow.

However, "it's going to take a number of years to build a business," Paul Brown-Kenyon, a manager at McKinsey & Co, told attendees of Hong Kong's first 3g Investment Seminar. He pointed to the craze in Japan over iMode, a service which was initially ridiculed as a fanciful "Hello Kitty" type of service. The wireless Internet service permitted schoolchildren and adults to not only chat with each other, but to download cartoon characters, play a virtual fishing game and use a whack of other applications. NTT DoCoMo, which offers iMode in selected areas in Japan, took 3-1/2 to four years to build a formidable base of approximately 11 million subscribers. The company's success was also attributed to its partnerships with numerous third-party application providers, Mr Brown-Kenyon said.

Still, Mr Brown-Kenyon noted that this Japanese model for cellular mobile Internet services may not translate to Hong Kong. In the past, even some United States-based Internet models have failed to translate to mainland markets due to cultural differences, he added. The 3g Investment Seminar, which was attended by about 150 analysts, fund managers and interested parties, was designed to attract money to Hong Kong's developing 3g market. Co-hosted by mobile phone maker Nokia and the Hong Kong Industrial Technology Centre, seminar participants played up the potential of 3g but also discussed some of the technology's current problems.

A Nokia executive from Finland, Joe Barrett, said that companies will have to build trust with users to persuade them to use 3g-enabled phones when accessing the Internet as they now do on their desktop computers and to pay for such service - 5 cents every time they check the weather, for example. "It takes anywhere from three to seven years to have a change in people's behaviour," warned Mr Barrett. Mr Barrett also hailed the opportunity to switch from the Internet business model - where all users expect services to be free - to the money-making model. "The current Internet revenue model is not working," he said, adding that people today expect Internet services to be free, which does not generate money for the service providers.

To date, Hong Kong has 4.8 million mobile phone users out of a population of 6.8 million, giving the city a penetration rate of more than 70 per cent. That's much higher than the estimated 2.3 million people or 34 per cent of the population that use the Internet. Analysts generally predict that worldwide demand for wireless phones will outstrip Internet usage in a few years, since less developed nations will be able to use wire free services without laying expensive cables. Asia telecom research director at Credit Suisse First Boston, Ni Quiaque Lai, said the mobile phone would break the language, availability and education barriers that currently exist in the English language-dominated Internet.

Cheap wireless phones are expected to give users the chance to press "yes" or "no" and 1,2,3 for services. However, 3g companies would need to grow big to be able to compete in their markets, Mr Lai said. Mr Lai added that companies would be forced to create alliances, such as those set up by various airlines around the world, to survive in the competitive market.