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3G: Boldly going where no one should have gone in the first place?

Across Europe, auctions of third generation mobile licences have prompted huge bids and heated debate. The only certainty, it seems, is that it is impossible to predict what the outcome of investments will be.
Written by Pia Heikkila, Contributor

Across Europe, auctions of third generation mobile licences have prompted huge bids and heated debate. The only certainty, it seems, is that it is impossible to predict what the outcome of investments will be.

The process behind the awarding of third generation mobile (3G) licences has received plenty of bad press over the last few weeks. European telecommunications gurus recently slammed the inflated UK and German 3G licence fees as a bad investment. Some operators, such as Belgian incumbent Belgacom, have announced they will not pay "an exaggerated fee" for the Belgian 3G licence. The Danish government's plan to use the auction method for 3G licence allocation has raised objections from one lobby group, comprised of the country's five biggest telcos, pressing for a 'beauty contest'. Some critics also claim that existing technology can provide most of the functionality the 3G winners have planned for their new networks. For instance, the GSM network, supported by EDGE (enhanced data rates for global evolution) and GPRS (general packet radio service), can now increase the bandwidth available. In addition, wireless local area networks (WLAN) and wireless local loop (WLL) can deliver fast wireless internet access over the last mile. Arto Karila, professor of computing at Helsinki University, sees the European sour grapes as justified, and says alternative technologies can provide similar coverage to UMTS: He said: "Firstly, the so-called 2.5G technologies, such as EDGE and GPRS, will allow access as fast as 50-100KB per second, which is enough for most internet enabled applications. Secondly, internet access normally takes place in the vicinity of a wireless LAN, such as at hotels, restaurants and homes. And finally, as far as voice and data transfer is concerned, the second generation networks' speed is enough to support any additional usage." Juha Heinanen, technology director at the Swedish operator Telia, deemed the 3G's promised 2MB per second speed to be a crucial benefit. But he also highlighted the fact that network speed alone is no guarantee of success in the business of internet access. He said: "There are no guarantees as to whether the UMTS will perform as expected. Mobile handset manufacturers seem eager to convince operators that video will be the killer application. In my opinion, there is no proof video on mobile will be a technological success story." But Claire McCarthy of research consultancy Ovum believes the operators have not paid an unrealistic amount. "It is possible that technologies such as EDGE can replicate the speed of UMTS, but it is widely accepted that it is good to have additional spectrum, which you will need for higher bandwidth applications," she said. Andrew Peck, ebusiness consultant at telecommunications consultancy group Smith, said the operators have paid for the right to use this spectrum for enhanced access: "The spectrum has an inherent value because of its ability to provide additional capacity for browsing. In addition, the third generation network will give you the speed of your desktop, which most people will expect from their mobile device." One of the winners of the Finnish cellular pageant was Sonera. The director of Sonera's mobile applications, Pekka Keskiivari, believes the most likely technological success is a network hybrid, which utilises the speed of 3G and the proximity and accessibility of WLAN stations. He said: "Competition is a good thing because it enables the best possible developments. The problem is that technology is always developed first and only afterwards is thought given to how it can best be utilised." He agreed with Telia's Heinanen that it is difficult to forecast which applications will prove a success. The vision in the wireless crystal ball remains blurred. The debate over 3G technology and its alternatives rages across Europe. But the professional palm readers' negative stance may bear a word of warning for members of the exclusive billionaires' club: an innovative climate thrives only on open competition, not on exclusivity. But with a little help from alternative technologies, the future looks bright for those excluded from Europe's telco clique too. Need the low down on WAP? Want to know how it could change your business? Like to see how some companies are already reaping its benefits?
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