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A year in review: Third generation games

This year has been dominated by scrambles to win third generation UMTS (Universal Mobile Telecommunications System) licences in Europe, which sparked a wave of controversy and caused telco credit ratings to tumble.
Written by Lisa Burroughes, Contributor

This year has been dominated by scrambles to win third generation UMTS (Universal Mobile Telecommunications System) licences in Europe, which sparked a wave of controversy and caused telco credit ratings to tumble.

Licence fee bills alone have reached just under E100bn (£62bn). But the percentage of that amount gained by each country varied enormously - and this was central to a few allegations of auction fixing. The UK and German governments gained the most - the national equivalents of E36bn and E49.7bn respectively. In contrast, Finland, which kicked off the European auctions in February, chose to award the licences through a best-fit process commonly called the 'beauty contest', as did Spain and Sweden. Sweden also took the unusual step in December to rule out the country's incumbent telco Telia on grounds that it didn't appear committed to delivering a high-quality network. Italy's antitrust commission launched an investigation into its auction when bids reached only E12.2bn (£7.6bn). Spain, which was among the first to give its licences away in a 'beauty contest', complained it hadn't raised enough from the allocation, and German company MobileCom lodged a legal complaint that the German licence auctions were driven higher than they needed to be by the incumbent Deutsche Telekom. UMTS will allow operators to provide high-speed voice and data access services with speeds of up to 2Mbps. And many operators are banking on the prospect of lucrative video streaming services over mobile phones, as well as ecommerce, to swell their coffers. However, the risk involved in building a business on a technology that is unproven gave rise to concerns that the industry will go weak at the knees in 2001. The licence fee is just the beginning, with the cost of rollout for each 3G network estimated to run into several billion Euros. Siemens board member Volker Jung told Reuters shortly before Christmas that "several of these operators won't survive". And Jung isn't alone. Many of the investment banks are reviewing the credit ratings of large telcos, while analysts believe the price of services in some countries will have to be so high to cover costs that it will hinder take up. The disparity between countries will also create a very uneven playing field for mobile data services. The first 3G services won't be seen for at least another year. In the mean time those operators with investments in interim services (GPRS or HSCDC) will be keen to prove the value of mobile data for both the consumer and business professional in 2001.
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