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In a speech to the European-American Business Council last March, European Commissioner Erkki Liikanen touted Europes lead in wireless technologies and predicted that the Continent could leave the U.S. in the dust, rolling out third-generation wireless networks.
A year later, 3G spectrum has been auctioned in Europe, and mobile phone users there still outnumber U.S. subscribers. About 61 percent of Western Europeans are wireless customers, compared to about 35 percent in the U.S., industry groups report.
U.S. operators are eager for federal regulators to identify and auction next-generation spectrum here, but are watching their European counterparts — who spent billions on spectrum licenses — very closely. Some analysts say the pricey 3G spectrum, which allows operators to deploy next-generation mobile communications services, either puts the European firms on the edge of something great or at the edge of disaster.
European operators may be able to replicate the marketing success of NTT DoCoMos i-mode service, which has attracted more than 19 million customers, mostly in Japan, who access next-generation functions such as e-mail, games and short message service over their wireless phones.
Or, says Lars Godell, a Forrester Research analyst based in Amsterdam, “3G could be the trigger to implode the whole industry. It was a very expensive experiment, and theres no clear business case to support it in many countries.”
Some industry representatives say European firms would be best served by rolling out new, revenue-generating services that are easily deployed using current network technologies, rather than setting their sights on 3G.
Early Steps
Many analysts and industry experts say Europes adoption of a single technical standard, global system for mobile communications (GSM), is a key reason the mobile phone market has grown faster in Europe than in the U.S., where wireless operators offer competing technical standards for mobile phones.
They also point to the fact that European wireless customers do not pay when someone calls them, unlike U.S. subscribers, who are charged for incoming and outgoing calls.
Travis Larson, a spokesman at the Cellular Telecommunications & Internet Association, which represents mobile operators in the U.S., disagrees. He says other factors fueled European growth — in particular, the fact that governments there began issuing licenses for second-generation technologies before the Federal Communications Commission held its auctions.
“We were first to work with the technology on a tryout basis, but the Europeans regulatory structure went ahead faster,” Larson says.
European governments moved quickly to identify spectrum and to provide an encouraging regulatory atmosphere, says Anna Snow, senior trade adviser at the European Unions Washington delegation. Because governments issued nationwide licenses, European operators also are helped along by dense network coverage.
European government officials saw nationwide licenses “as a competitive wedge to use to compete with the U.S.,” says Rudy Baca, global strategist at the Precursor Group, but the strategy could backfire. “The high cost of licensing in Europe and the nascent stage of technological development gives the U.S. some leverage.”
Darker Skies to Come?
BACA and others argue European operators could fall behind and blame the trouble on the 3G spectrum auctions. Many companies were forced to bid for fear of being out of the game before it began, Baca says, and its still not clear whether they will be able to generate a return on their investments.
“Its an incredible gamble,” says Jacob Christfort, chief technology officer and vice president of product development at OracleMobil, Oracles wireless application service provider subsidiary.
European operators have not been as adept at providing wireless Internet services and, for the moment, are trailing Japanese companies.
“Europe touted itself as leaders in wireless,” says Steve Shivers, managing director at InfoSpace Europe, which provides Internet applications for Web sites and wireless operators. But Japan and the Far East are outpacing Europe in mobile Internet services. “While [European companies] have an advantage relative to the U.S., they are significantly behind in Web technologies.”
The initial rollout of Wireless Application Protocol (WAP), a programming language that allows cell phones to access Internet-based information, has not been well-received in Europe. It promised a lot, analysts and industry officials say, but not much content has been delivered.
Caroline van Weede, chairman of GSM Europe, the European interest group of the GSM Association representing mobile operators, argues that 3G will provide the necessary bandwidth to provide new and improved services based on WAP.
Lars Nilsson, manager of strategic marketing at Ericsson, predicts WAP will take off once General Packet Radio Service technology is introduced later this year. GPRS is expected to improve the performance of WAP.
But, van Weede says, European operators have other worries at the moment. Her group is particularly concerned about a package of telecommunications measures working their way through the European Union that she says could reduce revenues and increase regulatory burdens on an industry that has so far been lightly regulated.