3G grinds to a start

After 18 months of nervous anticipation, the wait is finally over. The much-hyped – and often vilified – wireless technology known as third generation (3G) has finally gone live.
In October 2001, Japan's largest wireless operator, NTT DoCoMo, became the first company in the world to launch a fully commercial 3G service. The service is based on wideband CDMA (code division multiple access) technology, and other 3G licensees around the world are watching like hawks.

So far, the news is positive. According to NTT DoCoMo and impartial observers alike, demand for the new services is far outstripping supply. Of the approximate four thousand 3G handsets DoCoMo has in stock, over eight thousand people have already attempted to sign up for the new services – and this after just a few days.
Handsets are priced at around 500 euros for the lower-end NEC models, rising to 800 euros for the more feature-rich Panasonic handsets, which bundle a digital camera with the digital phone.

The service, dubbed 'Foma' – Freedom of Mobile Multimedia Access – is available in a 30 kilometre area around Tokyo. DoCoMo plans to extend Foma to Osaka, Kyoto and Nagoya by Christmas, and hopes to have rolled out the service to the rest of the country by the spring of 2002.
Additionally, the company wants to attract six million subscribers by March 2004.

However, before other expectant European 3G operators get too carried away in the initial euphoria, it must be remembered that this is Japan – a country that, almost single-handedly, invented the ‘technical gadget’ and whose appetite for the latest gimmick knows no bounds.
Just because something works in Japan does not automatically mean it will find the same willing market across the globe.

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Europe

While the launch of DoCoMo’s 3G service comes as no surprise (it has been on schedule for months), the apparent ease with which it has been deployed in a professional, low key and business-like manner, is in stark contrast to the efforts of the European operators.
While the European 3G cellular sector attempts to navigate a path through a storm of economic gloom mongering, increased debt interest repayments and creeping technical scepticism, the good ship DoCoMo has sailed serenely on.

Seemingly too broke – after massively expensive licence acquisition auctions – to build out their own networks, the unthinkable is happening. Many European archrivals are having to turn to each other to share the huge costs of the building out the network infrastructure. How can this possibly lead to a competitive commercial sector where innovation is sought and rewarded?

Forget commercial pride, with 3G, Europe has created a rod for its back, which is crippling the industry. To put it bluntly, compared to Japan, Europe’s on-going evolution to 3G is a fiasco.

Whoever is to blame for the current quagmire is a moot point. Some operators believe that governments were too greedy when they were auctioning the spectrum. ‘How can we build out the networks when all our money was spent on the licence?’ they say.

Yet, in their defence, governments can easily pass the buck by rightly pointing out that, if operators knew there would not be enough money left over for the network rollout, why on earth did they continue bidding?

The blame is probably shared equally between the two parties, as the scent of so much money – and in the case of the operators, potential money – lingered too long in the nose and distorted all other reasonable instincts, including caution and suspicion. Moreover, no one could have predicated the sudden, and almost immediate, loss of investor confidence in the ‘new economy’, which rightly or wrongly spread to the telecoms market putting even more financial pressure on already highly geared companies.

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Under pressure

Something had to give, and recent news from France suggests it just has. In early October 2001, it emerged that, Vivendi-backed, SFR and France Telecom (FT) are threatening to withhold 3G spectrum payments unless the government is prepared to renegotiate – as they see it – its onerous and unworkable repayment schedule.

Of course, such news should be tempered by the fact that, of the four 3G licences made available, only SFR and FT were prepared to pay the licence fee of approximately five billion euros, placing them in a very strong ‘negotiating’ position. However, such action is clearly indicative that some part of the 3G equation is still very wrong.

Unfortunately, other European operators do not have this luxury. For many of those operators, renting surplus capacity to MVNOs (mobile virtual network operators) was one way they were hoping to recoup some of their investment. However, this idea now seems to be quickly fading. Both Virgin and Carphone Warehouse – operators of successful GSM MVNOs – are facing their own tough times as demand for new subscriptions dries up, making additional spectrum currently surplus to requirements.

To compound the embarrassment even further, there are rumours emanating from some European 3G licensees that the new services will not deliver as much capacity as was originally thought. If this were true, the current problems afflicting operators would pale into insignificance, as the entire sector became a global laughing stock.

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