The biggest issues facing the operators of future mobile telephone networks are what to do with them. What services will use the high-speed data channels they will offer, and how will the massive cost of licences and equipment be recouped when so many pundits are predicting cheaper calls?
UMTS, or universal mobile telephony service, is Europe's next generation of mobile telephony. Also known as third generation, or simply 3G, it will relieve congestion in urban areas by allowing a higher number of calls per cell than existing cellular systems.
It allows high-speed data channels to phones, bringing Internet-style services to mobile users. The future of UMTS, including the technology, the commercial issues, and the regulatory issues, was the topic of last week's three-day UMTS '99 conference in Monte Carlo.
There are about 300 million mobile users worldwide, and this figure is rapidly growing. Paradoxically, this represents a challenge for mobile network operators, who must invest heavily in new equipment and services in order to compete for new customers.
Even before UMTS networks finally go live sometime in 2002 in Europe (and probably a year earlier in Japan), operators are being urged to invest in network upgrades to support mobile data and Internet on current GSM networks.
The operators are worried. Mr Kurt Schmid, from the Swiss operator Swisscom Mobile, told the conference that operators were concerned at the number of variables surrounding UMTS development: equipment costs, network roll-out details, and the market readiness in 2001 were still unknown, he said.
Underlining operator uncertainty, Mr Schmid said Swisscom Mobile's business case for UMTS would result in something between bankruptcy and a 300 per cent stock price increase.
As if this weren't enough to worry about, existing operators are also concerned about competition from young blood as new operators pop up with UMTS licences. Mr Peter Bliksrud of Norwegian operator, Telenor, bemoaned the potential growth of what he called "virtual network operators". He described these as operators who were awarded telecommunications licences to operate mobile networks, but who only installed the radio parts of a network. He said they then switch calls over existing telecommunications networks at wholesale rates, gaining call revenue for minimum investment. "They're short-circuiting the interconnection arrangements," he complained.
But any hopes Mr Bliksrud has of regulators curbing the growth of this type of operator may be wishful thinking. The following two speakers both advocated relaxed licensing conditions to maximise the opportunity for new operators. In particular, Mr Michael Davies, president of Massachusetts-based consultants Mercator Partners, likened future mobile networks to the Internet business model. He advocated light regulation which he predicted would spawn new business partnerships.
Mr Davies predicted hundreds of thousands of sources of online content, and urged new operators to roll out nationwide UMTS networks, as opposed to the more financially conservative plans for so-called "islands of UMTS in a sea of GSM", as most industry experts are advocating.
Licensing is shaping up to be one of the biggest concerns of the mobile industry. So far, Finland has awarded the first European UMTS licence, in a so-called "beauty-competition" approach whereby bids are evaluated and licences awarded on merit. The Finnish licence fee is nominal, to cover administrative costs.
Britain, however, has announced plans to auction five UMTS licences, and the speculation is that this will raise up to £4 billion sterling. Operators favour the Finnish approach, and are awaiting announcements from other European countries with trepidation.
Mr Ruprecht Niepold, head of the mobile and satellite communications unit in the telecoms directorate general (DG XIII) of the European Commission, cautioned that there was little experience of auctions in Europe, and that they could go wrong in an imperfect market. However, he said, legally Britain could go ahead and DG XIII would not intervene.
Operators are not the only parties concerned about cost. In order to shoulder the cost of developing UMTS networks, suppliers Motorola of Chicago and Alcatel of France have agreed to jointly develop the radio network equipment. Mr Jean-David Calvet, vice-president of marketing and products at Alcatel, said the companies would still compete for customers, but would sell each other's equipment as part of UMTS network solutions.
Mr Calvet echoed the sentiments of many equipment suppliers who said operators were investing in upgrades to current GSM networks to carry fast data packets in order to gain market experience of running packet-data networks before investing in third-generation networks. Calling such networks 2.5G networks, he said: "If you can't do 2.5G data there is no point in doing 3G."
But just as the Internet would be useless without services, there was consensus that UMTS will need services and applications to drive its popularity. Video telephony was predicted by some to be the hot service.
One service which will probably be cheap and popular will be online news sent to mobile terminals. Spotting the opportunity, CNN Interactive was one of only a few content providers at the show. Commenting on this, Mr Davies of Mercator likened operators and content providers to "the dogs that didn't bark in the night".
If, as predicted, GPRS technology brings the Internet to mobile phones in the next year, there should be many more mobile data applications at the next UMTS show in Barcelona. The Catalan night air may hear more dogs barking than did Monte Carlo.
Eoin Licken is at elicken@irish-times.ie
