Serious business

Serious businessA stake in the UK mobile phone market is probably worth a couple of billion pounds, so when the government let it be known that one or two new operators would win UMTS licences at the expense of one of the big four it was major news. But is it the right thing to do? asks Richard Wilson
The UK is to have not four but five mobile phone operators after the auctioning of the licences for 3rd generation mobile communications services later this tax year. The government’s decision to throw caution to the wind in its spectrum allocation plans for 3rd generation mobile communications known as the UMTS is not without its critics amongst manufacturers and operators.
We should not really be all that surprised that the government has decided to err on the side of competitive ambition for its UMTS licences. The UK may already have Europe’s most competitive mobile phone markets – made possible ten years ago by the policy of the last government.
This has allowed the UK to become a leading centre for mobile communications technology and product development.
But now the present Labour government has been convinced by its advisors that the licensing of UMTS operators is the ideal opportunity to introduce a “new style” of mobile phone operator.
This will raise new tax revenues for the Exchequer and also take the UK on to a new plane as a world centre for mobile communications technologies.
Naturally this has not gone down too well with the UK’s four existing GSM mobile operators, namely Vodafone, Cellnet, Orange and One2One. But Trade Secretary Stephen Byers and his colleagues at the DTI care little for their discomforture.
Byers and his competition afficionardoes have set their hearts on attracting “visionary” media types like Richard Branson’s Virgin Group into the mobile phone market. The last thing the DTI wants to see is a cosy transfer of the new UMTS licences to the four existing GSM operators.
So a shake-up in the mobile market of significant proportions is on the cards with certainly one and probably two new operators looking favourite to win UMTS licences at the expensive of at least one of the four current mobile phone operators.
With operators bidding for stakes in a UK mobile phone market worth ?2bn this is serious business and there is much to play for. But has the government got its mobile sums wrong?
The UMTS Forum, Europe’s leading body which represents manufacturers and (potential) operators of 3rd generation UMTS mobile phones is convinced a mistake has been made. It claims that the warnings of its experts, who work for the likes of Deutsche Telekom and Nokia, have been ignored by the DTI in its decision to go with five UMTS operators.
The issue is the amount of available radio spectrum in the band chosen for 3rd generation mobile phone services across Europe. Given the size of the band, four operators in the UK would have been a more logical choice argues Dr Bernd Eylert, chairman of the UMTS Forum, who has effectively accused the DTI of trying to squeeze a quart into a pint pot over UMTS spectrum allocation.
“You can’t just subdivide spectrum into little pieces and expect a flourishing business,” said Dr Eylert. “Restricting the amount of available spectrum per operator by awarding too many licences places serious limitations on any operator’s ability to create a viable market for 3rd generation information services.”
It is tempting to believe that such is the UK government’s desire to add new operators to the mobile phone market that its advisors have convinced themselves that they can get away with allocating each UMTS operator less spectrum that the almost universally agreed benchmark figure of 2 x 15MHz.
Three of the five UK licences will get just 2 x 10MHz of paired spectrum, with an additional 5MHz of unpaired spectrum. The distinction of so-called paired and unpaired spectrum may be the dodge the DTI’s spectrum authority the Radiocommunications Agency (RA) has come up with to appease concern over a lack spectrum.
In effect, paired spectrum represents the frequencies available to operators for their principal UMTS services. The extra frequencies of unpaired spectrum will only be available for restricted use, principally for local area radio links such as in-building services. (See panel).
According to Dr Chris Wildey, a radio spectrum expert at the UMTS Forum, the 2 x 10MHz plus 5MHz unpaired spectrum being offered in the UK is “fine for just voice but it is not enough for multimedia services.”
UMTS 3rd generation mobile communications without the ability to provide state-of-the-art multimedia services, such as Internet downloads, audio and video, is not 3rd generation at all. In fact it will be little better than current GSM services. “The minimum for UMTS just to get started is 2 x 15MHz plus 5MHz unpaired,” adds Wildey.
Under the government’s proposal only one of the five licences will get this higher allocation of spectrum. And what will really niggle existing operators is that this “premiership” licence will only be awarded to a “new entrant”.
This is the crux of the UMTS licence issue. The government seems to be so determined to introduce new operators into the market, that it may end up artificially distorting the spectrum allocation to achieve its desire.
Not only has the DTI set aside “the largest licence” (the DTI’s own words) for an as yet unknown new entrant to the mobile market. It will also force existing operators to accommodate the customers of new operators on their existing GSM networks until new UMTS networks are fully operational.
The message from the government seems to be clear. The UK will have new blood in its next generation of mobile communications service come what may.
There is nothing wrong with such a policy. Indeed it was the last government’s plans for greater competition in the GSM market which has put the UK in the driving seat when it comes to mobile communications R&D.
Nokia, Ericsson, Motorola, Lucent Technologies, NEC and Panasonic are some of the mobile firms with development centres in this country. The theory is that this is where the mo bile action is, so to speak. And it is easy to see that the government’s UMTS plans are intended to continue this trend of greater competition in the market and greater innovation in the R&D labs along the M4.
“The UK must continue to play a leading role in this fast moving and rapidly developing mobile telecommunications market,” said DTI telecoms minister, Michael Wills when announcing the government’s plan to award five UMTS licences. “The prospect,” he continued, “of one or more new operators and the increased competition and innovation that this will bring is good news both for the economy and consumers in the UK.”
We can only hope that the government’s radio advisors have not overestimated the extent of the UK’s radio spectrum resource.If they have got it wrong it is not just mobile phone users who will pay the price, but also the engineers working in the UK’s all-important mobile communications research and development sector. The government’s plans for the third generation mobile phone industry Sometime between now and April 2000 five operator licences will be auctioned to the highest bidders potentially this could raise ?2bn-?3bn for the Treasury. Preferential licensing conditions will be reserved for one “premier”new market entrant. There will be three licences for 2 x 10MHz for spectrum (with additional 5MHz unpaired spectrum), one licence for 2 x15MHz and a fifth licence set aside for a “new entrant” with 2 x 15MHz (with additional 5MHz unpaired spectrum). Unpaired spectrum is intended as a “top-up” for operators.It will be used for short-range links in local area networks. Some see this as aspect of UMTS as a replacement for in-building cordless telephone links and not a “full-blown” wide area cellular service. The UMTS Forum maintains that each licence should have a minimum of 2 x 15MHz plus 5MHz unpaired spectrum to be viable. Government will also give all new entrants the right to make use of one of the four existing GSM networks, to carry calls while building their own UMTSnetwork.

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