LICENSING OF THIRD GENERATION (3G) MOBILE: BRIEFING PAPER1 1 This paper was prepared by Dr Patrick Xavier of the School of Business, Swinburne University of Technology, Melbourne, Australia ([email protected]) ahead of the ITU Workshop on licensing 3G Mobile, to be held on 19-21 September 2001 in Geneva. The author wishes to thank Lara Srivastava, Dr Tim Kelly and Audrey Selian of the ITU and John Bahtsevanoglou of the Australian Competition and Consumer Commission for significant contributions relating to the preparation of this paper. The views expressed in this paper are those of the author and do not necessarily reflect the opinions of the ITU or its membership. 3G Briefing Paper TABLE OF CONTENTS 1 Introduction................................................................................................................................................ 5 1.1 Introduction ...................................................................................................................................... 5 1.2 Structure of the paper ....................................................................................................................... 6 2 Technical issues in the evolution to third-generation networks................................................................. 6 2.1 Standardization issues ...................................................................................................................... 7 2.2 The migration path from 2G to 3G................................................................................................... 9 2.3 Is 3G being squeezed?.................................................................................................................... 11 3 The potential for 3G: services and market demand ................................................................................. 12 3.1 The 2G Space and the Demand for Data ........................................................................................ 12 3.2 3G Services and Applications ........................................................................................................ 16 3.3 Market Demand – is there a need for 3G?...................................................................................... 16 3.4 Billing issues for 2.5G and 3G Services......................................................................................... 20 3.5 Deployment .................................................................................................................................... 21 4 Licensing policies .................................................................................................................................... 23 4.1 Approaches to 3G Licence Allocation............................................................................................ 23 4.2 Cost Sharing ................................................................................................................................... 31 4.3 Spectrum Trading........................................................................................................................... 31 4.4 Roaming between Networks........................................................................................................... 31 4.5 Principles for 3G Licensing............................................................................................................ 33 5 Enhancing the competitive landscape...................................................................................................... 35 5.1 The introduction of Mobile Virtual Network Operators (MVNOs) ............................................... 35 5.2 Infrastructure Sharing..................................................................................................................... 41 5.3 The evolving 3G value chain.......................................................................................................... 42 5.4 Network Interconnection................................................................................................................ 42 6 Globalizing 3G and the role of international agencies............................................................................. 45 6.1 International Roaming.................................................................................................................... 45 6.2 Global circulation of IMT-2000 Terminals.................................................................................... 46 6.3 International policies and the role of international agencies .......................................................... 47 7 Conclusion ............................................................................................................................................... 48 ANNEX 1: 3G LICENSING IN VARIOUS ECONOMIES ......................................................................... 50 ANNEX 2: LIST OF ISSUES FOR THE WORKSHOP TO CONSIDER ................................................... 54 A.1 Technical issues ....................................................................................................................................... 54 A.2 The demand for 3G services .................................................................................................................... 54 A.3 Licensing policies .................................................................................................................................... 54 A.4 Enhancing the competitive landscape...................................................................................................... 55 A.5 Globalising 3G and the role of international agencies............................................................................. 55 3 3G Briefing Paper LIST OF FIGURES Figure 2.1: IMT-2000 STANDARDISATION................................................................................................. 8 Figure 2.2: Evolution from 2G to 3G............................................................................................................... 11 Figure 3.1: Comparison of Fixed and Mobile Internet Services, Content Standards, and Network Technology .............................................................................................................................................. 13 Figure 3.2: PC Internet Access and Mobile Internet Access in Japan ............................................................ 14 Figure 3.3: Mobile By the Numbers: Subscriber Penetration 2000 – 2005.................................................... 17 Figure 4.1: Significantly varying prices of 3G licences, in Europe and the rest of the world........................ 28 Figure 4.2: The 3G rollercoaster..................................................................................................................... 29 Figure 5.1: An MVNO customer making and receiving calls ........................................................................ 36 Figure 5.2: The 3G value chain....................................................................................................................... 43 Figure 5.3: The i-mode network and access to ISPs...................................................................................... 44 LIST OF TABLES Table 2.1: New 3G services.............................................................................................................................. 7 Table 3.1: Applications that could drive demand for mobile data.................................................................. 15 Table 3.2: Estimated cost of GSM and UMTS networks ............................................................................... 22 Table 4.1: Allocation of 3G mobile licences around the world...................................................................... 27 Table 5.1: Regulatory Attitudes to 3G Mobile Virtual Mobile Services ........................................................ 38 LIST OF BOXES Box 2.1: The 3G standard issue in South Korean license allocation ................................................................ 8 Box 3.1: Comparing services/applications provision under 2G , 2.5G and 3G.............................................. 16 Box 3.2: Revenue Forecasts for mobile services ............................................................................................ 18 Box 3.3: Main Operators in the Market.......................................................................................................... 19 Box 3.4: Case Study of 3G in Ghana............................................................................................................. 20 Box 4.1: Czech Republic 3G licensing........................................................................................................... 25 Box 4.2: A modified auction approach – licensing in Hongkong SAR through a ‘royalty-based’ system .... 28 Box 4.3: Spectrum allocation for 3G service in Europe ................................................................................. 34 Box 5.1: Virgin Mobile --an example of an MVNO....................................................................................... 37 Box 6.1: Barriers to Global Circulation --The Case of Japan......................................................................... 47 4 3G Briefing Paper 1 Introduction 1.1 Introduction This document is designed to serve as a briefing paper for the ITU Workshop on: “Licensing of Third Generation (3G) Mobile”, to be held