3G rollout status - rapport om 3G-utvecklingen i Europa - PTS-ER-2002:22 - oktober 2002


Executive Summary

This report provides a descriptive and analytical overview of the status of 3G rollout in the European Union and Norway. It focuses on potential modifications of licence distribution and conditions and the changing market outlook for 3G services in Europe.

The European Commission and national regulators share powers of regulation over the mobile telecommunications sector in Europe. While many regulators have made no alterations, at national regulator level licence conditions that have been altered/clarified include timing of service launch, timing of coverage milestones, network sharing, extension of the licence period and revision of payments for fees associated with the licence. These indicate there is some limited flexibility to the industry, and a slight change of regulatory focus from market liberalisation to 3G market facilitation.

Regarding availability of equipment, potential showstoppers from a network functionality perspective include:

  • Plain software stability of some of the nodes required for offering reasonable service functionality.
  • Interoperability between terminals and infrastructure. I
  • nteroperability between network nodes in case of multiple vendors.
  • Handover and cell reselection between 2G and 3G.

Availability of handsets is strongly linked to interoperability testing of handsets on networks. Access to handsets is not straightforward for operators, and possibly less so for those in less influential markets. Operators are more likely to cite handset delays than network delays, in order to maintain their relationship with their equipment vendor. However, actual reasons for delay rest on a balance between handset availability and network functionality.

In Europe the number of operators has generally increased in comparison to the 2G market situation, but not to the extent that was anticipated at the time of 3G licensing. There is a Europe-wide trend for fewer 3G operators than originally anticipated. Operator announcements show that 3G is delayed across Europe; operators expect initial launches in mid-2003. Some operators indicate ‘soft launches’, i.e. non-mass market launches, without major revenues at that stage. Multi-national operator groups tend to co-ordinate delays.

Regarding operators’ financial situation - with reduced credit ratings, and lower than anticipated profits, operators find that the 3G commitments they’ve previously committed to will require greater external financing, at a higher cost. This impacts their capacity to rollout networks.

In the current European market the variety of services is lower than expected, with service development increasingly dependent on operators. This is reflected in changed industry expectations - revenue forecasts made in 2002 are approximately 25% lower than those made in 2001. Industry forecasts from 2001 to 2002 show a slower 2G /3G conversion pace than originally anticipated. Market take up is heavily dependent on handset and service availability. Incumbent operators are likely to be 3G rollout status 3 (54) less impacted by the delay than new entrants, as new entrants still have to secure a customer base.

In both Europe and Asia, there is little evidence of 3G-specific services. However in Korea, there are limited grounds for optimism. While there is little difference in the successful data services on 2.5G and 3G in these markets, there is an indication that more sophisticated handset features stimulate greater usage of these features, and greater revenues. In addition, these operators are growing the non-traffic based proportion of their data revenues. However, it is likely this is due to the large content communities that are in place, which European operators have not successfully stimulated.

Finally, Northstream concludes that evidence confirms that the European 3G market is delayed, with many players waiting to roll-out ‘soft-launches’ in mid 2003. In addition that market has qualitatively changed. There are differences from original expectations in terms of competitors, services and revenues, which show that operators are operating in an unanticipated market environment.