International Regulation of Wireless Communications

 
International Regulation of Wireless Communications
Each country has its own wireless network regulations, and many have separate regulatory
bodies devoted to telecommunications. Without international cooperation and communication,
this situation creates fractured networks and standards and results in poor international
wireless services. International regulating bodies do not arbitrarily set policies, rather they
attempt to create consensus among members. [*** “Regulation,” <www.itu.int/
journal/200101/E/html/regulation.htm>***]
One international regulatory body is the International Telecommunications Union
(ITU), (www.itu.int) based in Geneva, Switzerland. Members include 189 nations and
650 sector members. Sector members are telecommunications and technology companies
from various nations. ITU’s goal is to encourage cooperation between governments and the
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private sector to work toward agreeing on telecommunications issues. The International
Mobile Telecommunications (IMT) group is the division of the ITU that focuses on wireless
issues. [*** “Overview,” <www.itu.int/members/index.html>***]
Another is the Global System for Mobile Communications (GSM) Association
(www.gsmworld.com). GSM is the most widely-used cellular communications standard.
The GSM Association is responsible for the development, deployment and evolution
of the GSM standard. Member organizations are from Europe, India, Asia-Pacific, the
Middle East, Africa and North and South America. More than 490 network operators, regulators
and administrative bodies and manufacturers are members. [*** “About GSM
Association,” <www.gsmworld.com/about/index.html>***]
9.2.1 3G Licensing Auctions
In 2000, governments began selling licenses of new high speed radio frequency spectrum
to telecommunications companies. This spectrum, called third generation (3G) spectrum,
will support increased transmission rates required by the next generation of bandwidth-intensive
wireless applications, such as multimedia. This section examines the licensing
methods and the consequences of the licensing. We discuss 3G technologies in detail in
Chapter 10, Wireless Communications Technologies.
Governments either auction the spectrum or select the licensee via a beauty contest
(granting spectrum or the opportunity to purchase the spectrum to the company with the
best proposal). Spectrum sales produce income for governments. In 2000 alone, over $100
billion was spent by wireless companies in European spectrum auctions. The British government
auctioned five 3G spectrum licenses in April 2000, earning $22.5 billion (British
pounds). [***C. Woffenden, “German 3G Auction Bids Top UK’s,”
<www.vnunet.com/print/1108990> 16 August 2000***] The German auction of
six licenses was the most expensive of 2000. The license winners were T-mobil,
MobilCom, Viag Interkom, Group 3G, Mannesmann and E-plus Hutchinson, with the bidding
ultimately raising 50.5 billion Euros. [*** “3G License in Germany,” 3G Generation,
<www.3g-generation.com/germany.htm> ***] Sweden used the beauty
contest method to grant licenses, and did not charge licensing fees. Presumably, the money
saved by licensees can be used for the 3G technology development and foster wireless
growth. [***C. Shirky, “Wireless Auction Follies,” Business 2.0 14 November 2000:
123.***]
The 2001 spectrum license market is softer than in the previous year. The French government
had set a $4.6 billion entry fee for its 3G license beauty contest. Ultimately, only
two companies applied for the licenses. Bouygues Telecom and the partners Suez Lyonnaise
des Eaux and Spain’s Telefonica Moviles exited the auction, citing the entry fee
expense as the reason. The French government had decided to rerun the contest. [***
“France is Reconsidering Wireless Sale” The New York Times 1 February 2001:
W1.***] The three major mobile telephone operators in Czechoslovakia stated that they
thought the government’s asking price was too high, given the current market. The Czechoslovakian
government announced that it expected to offer the companies each a license,
for $134 million, and auction off the last license. [***R. Anderson, “Target Price Set for
Mobile Licenses” Financial Times 15 February 2001: 20***]
Companies have purchased spectrum licenses outside their home countries. Two of the
six German license winners were from other countries: Viag Interkom is 90 percent owned
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by Britain’s British Telecommunications and Group 3G is a combination of Finland’s
Sonera and Spain’s Telefonica. [*** “3G License in Germany,” <www.3g-generation.
com/germany.htm>***] Germany’s Deutsche Telekom announced in 2000 its
plans to acquire VoiceStream Wireless and Powertel, both of the United States. VoiceStream
is a United States’ 3G license holder. [*** “DT VoiceStream Merger Secures
Shareholder Approval,” Communications Update <www.citpubs.com/comms/
140301.htm> 14 March 2001***] The French conglomerate, Vivendi, purchased one
of the two available Moroccan GSM licenses in December 2000. [***J. Drummond,
“North Africa’s Mobile Connections,” Financial Times 1 February 2001: 20.***]
9.2.2 3G Licensing Effects
After companies pay millions or billions for new 3G spectrum licenses, they still must install
the infrastructure (towers, antennas, broadcasting equipment and networks) that supports
the new network technology. This could cost millions or billions more. Not only are
costs mounting, but time is limited. During the license sales, governments set deadlines for
establishing the new networks. [***P. Purton, “3G Threatens to Cripple Europe,” m-
Business February 2001: 38.***]
Deadlines, expenditures and limited licenses granted by world governments have led
to consequences, including moved timetables and slowed network deployments. [***M.
Mowrey, “Full Steam Ahead?” The Industry Standard, November 2000: 68***] Singapore’s
Infocomm Development Authority pushed back its 3G network rollout by a year,
to December 2004, because of concerns over 3G technology equipment supply. [*** “Singapore
Slashes 3G Price,” Communications Update <www.citpubs.com/comms/
090301.htm> 9 March 2001***] Both Korean 3G license holders are delaying launch
of their 3G networks. Korea Telecom postponed its proposed April 2001 date, and SK
Telecom delayed its network until it recoups expenses from its existing mobile network
technologies. [*** “Korea Telecom Follows Suit,” Communications Update
<www.citpubs.com/comms/140301.htm> 14 March 2001***]
Another consequence is that license holders are partnering with other companies. This
partnering allows auction losers to become involved in 3G spectrum development and technology
sharing. Partnering also provides much-needed cash flow to license winners.
[***M. Mowrey, “Full Steam Ahead?” The Industry Standard November 2000: 68***]
AT&T has a joint venture with Shanghai Telecom and Shanghai Information Investment,
Inc. to deploy wireless network services. [***A. Hamilton, “The China Syndrome” Red
Herring 13 February 2001: 48***] France’s Vivendi purchased 35 percent of Morocco’s
Maroc Telecom. France Telecom owns part of Egypt’s Mobinil. [***J. Drummond,
“North Africa’s Mobile Connections,” Financial Times 1 February 2001: 20.***] In
November 2000, Japan’s NTT DoCoMo announced the purchase of 15–20 percent of
AT&T Wireless in the United States for an estimated $9.8 billion. AT&T Wireless will then
create a unit expressly for 3G application development, and the two companies plan to
deploy an advanced wireless network in the United States. [***M. Mosquera, “NTT
DoCoMo, AT&T Wireless Tie to Speed Up 3G,” <www.techweb.com/wire/
story/TWB20001130S0014>***] Britain’s Vodafone, a wireless provider, purchased
a 15 percent stake in Japan Telecom. It was the second largest investment ever in a publicly
traded Japanese company by a foreign firm, and the largest in Japan’s telecom industry.
[***A. Hamilton, “The China Syndrome” Red Herring 13 February 2001: 48***]
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These examples illustrate a clear trend in investment crossing national boundaries, and of
the truly global nature of the communications industry.
One joint venture, between Vodafone and Verizon, is experiencing problems.
Vodafone owns 45 percent of U.S.-based Verizon Wireless, and Verizon owns the controlling
share. Verizon Wireless plans to build a 3G network using the Code Division Multiple
Access (CDMA2000) standard rather than the Wideband Code Division Multiple Access
(WCDMA) standard Vodafone and other European networks plan to adopt as their 3G standard.
If Verizon Wireless chooses CDMA2000, travelers would not be able to use the same
phone in both Europe and the United States. Vodafone views this as impacting their global
business and strategy. [***D. Roberts, R. Waters “Verizon’s 3G Plans Upset
Vodafone,” Financial Times 28 March 2001: 17***] We discuss standards technologies
in Chapter 10, Wireless Communications Technologies.
Not everyone believes that 3G investments are worthwhile. Critics are concerned that
companies are investing millions for technology that has not yet been tested in the marketplace.
[***E. Abreu, “Still Ahead of Its Time,” The Industry Standard 13 March
2000***] Another concern is that for wireless companies to recoup their investments on 3G
networks, they may conspire to set higher prices. [***A. Beattie, “Telecoms in Bid
Trouble,” Financial Times 28 March 2001: 11***] One company’s claim raises the question
of whether 3G networks are even needed. Idetic, Inc. has developed the Far Reach™
product which optimizes wireless bandwidth. Idetic claims that Far Reach achieves 3G
transmission speeds over existing networks. [*** “Idetic Enables 3G Speeds Over
Existing Networks,” <www.idetic.com/fullpress_03_12_01.html> 12
March 2001***]
2001 has seen the economy and cell-phone market slowing. Dominant cell-phone companies
Ericsson of Sweden, France’s Alcatel and Motorola of the United States all reported
earnings warnings in March 2001. By this time, Ericsson had already lost 70 percent of its
stock value and had ceased handset production, opting instead to outsource handset production
while concentrating on service and technology development. [***N. George, “Dark
Day for Sweden’s Ericsson,” Financial Times 16 March 2001: 40.***] [***R. Evans,
“Mixed Signals,” Barrons 27 November 2000: 17.***]