A Finnish Internet service provider will test the European Commission’s claim it has not shut
competing mobile phone technologies out of Europe.
Clari Net Oy, wholly owned by Finnish ISP Saunalahden
Serveri Oy, has applied for a license to operate a third-generation mobile phone network in Finland using cdma2000
technology, a technology based upon today’s Interim Standard-95 CDMA systems.
This company’s move could
determine whether other technologies besides the one chosen by the European Telecommunications Standards Institute
can survive in Europe. The EC, in defending itself from U.S. government claims that Europe is closed to competing
wireless standards, claims it allows European operators to choose non-ETSI standards as long as at least one operator in
each country selects an ETSI-chosen standard to allow pan-European roaming.
But a trade war between the U.S.
government and the European Union may be imminent. The U.S. government remains concerned W-CDMA
technology-a proposal incompatible with today’s IS-95 systems-is the only 3G standard approved by ETSI for 3G
systems. The Clinton administration, invoking references to the World Trade Organization, has said it wants EC
member states to license and assign radio spectrum to the maximum number of service providers without regard to
technology, based on the standards that emerge from the International Telecommunication Union-the international
standards body in charge of setting a worldwide 3G standard. The ITU wants to come up with one 3G standard
incorporating the 16 proposals submitted to it by standards bodies and other groups from around the world by March.
The EC insists it maintains a policy consistent with its global trade obligations.
“The Fins are the guinea pigs
for European 3G licensing,” said Patrick Donegan, wireless analyst with the Yankee Group in London.
“They left the door open to this bidder in order to not inflame the potential trade rivalries between the EU block
and the U.S. block.”
Regardless of policies, economics alone may keep any rival technologies out of Europe.
European mobile phone customers already are accustomed to pan-European roaming through today’s GSM systems.
Europe decided long ago to allow European operators to deploy only GSM technology and avoid fragmented digital
technologies like the United States has allowed. Any European operator wanting to deploy a 3G standard other than W-
CDMA technology would be hard pressed to find a business case, analysts say. While operators still are unsure of the
costs associated with deploying 3G systems in general, choosing a standard other than the ETSI standard would make
an operator a technology island, thus requiring it to spend extra money to find ways to allow customers to roam across
Europe. In Finland’s case, the ministry has not mandated global or regional roaming in the country. Each company will
be required to negotiate its own roaming agreements, said Molly Foerster, Qualcomm Inc. representative in
France.
“You’ll find that the huge majority of carriers will choose a standard that is approved within
ETSI,” said Donegan. “It’s more expensive for cdma2000.”
This is likely why 14 other companies
interested in obtaining 3G licenses from the Finnish Ministry of Transport and Communications opted to use the ETSI-
chosen standard.
Clari Net attorney Hannu Rintala said the company chose cdma2000 technology because of the
technology’s “competitiveness and the fact that it is technologically advanced.” The company declined to
comment on how cdma2000 technology will be interwoven into its business strategy.
Some analysts say cdma2000
technology will become commercially available before W-CDMA technology, which could give Clari Net a
competitive headstart in the marketplace. The company’s parent is the second-largest ISP in Finland.
“The
group is aiming to be a New Age Telco in the near future, and therefore 3G also will be part of the business
strategy,” said Rintala. “Clari Net Oy has no prior technological commitments and is therefore in a position
to freely choose the best technology suited for its purposes. The emphasis of the business of Clari Net Oy is also
slightly different from the traditional telephone operators.”
Qualcomm, which has been successful in lobbying
the U.S. government to prod Europe into opening its mobile phone markets to IS-95-based technology, said it has no
affiliation with the company.
Donegan said the third-generation license proposals received by the Finnish
government provide pointers as to the way licensing will play out in Europe for different technologies and
opportunities. Finland will become the first country in Europe to grant licenses, likely in the second quarter.
The
United Kingdom plans to auction licenses this summer, while the Netherlands also could tender licenses this year.
France and Germany are likely to grant licenses next year, said Donegan.
Harri Pursiainen, deputy head of the
Communications Administration Department within the Finnish ministry, said the applicants have until Feb. 15 to
provide the ministry with detailed information about their applications. The country is likely to grant four licenses if all
four operators use W-CDMA technology, but won’t commit to four licenses if cdma2000 technology is used because of
guard bands that may be needed to prevent interference between the different technologies. The ministry is hoping that
by Feb. 15, the 15 companies will have formed consortia to lower the number of applicants. Clari Net could have
difficulty finding partners if it pushes ahead with cdma2000 technology.
“We haven’t decided what to
do,” said the ministry’s Pursiainen. “We are waiting for final applications, and of course, we will have to
look at the ITU process.”
The ITU standards-setting process today is at a standstill. Qualcomm Inc. of San
Diego and Sweden-based L.M. Ericsson claim to own key patents to both W-CDMA technology and cdma2000
technology. Qualcomm won’t grant its patents unless one CDMA standard compatible with European and North
American systems is achieved, while Ericsson said it will withhold patents unless each region is allowed to choose its
own technology without being hindered by unequal IPR policies. Those involved with the ITU process believe it’s more
likely that a family of standards will be chosen.
“We believe the best chance of Saunalahden Severi Oy
winning a license is via a compromise between Qualcomm and Ericsson being reached within the ITU,” said
Donegan. “We think it unlikely that stand-alone cdma2000 networks will be launched in Europe because of the
strong support for the Ericsson-defined W-CDMA standard among likely UMTS license bidders.”
Rintala
said part of the reason Clari Net chose cdma2000 technology is because it believes convergence is likely to be
achieved.
Finland’s incumbent telephone companies as well as foreign bidders including Vodafone plc, Tele
Danmark and British Telecom plc have placed proposals with the Finnish ministry.
