Communication from the Commission to the Council, the European Parliament, the economic and social Committee and the Committee of the regions - Strategy and policy orientations with regard to the Further development of mobile and wireless communications (UMTS) - Out come of the public consultation and proposals for creating a favourable environment
Date: 1997-10-15
Institutions: European Commission
Subjects: EU policy, competitiveness, new technology, radio telecommunications, telecommunications industry

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  15.10.1997 
COM(97) 513 final 

COMMUNICATION FROM THE COMMISSION 

TO THE COUNCIL, THE EUROPEAN PARLIAMENT, 
THE ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 

STRATEGY AND POLICY ORIENTATIONS WITH REGARD TO 
THE FURTHER DEVELOPMENT OF MOBILE AND WIRELESS 
COMMUNICATIONS (UMTS) 

OUTCOME OF THE PUBLIC CONSULTATION AND PROPOSALS FOR 
CREATING A FAVOURABLE ENVIRONMENT 

SUMMARY 

The development of the telecommunications market is driven forward at a great speed, in 
part by the liberalisation of the telecommunications sector in major parts of the world and 
in part by the advances in technology in areas such as information processing and multi 
media communications over the Internet Protocol. 

Two main  trends will prevail over the years ahead: the rapid Internet  expansion  and the 
huge  growth  of  mobile  and  cordless  terminals.  This  development  is  not  confined  to 
Europe  but  takes  on  a  global  dimension  and  will  lay  the  foundation  for  a  global 
Information  Society  without  frontiers  where  information  is  stored  and  communicated 
electronically. 

A  great  opportunity  exists  for  the  mobile  communications  industry  to  foster  that 
to  provide  easy  and  ubiquitous  access.  Mobile 
development  by 
communications offers  everyone the ability to make phone calls, receive faxes, check e-
mail or use the Internet whilst on the move. 

its  ability 

The  huge  potential  for  expansion  that  this  market  holds  explains  the  rapidly  growing 
interests  of  industries  world-wide  in  the  standardisation  process  for  next  generation 
mobile  communications  in  the  ITU  (under  the  name  IMT-2000).  In  Europe,  these 
developments  take  place  under  the  umbrella  of  UMTS  (the  Universal  Mobile 
Telecommunications System) and are driven forward by the UMTS Forum and ETSI. 

But  also  other  parts  of  the  world  have  woken  up  after  the  success  of  GSM1.  Japan  is 
preparing  for  a mass  consumer  market,  a market  where  Japanese  industry  traditionally 
has  strength,  and  industry  momentum  is  building  up.  In  the  USA,  new  satellite  based 
concepts  are being developed  (e.g. the Teledesic) whilst  CDMA is heavily promoted  by 
its  industry  as  an  alternative  and  competitive  radio  access  technology  for  terrestrial 
mobile cellular communications. 

The European market of the year 2005 is expected to represent over  100 BECU of annual 
revenues and some 200 million subscribers. The global market is anticipated to grow even 
faster,  in particular in Asia. This means that any development in Europe in that area must 
take  into  account  the  global  nature  of  this  market.  To  that  end,  a  strong  home  market 
would seem to provide the best conditions for European industry to compete in other parts 
of the world. 

In order  to  set  out  strategy  and policy  orientations  for  Europe  in  this  important but  also 
very  complex  growth  sector,  the  Commission  issued  a  Communication2  in  which  it 

The success of GSM is generally attributed to the fact that it was an open standard and provided full 
cross  border  roaming  functionality.  GSM  has  become  the  de-facto  world  standard  for  mobile 
communications  with  now close to  250  operators operating or  building  a  network, the  majority  of 
them outside Europe. It is estimated that the total investment in GSM infrastructure will exceed 100 
B$ by the turn of the century. GSM has delivered a great net export result for Europe and created a lot 
of new employment within the industry. 

requested responses from Member States and sector players to a number of key  questions 
related to the further  development of mobile and wireless communications in Europe. 

This  Communication  provides  a  synthesis  of  the  comments  and  contributions  that  were 
received.  In particular,  clarification  of the licensing regime that will be used  for  granting 
UMTS  licenses  and  certainty  that  radio  frequency  spectrum  will  be  made  available  in 
good time were seen as critical areas where action by authorities is required  as a matter of 
urgency.  There  was  an  almost  unanimous  view  of  Member  States  and  industry  that  this 
would create favourable  conditions  for the development  of UMTS and thus help preserve 
the competitiveness of European industry. At the same time, Member States and operators 
felt  that  it  would  be  necessary  to  secure  basic  customer  interests  such  as  Europe-wide 
roaming  for  mobile  multi-media  services  on  the  basis  of  a  common,  open  and 
internationally  competitive  air-interface  standard  in order  that  the  European  citizens  can 
benefit  from  the  "wireless  Information  Society"  without  frontiers  as  they  can  do  today 
with voice using GSM. 

On the basis of the responses received, the Commission sets out action lines for creating a 
favourable  environment  for the further  development  of this sector.  These  action  lines are 
summarised in the table below: 

Action  Plan for  the  Community: 

action 

WRC-97: preparationôfagenda WRC-99 
(to include UMTS spectrum allocation) 

Council Resolution on present Communication 
setting out the political priorities 

Proposal of a UMTS Decision on spectrum and 
licensing conditions 

by 

Oct.97 

Dec.97 

Jan. 98 

Implementation of 5th Framework Programme for 

98 

Research and Development 

Adoption of UMTS Decision 

Mandate to ERC on further  spectrum allocation 

MRA negotiations 

WRC-99: extension of UMTS spectrum allocation 

Review of telecommunication regulatory 
environment 

early 99 

Feb. 99 

continuous 

Oct.99 

end 99 

I 

This  Communication  is  intended  to  present  strategy  and  policy  orientations  for  the 
development  of  third  generation  mobile  communications  (UMTS)  to  the  European 
Parliament  and the  Council;  the Economic  and  Social  Committee  and the  Committee  of 
the Regions. It responds to the specific call from the Council and the European  Parliament 
following the Mobile Green Paper3 for additional action to ensure a continuing support  for 
the evolution towards third generation mobile communications. 

TABLE  OF  CONTENTS 

im 

SUMMARY 

TABLE OF CONTENTS 

1. INTRODUCTION 

2. INDUSTRY AND ADMINISTRATION VIEWS ON THE FURTHER 
DEVELOPMENT OF MOBILE AND WIRELESS COMMUNICATIONS 

2.1. Main lines of comments on core issues 

2.2. Comments on key regulatory issues 

3. COMMISSION ASSESSMENT 

3.1. Areas of consensus 

3.2. Issues for further discussion 

4. ORIENTATIONS FOR PUBLIC POLICY 

4.1. Policy objectives 

4.2. Recommendations for further action 

4.3. Proposed targets, action plan and timing 

5. CONCLUONS REMARKS 

ANNEX I:  I I ST OF CONTWBMTORS TO THE CONSULTATION 

ANNEX SI:  LIST OF ACRONYMS 

2 

4 

5 

8 

8 

11 

17 

17 

18 

19 

19 

20 

26 

27 

28 

29 

i. 

INTRODUCTION 

The  Commission's  Communication  on  the  further  development  of  mobile  and  wireless 
communications2  was  published  on  29  May  1997. 
It  presented  an  overview  of 
developments  in mobile  and wireless  communications  within  the  European  Community 
since the  1994 Green Paper  on mobile  and personal  communications3 and  examined  the 
future  direction  of  mobile  and  wireless  communications.  In  particular,  it  invited 
comments  on  a number  of  core  issues  linked  to  the  further  development  of  mobile  and 
wireless systems: 

«  Is  this  the  right  moment  to  define  a  strategy  for  the  introduction  of  the  Universal 
Mobile  Telecommunications  System  (UMTS)  or  would  regulatory  action  today  be 
premature? 

«  Is  there  a  consensus  in  Europe  on  the  notion  of  UMTS  or  third  generation  mobile 
communications?  Will  it  be  a  new  single  technology,  or  a  number  of  interoperable 
solutions based on different  technologies ? 

•  What  should  be  the  respective  roles  of the private  sector  and  of public  authorities  in 

the transition towards UMTS? 

•  How can UMTS impact on the competitiveness of Europe's industry? 

®  How  do  we  ensure  that  the  broader  social  and  societal  interests  are  secured  in  the 

development of the "wireless information  society"? 

Additionally,  the  Communication  invited  comments  on  the  need,  if  any,  for  action  by 
governments,  the  European  institutions  or  other  regional  or  global  bodies.  The 
Communication asked for responses by 15 July 1997.  However, this period was extended 
into  September  at the request  of the Telecoms  Council  at  its meeting of  27  June.  More 
than  50  written  comments  were  received  (see  Annex  I  for  list  of  contributors)4  from 
télécoms operators, equipment  manufacturers  and  from  Member  States. Comments from 
business  and  user  interests  were  limited  to  a  comment  from  a national  user  association 
and from UNICE. 

Since  the  publication  of  the  Communication,  a  number  of  developments  can  be 
highlighted  which  reveal  a  rapid  evolution  of  the  UMTS  debate  and  confirm  the 
timeliness of the consultation launched by the Communication of last May: 

•  In July  1997, the UMTS Forum5 produced its first  report on a "Regulatory Framework 
for  UMTS"6.  The  report  examines  those  political  and  regulatory  actions  which  are 

Communication to the European Parliament, the Council, the Social and Economic Committee and the 
Committee  of  the  Regions  on  the  further  development  of  mobile  and  wireless  communications -
Challenges and choices for the European Union - COM(97) 217 final, 29.05.97 
Green Paper on a common approach to mobile and personal communications in the European Union, 
COM(94)  145 final, 27.04.94  " 
Copies  of  the  comments  are  available  on  request  (to  be  sent  to  umts@dgl3.cec.be or  by  fax  to 
Secretariat, DGXIII / AID, +32-2-2968395) 
The  UMTS  Forum  counts  now  about  Î00  members.  Memberships  includes  all  major  European 
manufacturers  and mobile communications operators. The Administrations  of  France,  Germany and 
the UK are also a member of the Forum. 

5 

considered essential for the successful  development of UMTS, as well as the  following 
timetable for such actions. 

MAJOR MILESTONES FOR THE DEVELOPMENT AND INTRODUCTION OF UMTS 
AS PROPOSED BY ETSI AND THE UMTS FORUM 

1 October 1997 

ERC  Decision  on UMTS  core band becomes  effective;  Member 
States expected to sign up for its implementation. 

31 December  1997 

Plans for the licensing of UMTS and for the provision of adequate 
frequency  spectrum must be clear in order to reduce the risks and 
uncertainties for industry 

First quarter  1998  Operators identified;  drafting of licences commences. 

31 December 1999  Agreement by ETSI on UMTS Phase 1  standard. 

Early 2002 

Start of commercial UMTS service. 

•  The UK in a consultative document7 has become the first Member State to announce a 
timetable for granting several UMTS licences with a view to services starting in 2002. 

•  Within  ETSI,  intensive  discussion  is taking  place  to  reach  a  common  understanding 
about  the  basic  technical  characteristics  of  UMTS,  and  a number  of  announcements 
have  recently  been  made  by  some  of  the  major  actors  in  the  European  mobile 
manufacturing  industry. 

•  Internationally,  there  have  been  a  number  of  announcements  from  industry  and 
Governments concerning third generation systems, for example in the USA, Japan and 
Korea.  Work in ÎTUIMT-20008 has provided a forum with wide global participation, 
whilst  contacts between regional  standardisation bodies have been established  and are 
strengthening,  particularly  in  areas  related  to  the  development  of  a  single  radio  air-
interface. 

In  preparing  this  Communication,  the  Commission  has  drawn  conclusions  from  the 
public  comments received  in response to the May  Communication,  and from  the Report 
of the UMTS Forum as well as other ongoing developments. 

The objective  of the present  Communication is to establish policy objectives  in the areas 
of UMTS; to clarify  how certain aspects of the current regulatory environment impact its 

A Regulatory  Framework  for UMTS, Report No.  1 from the UMTS Forum,  25 June  1997. It can made 
available  by the secretariat  of the Forum, Russell  Square House,  1-12  Russell  Square, London WC1B 
5EE, UK, fax +44  171 331 2040, e-mail  umtsforum@fei.org.uk 
Multimedia  communications  on the move, a consultative  document  from  the UK Department  of Trade 
and Industry,  31 July  1997. 
IMT-2000  (International  Mobile  Telecommunications  2000)  is  the  name  designated  by  ITU-T  (the 
Telecommunications  sector) to the standardisation  efforts  for third generation  mobile  communications. 
The corresponding  acronym  FPLMTS  (Future Public Land Mobile Telecommunications  System)  is up 
till  today  still used  by  ITU-R (the  radio  frequency  sector)  to  designate  the  radio  frequency  spectrum 
allocated  to third generation  mobile  communications. 

development  and to propose further action in key areas, as well  as a timetable for stfch 
steps. 

The  Commusication  proposes  to  confirm  the  commitment  at  Community  level  to 
ensuring  an environment  conducive  to  a successful  preparation  and implementation  of 
UMTS. 

jp.'!aiK^,ja^*a^.^vffiBi^j|^^lTr,-wj 

2.  •  INDUSTRY AND ADMINISTRATION VIEWS ON THE FURTHER 
DEVELOPMENT OF MOBILE AND WIRELESS COMMUNICATIONS 

The launching  of  a debate within  the European Union  on the  future  strategy  for  UMTS 
was widely welcomed  though it was clear that industry and Member States had  different 
expectations  for  the process. Section 2.1 below  is structured  along the main  lines of  the 
comments  that  were  received  to  the  core  issues  identified  in  section  3.3  of  the  May 
Communication, whilst  section  2.2  presents  additional  comments  on the key  regulatory 
issues raised in section 3.4 of the May Communication. 

2,1,  Main lines of comments on core issues 

2,hl  An overall strategy is urgently needed to provide regulatory certainty for  UMTS 

Industry  looked  for  the  rapid  development  of  a  clear  regulatory  framework  in  the  key 
areas,  such  as:  the  impact  of  competition  rules  on  UMTS; the  way  licences  would  be 
issued  and  the  conditions  to  be  attached  to  them,  and  the  future  frequency  allocations 
within  the  2  GHz  band.  Lack  of  timely  decisions  on  these  issues  will  deter  the  sector 
actors to take the required investment decisions without which the further  development of 
UMTS will be seriously compromised. 

Industry  believes  that  an  approach  at  European  level  is  essential  to  maximise  the 
opportunities  for  European players within the global market  for  third  generation  mobile 
communications9.  With  other  technologies  on  the  horizon  (e.g.  the  development  by 
Japanese and North American industry of new air interfaces), it was felt that Europe had a 
narrow window of opportunity in which to develop a clear and winning strategy. 

At the same time a number of comments pointed to the difficulty  of taking decisions at a 
stage  where  UMTS  has  not  been  clearly  defined  in  system  terms  and  users  had  yet  to 
indicate what level of demand there would be for the next generation of services. 

The European market for third generation mobile communications is a small part of the potential global 
market. The UMTS Forum forecast for the world-wide growth of mobile communications is shown in 
the  table below. The North American and European markets are expected to reach saturation first as 
car. be seen in the table. But even in 2015, markets in Asia, Africa and South America are expected to 
be far from saturation, even without taking population growth into account. 

Customers in millions 
at year end 
EU 15 
North America 
Asia Pacific 
Rest of World 
Total 

1995 

2000 

2005 

2010 

2015 

22 
36 
22 
7 
87 

113 
127 
149 
37 
426 

200 
190 
400 
150 
940 

260 
220 
850 
400 
1730 

300 
230 
1400 
800 
2730 

The key message from the Member States  that responded to the consultation (see  Annex 
I)  was  that  the  development  of  UMTS  should  be  market-led  with  industry  playing  a 
predominant  role.  Regulators  should  not  substitute  themselves  for  market  forces.  As  a 
result  some Member  States  (United Kingdom, Finland  and  Germany)  suggested  that  the 
combination  of competition  law  and the Licensing  Directive  offered  the necessary  basic 
regulatory  framework  within  which  UMTS  could  be  introduced.  Beyond  this,  Member 
States  generally  supported  industry  in  seeking  further  clarification  with  regard  to  the 
impact of competition rules, and with regard to how the Licensing Directive would  apply 
to UMTS. 

The UK indicated that whilst it saw the possible need for additional regulation for UMTS, 
it  questioned  the need  for  those rules to be developed  within  a Community  framework. 
France  highlighted  in  this  context  the  1999 Telecoms  Review  which  would  adapt  the 
télécoms regulatory framework, if required, in the light of two years of competition. 

2Js2^Ajdmr  picture with rezardJalreauencies  lies at the heart of the debate 

Member States attached importance to the current work within the ERC which had led to 
a  Decision  on  UMTS  bands10.  At  the  same  time,  Finland  and  France  both  expressed 
concerns that  should the ERC mechanism  fail  to produce timely  and binding results, the 
European Community should consider adopting a Frequency Directive. 

Industry  and the UMTS Forum  also attached  importance to the ERC s work  as the basis 
for  the  management  of  the  spectrum  for  UMTS/IMT-20Q0.  Some  industry  comments, 
however,  preferred  the  use  of  a  binding  Community  measure  to  allocate  frequency, 
together  with  a  clear  identification  at  a  political  level  of  Community  priorities  and 
objectives in relation to UMTS. 

Several  respondents  focused  on  how  much  fees  companies  would  have  to  pay  for 
spectrum  and  whether  it  would  be  allocated  by  auctions, with  some  comments  arguing 
that high fees acted as a market barrier. 

2JJ  The notion of third generation mobile communications 

A number of comments focused on the need for a migration strategy from existing second 
generation  systems, so that  a degree of backward  compatibility  would  be  guaranteed.  In 
this  regard,  some  comments  highlighted  the  current  evolution  of  the  GSM  standard,  in 
particular  the  development  of  the  General  Packet  Radio  System  (GPRS,  as  part  of  the 
GSM Phase 2 package, to support a limited  form  of mobile multimedia)  as an  important 
test  bed  for  future  developments.  Many  commentators  argued  that  UMTS  should 
constitute a multimedia evolution of GSM. 

10  ERC Decision  on the frequency  bands  for  the introduction  of Universal  Mobile  Telecommunications 
Systems (UMTS), ERC/DEC/(97)07, 30 June  1997. CEPT Administrations had until  1 October  1997 
to sign up for the Decision. On that date, the following EU Administrations had committed themselves 
to  implementing  the  Decision:  Austria,  Finland,  Germany,  the  Netherlands,  Portugal,  Spain,  UK. 
Furthermore, the following non-EU countries had signed up: Lithuania, Norway, Turkey. 

Several  industry players and the Member  States emphasised  that  ETSI provides the best 
platform  for translating the notion of UMTS into key open standards and that  technology 
choices should come from industry througrMie standardisation process in ETSI. 

The issue of whether  or not  existing  fixed  or mobile operators  should be able to  operate 
third  generation  systems  was  seen  to  raise  competition  issues.  The  UMTS  Forum 
suggested  that  existing  operators  should  not  be  excluded  from  bidding  for  UMTS 
licenses, because  of  the  huge  investment  costs  required  for  UMTS, whilst  a number  of 
GSM operators staked a claim to the automatic grant of UMTS licences, in order to allow 
users  to  benefit  from  their  skills  and  experience.  Member  States  considered  that  there 
should  be  neither  an  automatic  granting  of  licenses  to,  nor  an  a  priori  exclusion  of 
GSM/DCS operators. 

2JA  The broader impact of UMTS on Europe's society and global competitiveness 

Industry  presented  UMTS  as  a  test  of  Europe's  ability  to  rise  to  the  challenge  of  the 
communications  markets  in  the  next  century  and  the  development  of  a  "wireless 
information  society".  Industry  argued  in this context that UMTS must offer  nation-wide 
coverage  within  Member  States  and  be  priced  at  a  level  (both  services  and  equipment) 
which  reflected  a mass consumer market rather than a premium business  service. In this 
respect,  it  was  argued  that  high  valuations  placed  on  spectrum  would  lead  operators  to 
focus on high profit  business customers and could put European users and the industry at 
a serious disadvantage vis-a-vis other global players. 

To this  end, UMTS was also perceived  as having a direct  impact on the  competitiveness 
of  Europe's  economy  as  part  of  the  fabric  of  advanced  communications  which  was 
bringing  down  business  costs.  It  could  also  play  an  important  role  in  continuing  the 
success  of  Europe's  mobile  communications  industry,  offering  manufacturers  and 
operators  a  strong  home  market  from  which  to  expand.  This  assessment  was  largely 
shared  by  Member  States.  Stress  was  placed  on  the  fact  that  by  developing  products 
which  responded  to  market  demand  and  which  competed  successfully  with  other 
technologies, systems were likely to emerge which could compete on a world stage. 

In this respect, the UMTS Forum emphasised that the global potential  of this market has 
two  major  implications,  firstly  that  it  is  even  more  necessary  to  set  regulatory  and 
technological  frameworks  which  will provide  the greatest  impetus  to  UMTS  in  Europe, 
and secondly that UMTS developments need to take into account  trends in other parts of 
the  world.  Such  trends  include  a  greater  use  of  wireless  for  all  telecommunications 
services, particularly in emerging market. 

2.1.5  Other factors  related to the take UP of UMTS 

Strong  support  was  found  for  a  Community  co-ordinated  research  programme  into  the 
possible health effect  of mobile phones. 

There were no calls for extending current concepts of universal  service to include UMTS 
as a means of securing its wider deployment. 

Other issues were identified  in the comments as being important for the take up of UMTS 
services, namely: security and encryption issues, the protection offered  against fraudulent 
use, the need for adequate levels of privacy and protection of personal data, the protection 

10 

of  intellectual  property,  the  integration  of  UMTS  in  teleworking  and  teleteaching 
initiatives and access for the content industry. 

A  range  of  initiatives  are  underway  at  a  Community  level  in  relation  to  these  areas, 
therefore they are not considered further  in this Communication. 

2.2.  Comments on key regulatory issues 

| 

2<2J  The regulatory framework  f&r UMT& 

The development of UMTS should be market-led 

There  is broad  recognition  that  the private  sector  must  take  the  lead  and  should  design, 
build and deliver mobile and wireless multi-media services.  Such action should be driven 
by  market  demand.  Comments  suggested  that  the  role  of  public  authorities  was  one  of 
"political  leadership",  creating  an  appropriate  regulatory  environment  through  rales 
which promote innovation and  flexibility. 

Many  comments  whilst  emphasising  the  need  for  a predictable  regulatory  environment, 
confined  calls  for  regulatory  action  to  the  issue  of  grant  of  licences  for  UMTS  and  the 
need  for  early  frequency  decisions, in order to  avoid  over-regulation.  One  manufacturer 
stated  that  Member  States  must  set  a  global  example  by  committing  to  early  spectrum 
licenses.  Emphasis was also placed on the need  for rapid progress on a minimum  degree 
of  standardisation  i.e.  only  the  critical  interfaces.  A  number  of  comments  stressed  the 
need for early decisions if Europe was not to be overtaken by developments in other parts 
of  the  World  and  if  the  current  technological  lead  based  on  GSM  was  not  to  be 
squandered. 

A unique solution or interoperability and interconnection for  competing technologies? 

Some comments highlighted the risks of multiple wideband  air-interfaces,  allowing  users 
to be connected to a multi-media environment, undermining the objective  of Europe-wide 
roaming  and  connectivity.  This  led  for  calls  for  action  to  be  focused  on  ETSI  and  the 
UMTS Forum, in order to facilitate a single technological  solution. Such a solution would 
minimise  the  risk  of multiple  standards  being  adopted  or  implemented  in  Europe,  The 
importance  of  European  standardisation  efforts  was  stressed  as  a  means  of  influencing 
global developments. 

Others stressed the need for competition, preferring work to focus  on interoperability  and 
interconnectivity  rather than  a single technology.  Stress was  also placed  on the need  for 
UMTS to  allow  operators  to innovate  and to use their technology  of  choice, reflecting  a 
concern  that  over-specified  standards  tend  to  make  businesses  less  flexible,  preventing 
competition  based  on  differences  in  products  and  sendees.  In  their  view  the  current 
agreement on key characteristics of third generation systems was adequate for  investment 
decisions  and  for  the  limited  regulatory  action  required.  Any-attempt  to  establish  a 
consensus  around  a more  detailed  concept  of UMTS  was  unrealistic,  particularly  if  the 
aim was to develop a level of detail  similar to that  found within the GSM standard.  This 
view was supported in particular by the UK and France. 

11 

On  the  issue  of  whether  UMTS  should  be  service-  or  technology  orientated,  the  UK 
suggested that it should be technology based. The UMTS Forum report states that UMTS 
spectrum  should be reserved for systems using UMTS as defined  in standards adopted by 
ETSI.  Flexibility  of  the  UMTS  standard  as  defined  by  ETSI  would  be  an  advantage. 
Several Member States and operators felt that open standards were needed to ensure that a 
variety of manufacturers  will be able to supply equipment and that this equipment will be 
inter-operable. 

Roaming is a key regulatory issue for  UMTS 

Roaming  is  considered  by  most  of  Member  States  and  operators  as  a key  issue  for  the 
successful  take  up  of  UMTS,  particularly  as  it  seeks  to  compete  with  current  GSM 
networks.  Concerns  were  expressed  about  the  uncertain  regulatory  position  today  as  to 
whether  all  aspects  of  roaming  would  be  caught  by  the  Community's  Interconnection 
Directive. 

Some Member  States take the view that third  generation  operators should be  encouraged 
to  enter  into  roaming  agreements with each other, whilst  others went  further  suggesting 
that  legal measures  to oblige UMTS operators to negotiate roaming  arrangements  where 
required, where this was not covered by the Interconnection Directive. 

The  need  for  global  as well  as regional  roaming  was  also  highlighted  in the  context  of 
ITU work on IMT-2000. 

The need for  regulatory action to be co-ordinated at a European level 

The majority  view supported the case for a clearer concept of UMTS to emerge as a pre 
requisite  for  action  at the European  level. Most Member  States called  for  a  co-ordinated 
approach  with  regard  to  the  introduction  of  UMTS,  on  the  basis  of  discussion  at 
Community  level  and/or  within  the  CEPT.  This  view  is  supported  by  several  industry 
players  who  argue  that  the piecemeal  issuing  of  licenses  will  create  instability  and  that 
therefore  licenses  and  spectrum  should  be  made  available  in  a  co-ordinated  manner. 
Stress was  also placed  on the need to ensure a solution which was consistent  with IMT-
2000,  so  that  global  roaming  could  be  ensured.  Given  that  the  available  spectrum  is 
limited,  some  Member  States  argued  that  UMTS  should  be  constrained  to  a  single 
technology,  with  possible  legal  requirements  to  support  roaming,  perhaps  through  an 
obligation established at a Community level. 

Role for public  authorities to secure a broad competitive basis for  UMTS 

Member  States  saw a clear role for  action by public  authorities in order to  safeguard  the 
general  public  interest  by  ensuring  that  regulatory  environment  did  not  hold  back  the 
development of a competitive environment offering  a broad range of services. 

2.2.2  Frequency  issues related to UMTS 

The issue of spectrum pricing 

Several  industry  contributors  argued  that  high  pricing  of  spectrum  would  distort  the 
market  and  damage  the uptake  of UMTS  services.  Little  support  was  expressed  for  the 
use of market mechanisms, in particular, auctions, since these tend to overprice  spectrum, 
create uncertainty  and undermine the development  of  a healthy  industry.  Some  also  felt 

12 

that  auctions  risked  favouring  the  entry  of  non-European  players  into  the  European 
market  place.  On  the  other  hand,  some  Member  States  consider  that  spectrum  pricing 
should reflect  its economic value. 

Estimates of how much spectrum is required 

Industry players argued that the 2 x 40 MHz currently designated by the ERC11 will prove 
to  be  insufficient  for  the  needs  of  a  competitive  market  place  to  start  up.  The  UMTS 
Forum  identified  a minimum  requirement  of  2  x  40  MHz  to  be  released  now,  together 
with  another  band  of  20  MHz  which  will  be  needed  for  non-public,  in-building,  low 
mobility  systems.  In  the  longer  term,  the  Forum  considered  current  market  forecasts 
justify  a claim  for  the  full  155 MHz  identified  for  terrestrial  mobile communications  by 
WARC-92  to  be  available  by  the  year  2005,  with  a  further  185  MHz  required  for 
terrestrial  services by the year 2010. It was suggested that steps should therefore be taken 
by  the  CEPT  to place  the  subject  of  additional  spectrum  for  IMT-2000  on  the  WRC-99 
agenda. 

Additionally,  the  ITU  has  identified  60 MHz  for  the  satellite  component  of  IMT-2000, 
with forecasts of a need for a further  30 MHz by the year 2010. 

The idea of sharing a common pool of spectrum was rejected by industry who argued that 
it would be a significant  disincentive  for operators, whilst others doubt whether it would 
be technically possible or indicated that it would create monopoly structures. 

In  terms  of  the  UMTS  market,  several  comments  stressed  that  the  development  of  the 
UMTS market makes it necessary  that sufficient  spectrum is available to cover the needs 
of  all  operators  seeking  a  license.  This  would  also  have  an  effect  on  the  future 
development/evolution of the UMTS standard. 

When and how should decisions on spectrum be taken? 

The UMTS Forum called for a co-ordinated approach by all relevant authorities in Europe 
to  ensure  a  timely  approach  to  identifying,  liberating  and  allocating  UMTS  spectrum. 
Nevertheless, some argue that the detailed planning of the spectrum can only be done at a 
later stage when a clearer picture of UMTS has emerged. 

2JJ 

Standardisation related  questions 

General characteristics for  UMTS 

In  general  terms  there  was  agreement  on  some  of  the  key  service  characteristics  of 
UMTS.  As  a  system  it  would  have  to  represent  an  improvement  over  current  mobile 
systems, for  example, by offering  extended  coverage (preferably  global), higher bit  rates 
(to  support  multi-media),  better  spectral  efficiency  and  greater  flexibility  for  the 
customer, both in service offering  and price. 

Some  manufacturers  suggest  that  UMTS  is  effectively  mobile  Internet.  Other  more 
traditional  operators  viewed  UMTS  as  a  means  of  achieving  ISDN  type  sendees  on  a 

1 '  ERC Decision  on the  frequency  bands for  the introduction  of Universal  Mobile  Telecommunications 

Systems (UMTS), ERC/DEC/(97)07, 30 June 1997 

13 

mobile platform  and facilitating fixed-mobile convergence. Furthermore, a few comments 
drew links between UMTS and Digital Audio Broadcast (DAB) as well as TETRA. 

UMTS is likely to  involve both an evolution of  GSM and the development of a  new air 
interface 

Several  comments  stressed  that the path to UMTS is likely to involve both an  evolution 
of  the  GSM  backbone  infrastructure  for  call  control  and  mobility  management  and  the 
development of a new radio air-interface  supporting data rates up to 2 Mbits/s and multi 
media services12. 

Industry  is  apparently  prepared  to  accept,  given  the  significant  investments  in  current 
mobile networks and the need for evolution, that at global level different  regional systems 
will be developed  supporting different  air-interfaces.  Consequently multi-mode terminals 
would  be  required  for  global  roaming  services.  Some  felt  that  that  more  complex 
multimode terminals would slow down the development of the market. 

Comments  from  current  mobile  operators  stressed  that  GSM  covers  a  spectrum  of 
narrow-band  services  and  that  UMTS  would  be  the  natural  complement,  offering 
advanced  high  bandwidth  services.  Existing  operators  recognised  that,  if  UMTS  is 
optimised for wideband services, it will be easier for them as providers of existing narrow 
band  systems to claim  licenses in the UMTS band.  Some operators question whether the 
financial power in the market  is sufficient  to make third  generation  a success  if it would 
be  a  stand-alone  technology  and  stress  the  need  for  a  smooth  migration  from  GSM  by 
adding modular components. 

Finally,  ETNO  made  the  point  that  focusing  the  resources  of  many  operators, 
manufacturers  and service providers on a single standard (i.e. GSM) leads to high-quality, 
low-cost  products  and  demonstrated  market  satisfaction.  It  stressed  roaming  as  a  key 
issue to  service delivery  that  has played  a pivotal  role in the development  of the market 
across  Europe  and  many  other  countries  of  the  world.  Besides  meeting  an  important 
market  demand,  Europe-wide  roaming  was  identified  as  an  important  factor  that  has 
contributed  to  the  global  success  of  GSM.  Technologies  or  standards  (or  any  mix  of 
them)  which  inhibit  or constrain  such  roaming  may  prove  less  attractive  to  the  world's 
operator  community  than  those  that  facilitate  roaming  functionality  through  a  single 
standard. 

A central role for  ETSI 

Standardisation  is,  and  will  remain,  a  key  factor  in  providing  quality  services  for  a 
reasonable  price  and  in  enabling  roaming  between  systems.  The  success  of  UMTS 
depends  upon  the  flexibility  of  interfaces  and  the  capacity  to  evolve  in  parallel  with 
technology.  Continued  close  co-operation  between  operators,  manufacturers  and 
regulators  in  the  standardisation  of  UMTS  is  crucial  for  UMTS  to  be  as  successful  as 
GSM. 

12  Where the UMTS Forum elaborated the UMTS vision in broader  conceptual  and market  terms, ETSI 
is working  out the more  detailed  technical picture  of UMTS. ETSI  is expected  to  take  a decision  on 
the air-interface  standard for UMTS during the first half of 1998. 

14 

There was general support  for ETSI playing a role in developing an open and transparent 
approach  to  standardisation  for  UMTS  and  for  it  to  carry  out  the  task  of  UMTS 
standardisation, with an aim of ensuring efficient  use of the designated  UMTS frequency 
bands.  Several  Member  States  and  industry players  emphasised  that  technology  choices 
should  come  from  industry  through  the  standardisation  process  in  ETSI  where  only 
UMTS standards approved by ETSI should be used in those bands. 

A  close  co-operation  between  ITU,  ETSI,  and  other  regional  standardisation  bodies  is 
essential  to  establish  a  framework  for  global  compatibility.  The  Forum  further  places  a 
great deal of importance in identifying  UMTS as a part of the IMT-2000  family. 

The need  for  redirection  of the  standardisation  from  telecommunications  per  se  towards 
information  technology  is  recognised  in  several  contributions  from  Member  States  and 
industry.  It  is  mentioned  that  a  much  greater  participation  of  the  IT  industry  in  the 
standardisation process is highly desirable. 

Several  Member  States  had  difficulty  in  seeing  how  competition  amongst  standards 
within  the  UMTS  spectrum  band  could  work  without  de-stabilising  the  market.  It  was 
recalled  that  one  of  the  key  factors  in  the  success  of  GSM  had  been  the  stability  of  the 
standard  and  the  large  number  of manufacturers  supporting what  is  to  a  large  extent  an 
open  standard.  It was  argued  that  competition  between  standards would  invariably  mean 
proprietary  standards, which  have the major  drawback  (as perceived  by the operator  and 
its financial backers) of locking an operator to one manufacturer  for years. 

2.2.4  Research and Development 

The  majority  of  the  comments  relating  to  R&D  aim  at  improving  the  UMTS  networks 
that will be deployed  in the future,  in terms of performance,  capacity,  Quality  of  Service 
(QoS) usability and cost. 

The  proposals  for  future  R&D,  in  particular  in  the  context  of  the  5th  Framework 
Programme,  indicate  the  need  for  research  into  the  so-called  Enabling  Technologies. 
Under  this  term  can  be  found  technology  concepts  that  have  emerged  during  the  last 
years.  Their  incorporation  into  current  and  future  mobile  communications  networks 
promises  considerable  improvements  of  performance.  Technologies  such  as  Neural 
Networks,  High  Temperature  Superconductivity  (HTS)  and  Space  Division  Multiple 
Access (SDMA) fall under this category. 

The need for  further  research  on Software  Radio Technologies  (SRT) was highlighted  in 
all  contributions,  as  one  of  the  technologies  that  will  enable  the  introduction  of  service 
and  content  diversity  and  alleviate  the  problem  of  standards.  The  concept  of  software 
radio  is  seen  as  the  basic  technology  that  will  allow  a  mobile  network  to  adapt  and 
reconfigure  its radio interface  and reallocate its resources, and to meet the  characteristics 
of a variety of terminals. 

A  number  of  proposals  indicated  the  need  to  further  investigate  the  incorporation  of 
Digital  Audio  Broadcasting  (DAB)  systems  into  the  future  generations  of  mobile 
communications systems. The argument behind those comments is the ability of the DAB 
standard  to  provide  high  capacity  wireless  links  that  in  the  context  of  mobile 
communications  systems  can  be  used  for  downloading  the  code  necessary  for  the 
reconfiguration  of the mobile terminals. 

15 

ïn  light  of  the  foreseeable  penetration  levels  of  UMTS,  a  number  of  contributions 
indicated the need to provide information  on the issue of health hazards caused by the use 
of mobile terminals and base stations. 

Also the ease of use of mobile terminals is considered as essential. Hence, issues such as 
Man Machine Interface  (MMI), voice recognition, hands free operation, etc. need  further 
research. 

Research  on  tools  for  planning  and  allocation  of  resource,  network  management  and 
interconnection  of networks  (e.g. UMTS and broadband  W-LAN's), considered from the 
perspective of spectrum efficiency,  network capacity as well as QoS, are a priority, given 
the increased complexity of future networks. 

Further,  the  development  of pilot  platforms  that provide  the base  for  implementing  and 
demonstrating new applications  and services is considered  as a valuable tool, in order to 
demonstrate to the consumers the flexibility  and benefits of UMTS. 

Taking into  account that UMTS will be deployed  using the 2 GHz frequency  band, it is 
felt  that  research  should  also  be  oriented  towards  the  utilisation  of  higher  frequency 
bands,  providing  further  opportunities  to  meet  the  requirements  for  broadband 
communications. 

Comments were also expressed regarding the need to ensure that security and  encryption 
techniques  adaptable  on  the  nature  of  the  transmitted  information  over  mobile 
communication channels (private or professional)  are further  researched. 

2.2.5  International aspects 

Comments stressed that the European market for UMTS will be a part of a global market. 
This has a number of implications for UMTS. For example, UMTS developments need to 
take  into  account  trends  in  other parts  of  the  world.  But  also  the  issue  of  access  to  the 
global market was seen as an important success factor for UMTS. 

Free circulation  and roaming  in a global context  were mentioned  by Member  States, the 
UMTS Forum and industry as main issues on which European Community action  should 
focus.  Spectrum  and  standardisation  issues  must  be  progressed  through  the  appropriate 
international  bodies  and  specifically  with  the  ITU.  To  that  end,  it  was  felt  that  the 
European participation in IMT-2000 standardisation work should be strengthened. 

In  particular,  the  UMTS  Forum  report  recommended  that  the  European  Union  can 
undertake action to remove barriers to the use of UMTS beyond Europe. This includes an 
assessment  to  what  extent  UMTS  might  be  covered  by  the  commitments  made  in  the 
Group  on  Basic  Telecommunications  of  GATS/WTO.  It  is  also  recommended  to  take 
steps to ensure that UMTS products are explicitly covered by the Information  Technology 
Agreement (ITA). 

16 

3.  COMMISSION ASSESSMENT 

3.1.  Areas of consensus 

In the light of the comments  set out above, the Commission believes the following  areas 
of consensus or strong support can be  identified: 

Regulatory framework 

1.  Broad  agreement  is  found  that  now  is  the  time  to  set  out  the  strategy  for  the 
introduction  of  UMTS.  The  comments  confirm  the  need  to  raise  the  UMTS  to  the 
forefront  of a policy  debate at the level of the European Union. 

2.  The development  of UMTS must be market-led  and driven  by the private  sector.  The 
Government's  role  should be to ensure that the regulatory  climate does not  hold back 
innovation and investment. 

3.  The  view  that  the  current  regulatory  framework  is  broadly  sufficient  for  UMTS  is 
generally supported. Nevertheless, in order to enable investment decisions to be made, 
confirmation  was  requested  that  key  aspects  of  that  framework  (e.g.  licensing  and 
interconnection  rules)  would  apply  to  UMTS.  Furthermore,  clarification  was  sought 
on how decisions on licensing, frequency or standards could be accommodated  within 
the existing rules. 

4.  There is agreement that existing GSM players should be allowed to migrate to UMTS, 
while at the same time ensuring  an open and competitive market for new players. 

Frequencies 

5.  A majority  of commentators consider the present ERC decision  for  2 x 40 MHz to be 
allocated  by  2002  to  UMTS  out  of  the  FPLMTS  band  identified  by  WARC-92  as 
insufficient  to  establish  a  broad  competitive  service  offering  for  UMTS.  General 
agreement was found that further radio frequency spectrum needs to be  identified. 

Standardisation 

6.  Member  States  and private  sector players  stress  the need  for  industry  co-operation  in 
ETSI  to  arrive  at  common  and  open  standards  for  critical  interfaces  such  as  the  air-
interface.  Limiting  standardisation  to key interfaces  would  allow  for  a mix  and match 
of vendors, without undermining the creation of a competitive market for  equipment. 

7.  Ensuring  roaming  capability  for  future  multi-media  systems  is  regarded  crucial.  This 
would  be  facilitated  by  a  consensus  on  a  common,  open  and  internationally 
competitive air-interface  standard within Europe. 

A  solution  where  interoperability  and  roaming  are  provided  through  multi-mode 
handsets in an environment with multiple air-interfaces,  even if technically possible, is 
not  the preferred  solution  within  Europe  as it bears  the  risk  of  market  fragmentation 
and/or higher costs. At a global level it remains possible that  emphasis will be placed 
17 

on interoperability  of  a number of regional  air-interfaces.  The  lack  of  a common  and 
open air-interface in Europe would affect both the customer and the competitiveness of 
any UMTS standard. 

8.  UMTS  is  viewed  as  a  crucial  test  to  Europe's  competitiveness,  both  for  the  mobile 
communications industry and because of the importance of mobile communications  for 
economic  players  at  large.  A  strong  home  market  would  seem  to  provide  the  best 
conditions for European industry to compete in other parts of the world. 

Other issues 

9.  The  contributions  to  the  consultation  resulted  in  a broad  range  of  fringe  factors  that 
need  to  be  addressed  to  safeguard  the  general  public  interest.  Views  expressed  were 
largely  complementary  and  included  actions  in  such  areas  as  research  into  possible 
health effects  as well as measures to ensure the protection of privacy and personal data 
and against fraudulent  use. 

3.2.  Issues for further discussion 

From  the comments, it is also clear that  in  a number  of areas, either no clear  consensus 
emerged or further work is required: 

1.  The  extent  to  which  further  decisions  concerning  UMTS  frequencies  should  be  a 
matter  for  the European  Community  or for  CEPT. Whilst many  comments  supported 
the use of CEPT/ERC  mechanisms, concerns arose about the risk of those procedures 
failing  to produce  implemented  results. Should  that be the case a number of Member 
States  and  industry  players  saw  a  clear  role  for  binding  legislation  within  the 
Community. 

2.  There  was  a  split  between  industry  and  Member  States  with  regard  to  the  issue  of 
spectrum pricing, with the industry reluctant to face  spectrum  fees  which they argued 
would put up their business costs. Member States, however, were more open to placing 
a market valuation on a scarce natural resource to ensure its efficient  use. 

3.  Whilst there is agreement on the general notion of UMTS, the consultation has shown 
that it is not yet possible to describe UMTS in terms of system or technology concepts 
For Member  States  and operators  a definition  of UMTS, in particular  its  air-interface 
standard, is needed  for regulatory  action and indeed seems to be a pre-requisite  for  a 
co-ordinated introduction. 

18 

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iiii'iTMBrTiMrwiwrrr't^^r^r^ 

4.  ORIENTATIONS FOR PUBLIC POLICY 

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3iaart«B*m£t« 

While addressing a wide range of issues, the comments received can be structured  along 
main  challenges,  allowing  general  principles  and  political  priorities  to  be  identified 
(section  4.1). These  findings  are translated  into  recommendations  for  action  by  public 
authorities to establish a suitable regulatory  environment  and to address  certain  flanking 
issues (section 4.2). 

4.1.  Policy objectives 

In  the light  of the comments  received  and the consensus  established,  three  key policy 
objectives can be identified  which should underpin future  action both by the Community 
and by industry.  These are set out below.  In section 4.2 areas for Community actions to 
further  the attainment of these objectives is set out. 

•  Fostering the development of a  market with a  broad competitive offering  of  mobile 

multi-media services through competition 

This objective requires a legal and technical environment which will allow  competing 
providers of UMTS services and networks. This requires an open  licensing  procedure 
and early decisions on the number of UMTS licenses. It requires sufficient  spectrum to 
allow  such  competition  and  it  requires  standards  which  ensure  that  users  can 
communicate with other users  whilst not being so comprehensive as to prevent  service 
providers from offering  different  service elements or facilities. 

•  Enabling industry to meet user and societal needs 

The  success  of  UMTS  in  an  environment  in  which  second  generation  mobile 
technologies  are already  well  established  is closely  linked  to ensuring  it responds to 
user's needs, for example, for mobile multimedia and mobile Internet  functions  or for 
Europe-wide and global roaming of these services. The pricing of UMTS services and 
equipment  will  also  be crucial  to whether  it is  seen  as a mass-market  product  or a 
niche  premium  service.  From  a  regulatory  perspective,  it  is  essential  that  any 
remaining  artificial  market  barriers  are  removed  and  that  a  broader  convergence 
between telecommunications and audio-visual sectors is promoted. It is also important 
to  address the broader  social and societal  interests and secure  access to the "wireless 
information  society" for all citizens. 

•  Creating a climate for  investment and deployment of  UMTS and fostering  Europe's 

competitiveness 

Investment  and  business  planning  requires  early  decisions  as  to  the  regulatory 
framework of UMTS, the spectrum  availability  and as to the standards,  together with 
a longer term perspective on how further  spectrum may be required. The application of 
the  current  regulatory  enviromnent  to  UMTS  should  be  confirmed  and,  where 
appropriate, further  steps taken to adapt or clarify  that  framework.  Finally, in order to 
preserve  the  broader  industrial  interests,  industry  with,  where  appropriate,  support 

19 

from  the  Member  States  and  the  Commission  should  aim  at  positioning  UMTS  in 
global markets,  both through  ensuring a strong home base within  the internal  market 
and by promoting the rapid development of mobile multimedia applications. 

4.2.  Recommendations for further action 

Whilst  industry  and  national  Governments  have  a  key  role  in  achieving  the  policy 
objectives  set out  section  4.1, the Commission  believes that  all  appropriate  actions must 
be taken with particular attention being given at European level to the following five key 
areas:  regulatory  framework,  frequency  related  issues,  standardisation  and  system 
definition, research and development, and action at the international level. 

4,2J  Regulatory Framework 

The  Commission  considers  to  propose  a  European  Parliament  and  Council  Decision 
("UMTS Decision")  with respect to roaming, frequencies and standards. 

Licensing 

How,  when  and  by  whom  licences  for  UMTS  service  providers  and  operators  will  be 
granted,  are  questions  of  central  importance.  The  current  framework  for  licensing  is 
fully applicable to UMTS. UMTS does not therefore require a new approach to licensing 
in  order  to  respond  to  these  questions.  Nevertheless,  three  specific  implications  of  the 
current licensing framework  should be highlighted : 

•  The  number  of  UMTS  licences  should  only  be  limited,  in  line  with  existing 
Community law, by the spectrum13 to be made available on the basis of the  foreseeable 
market  requirements  (see  below:  "frequency  issues",  section  4.2.2).  However,  given 
the  need  for  UMTS  to be market-led,  the  Commission  believes  that planned  demand 
for UMTS should determine the amount of spectrum allocated14. Additionally, UMTS 
service providers should be able to enter the market without unnecessary constraints to 
allow  a  dynamic  market  and  broad  competitive  service  offering  to  develop  general 
authorisations  or  declaration  procedures  should  be  the  rule,  if  an  authorisation 
procedure  is  considered  necessary.  Individual  licences  should  be  confined  to  the 
operation of UMTS networks. 

•  UMTS  licensing  should  seek  to  ensure  the  development  of  pan-European  services 
through  a  co-ordinated  introduction.  This  implies  that  the  systems  licensed  should 
support  roaming  and  operate  in  conformity  with  standards  developed  for  UMTS  by 
ETSI where these are available (see below: "standardisation", section 4.2.3). 

13  Whilst  the  Licensing  Directive  also  foresees  limitations  " for  the  time necessary to  make available 
sufficient  numbers  in  accordance  with  Community  law",  shortage  of  numbers  represents  only  a 
temporary  ground  to  limit  licence  numbers  until  a national  numbering  plans  supporting  competition 
have been put in place.  These are linked to the liberalisation of the télécoms market and so would not 
be an acceptable basis to limit UMTS licences numbers, given the likely start date of 2002. 
In general spectrum  allocation decisions seek to ensure that spectrum is allocated to high value uses in 
preference to lower value uses. 

14 

20 

•  Licensing  procedures  should  not  automatically  exclude  any  organisation  from  the 
bidding process, nor should they automatically reserve UMTS licences for one or more 
existing  players  (e.g.  GSM/DCS  operators).  Any  assessment  of  applications  should 
take into account the benefits  of allowing current GSM/DCS operators into the UMTS 
market in terms of synergies and existing commercial experience. 

Interconnection 

With  the  adoption  of  the  Interconnection  Directive15,  a detailed  harmonised  framework 
for  interconnection  between  fixed,  mobile  and  fixed  and  mobile  networks  is  in  place. 
This interconnection  framework would be fully applicable to UMTS services. 

Roaming 

The  Commission  attaches  particular  importance  to  the  development  of  pan-European 
UMTS  services,  as  a  key  element  in  an  internal  market  for  telecommunications  and 
multimedia  mobility  services16. In this respect,  but  also  to  secure  the  attractiveness  and 
credibility  of  European  technology  to  the  world's  operator  community,  demonstrated 
Europe-wide roaming on the basis of a common, open and internationally competitive air-
interface standard has its particular relevance for UMTS. 

The proposed  UMTS  Decision  will  provide  for  rights  and  obligations  to  negotiate 
commercial  roaming  agreements  with  other  UMTS  service  providers  or  network 
operators  on  the  basis  of  a  common,  open  and  internationally  competitive  air-
interface standard. 

4X2  Frequency issues 

The  timely  availability  and  allocation  of  spectrum  is  fundamental  to  UMTS's  launch. 
The amount of spectrum made available will have a direct impact on how competitive the 
market  place  will  be.  While  the  Commission  welcomes  the  recent  ERC  decision  on 
UMTS spectrum allocation, it notes the concerns of industry that the amount of  spectrum 
reserved  is  too  modest,  if  current  demand  forecasts  are  correct,  and  considers  that  the 
allocation  of  further  spectrum  needs  to  be  examined.  On  the  basis  of  available 
information,  the  Commission  believes  that  an  assessment  of  the  value  of  alternative 
spectrum  allocations  is  required  in  order  to  assess  whether  UMTS  service  were  being 
uneconomically  "shut out" due to allocation of spectrum  to lower value alternative uses. 
Spectrum  must  be  allocated  sufficient  time  before  UMTS  services  are  commercially 
deployed (2002) and a clear strategy should be developed for the release of such spectrum 
as  demand  for  UMTS  increases  further.  Spectrum  could  be  drawn  by  exploiting  the 
FPLMTS  band  identified  by  WARC-92  as  well  as  by  refarming  in  the  900,  1800  and 
1900 MHz  band17.  Spectrum  needed  beyond  this  would  have  to  be  allocated  by  future 

15 

16 

17 

Directive 97/33/EC of the European Parliament and of the Council of 30 June  1997 on interconnection 
in  telecommunications  with  regard  to  ensuring  universal  service  and  interoperability  through  the 
application of the principles of Open Network Provision (ONP), OJ LI99, 26 July 97 
Council  Directive  91/263/EEC  addresses  inter  alia  the  mutual  recognition  of  conformity  and  free 
circulation  of  terminals.  A proposal  for  a European  Parliament  and  Council  Directive  on  connected 
telecommunications  equipment and the mutual recognition of conformity  of equipment (COM(97)257 
of 30.5.97) is currently under review. 
In this respect, consideration should be given to Article 2(3) and (4) of Directive 96/2/EC 

21 

decisions within the WRC mechanism  (see below: "UMTS in the international  context", 
see section 4.2.5). 

The  Commission  recognises  the  value  of  the  current  activity  of  the  CEPT  and  the 
particularly  relevant  involvement  of  industry,  through  the  UMTS  Forum,  in  spectrum 
discussions. 

The Commission  shares the views expressed  that  spectrum  allocation  should be pursued 
in the context of the CEPT. Nevertheless, the Commission believes that action to support 
the  timely  implementation  of  decisions  at  a  Community  level  can  make  an  important 
contribution  to  the  successful  preparation  and  implementation  of  UMTS  and  that  such 
action must be taken when needed. 

In relation to the valuation to be attached to spectrum, the Commission considers that any 
fees charged must aim at ensuring efficient  usage of a valuable resource. Where Member 
States choose to allocate spectrum via auctions, it will be important that the mechanisms 
put  in  place  do  not  result  in  outcomes  which  adversely  impact  the  public  interest,  in 
particular  in  respect  of  the  competitive  structure  of  the  market.  Where  assignments  are 
administered  by officials,  any  fees beyond  administrative  costs will  involve a  subjective 
valuation  of  the  resource,  given  that  a  market  valuation  can  only  be  obtained  through 
market mechanisms18. 

The  proposed  UMTS  Decision  will  therefore  set  out  a methodology,  similar  to  the 
one  applicable  through  the  S-PCS  Decision19,  for  the  timely  implementation  at 
Community  level  of  the  results  of  the  CEPT  ERC  work  in  UMTS  spectrum 
allocations. 

wireless local loop 

Although  wireless  local  loop is not  the subject  of this  Communication,  the  Commission 
considers it necessary to give its position on UMTS spectrum usage in relation to wireless 
local loop. 

The  Commission  recognises  that  wireless  local  loop  is  a promising  technique  to  bridge 
the gap between fixed and mobile cellular communications  where strong  interest  is seen 
from  existing  operators  -fixed  and  mobile-  as  well  as  potential  new  entrants.  Wireless 
local  loop could provide an economically  attractive  alternative to the wireline  local  loop 
and indeed to mobile communications. 

The Commission  considers that wireless local loop may develop on the basis of  different 
technological  solutions  in  national,  metropolitan  area  or  local  markets.  Although  some 

Where  properly  designed  auctions  are used  to assign  spectrum,  the  economic  theory  is  that  any  fees 
paid will reflect  the discounted present value of the excess profits  the second highest bidder expects to 
receive. The bidding stops when the second highest bidder drops out.  What the highest bidder  would 
have been prepared  to pay, is never discovered.  However,  a properly  designed  auction makes  public 
much  of  the  private  information  held  by  the  bidders,  thus  reducing  the  margin  between  the  second 
highest and highest bids. 
Decision  710/97/EC  on  a  co-ordinated  authorisation  approach  in  the  field  of  satellite  personal-
commimication services in the Community, 24 March  1997, OJ LI05/4 

19 

22 

form  of interoperability  is desirable, the scope and need  for harmonisation  may not be as 
for mobile systems where full roaming functionality  requires global or regional standards. 

The  Commission  recognises  that  some Member  States have  allocated  different  bands  of 
spectrum  to wireless  local  loop  services  and  supports  the work  of ERO to  look  into  the 
possibilities for further  harmonisation. 

The Commission considers that the scarcity of UMTS/FPLMTS spectrum and the special 
value  it has due to its Europe-wide  (global)  availability justify  access restrictions  to this 
band and therefore that wireless local loop systems should be allowed in this band only if 
a harmonised Europe-wide introduction can be agreed. 

4.2.3  Standardisation 

The Commission  supports the UMTS  standardisation  efforts  undertaken  so far by ETSI, 
calls  for  all  interested  parties  to  contribute  to  this  process  and  welcomes  the  fact  that 
standards development is being led by the private sector and that a consensus seems to be 
developing  on the  issue of the core network.  It considers  that  the results to be  delivered 
by  ETSI  in  time  for  the  envisaged  start  up  of UMTS  should  become  an  open  technical 
reference  for the future UMTS environment. 

In  order  to  allow  for  effective  service  competition  and  innovation,  the  Commission 
believes that  the UMTS standardisation process should be limited to what is necessary to 
permit  systems  to  be  developed,  while  allowing  a  differentiation  at  service  provision. 
Such  an  approach  is  consistent  with  the  competitive  telecommunications  environment 
today, in contrast to the largely monopoly  environment which existed  at the inception of 
the GSM standard. 

The  Commission  believes  that  the  standardisation  work  should  in  particular  aim  at 
ensuring  the  end  to  end  interoperability  which  is  needed  by  a  pan-European  UMTS 
environment.  This would strengthen the acceptance of UMTS by users (particularly, with 
regard  to choosing whether  to migrate from current  systems supporting  global roaming), 
as well as more rapidly securing a critical mass of UMTS equipment and services, within 
and beyond Europe. 

The  Commission  therefore  considers  that  work  should  aim  at  establishing  a 
common, open and internationally competitive UMTS air-interface standard. It calls 
on  manufacturers  to  work  within  the  ETSI  standardisation  process  towards  this 
goal. The  proposed  UMTS  Decision  will  identify  conditions  which  may  be  attached 
to  licenses  in  order  to  ensure  pan-European  services  based  on  ETSI  standards, 
where available. 

4.2.4  Research and Development 

Although  the  Community  efforts  under  the  RACE  and  ACTS  Specific  Research 
Programmes  have  already made  a significant  contribution  to preparing  the  technological 
base  for  UMTS  and  in  comparing  the  merits  and  disadvantages  of  competing  technical 
solutions  the Commission  believes  that there is a continued  need  for  research  in relation 
to UMTS. This  effort  will  be pursued  in the context  of the  forthcoming  5th  Framework 
Programme  and  should  in  particular  address  work  relating  to  network  planning  and 
management,  realisation  of  intelligent  networks  (network  agent  techniques),  network 
integration, quality of service, usability, cost/performance,  spectrum  efficient  techniques, 

23 

software  radio,  adaptive  allocation  of  network  resources.  Aspects  relating  to  man-
machine interfaces,  terminal usability and the safe  and secure use of mobile and wireless 
equipment20 will also be considered. 

Community  and  national  research  efforts  should  continue  to  support  pre-competitive 
work in the area of UMTS and its further  evolution, with the spin off that such investment 
ensures an expansion of the knowledge base for third generation systems and provides the 
experts which a UMTS industry will need. 

Besides  this  technological  oriented  research,  the  broader  social  and  societal  effects  of 
transitioning  towards  the  "wireless  information  society"  will  need  reflection  and  be 
addressed as a matter of priority. 

4*2*1  UMTS in the international context 

The  Commission  considers  that  the  further  development  of  UMTS  should  aim  at 
establishing a global standard, much like what was done for GSM.  The Commission calls 
on Member States and industry at large to join its efforts  and take the following actions: 

•  Proposing  and promoting  the UMTS  standard  (under development  within  ETSI)  as a 
key element of the IMT-2000 recommendation currently in preparation at the ITU. 

•  Securing  spectrum  availability  for  UMTS  for  its  longer  term  needs  by  seeking 
adequate  frequency  allocations  through  the  WRC  process.  In  particular, 
the 
Commission  supports  the  CEPT  and  the  UMTS  Forum  position  to  propose  the 
inclusion  of  the  issue  in  the  agenda  of  the  WRC-99  conference,  at  the  forthcoming 
WRC-97.  The  Commission  also  fully  supports  the  concerted  efforts  of  the  UMTS 
Forum towards the world  community to secure further  spectrum  for terrestrial  mobile 
communications. 

•  Encouraging  contact between  interested  industry organisations, standardisation  bodies 
and  administrations  of  Europe  and  those  of  our  commercial  partners  in  order  to 
promote the goal of a globally interoperable UMTS system and to help in establishing 
co-operation  and  alliances  among  private  partners  at  an  early  stage  of  UMTS 
development. 

•  Initiate at an early stage the discussion of market access and free circulation of UMTS 

systems and terminals building on the experiences of the GM PCS MoU. 

20  A  research  programme  into  the possible  health  effects  related  to  the  use  of  mobile  phones  is  under 
preparation.  This  work  will  draw  in  particular  on  the  recommendations  of  an  independent  multi-
disciplinary  group  of  experts  which  prepared  a  report  last  year  for  the  Commission  in  this  field; 
further,  a Commission proposal for a Council Recommendation pursuant to Article  129 (public health) 
is  under  consideration  which  will  address  health  concerns  as  regards  public  exposure  to  radio 
frequencies. 

24 

OVERVŒWOF  RECOMMENDED ACTIONS 

Note : The steps indicated in the regulatory area below are additional to the confirmation in this 
Communication that the current rules on licensing and interconnection apply to UMTS activities, in 
particular with regard to: (i) the limitation licence numbers; (ii) the need to support the take up of 
ETSI standards, where they exist, and (iii) the need to ensure that current operators are not 
automatically granted UMTS licences or excluded from bidding for such licences. 

domain 

recommended  actions 

Regulatory Framework 

•  Proposal by the Commission of a UMTS Decision which will : 
•  define rights and obligations to negotiate roaming 

• 

arrangements, to the extent that these are not covered by the 
Interconnection Directive 
identify  conditions which may be attached to licences in 
order to ensure pan-European services based on ETSI 
standards, where available 

«  set out a methodology for ensuring the co-ordinated 

allocation of frequencies in the Community for UMTS 

Frequency issues 

•  Ensure co-ordinated and timely allocation of spectrum within the 

Community by referring to CEPT mechanism or, where necessary, 
through Community measures, in particular: 

•  Prepare the allocation of adequate spectrum to be made 
available by 2002 (start of UMTS service provision) 
•  Consider  freeing  of 900,1800,1900 MHz bands for mid 

term UMTS usage (2005) 

•  Expand spectrum availability beyond the WARC-92 

FPLMTS band for mid to long-term UMTS usage (2005-
2010) 

•  Encourage efficient  use of UMTS spectrum through pricing 
•  ETSI to work out critical interfaces  for the UMTS environment to 
support competitive provision of products and services, while 
supporting interoperability and roaming 

•  Key focus for standardisation should be the development of a 

common, open and internationally competitive standard for the air 
interface 

•  Pursue R&D support on technical solutions needed for UMTS (5th 

Framework Programme) 

•  Dissemination of information  and training on UMTS related 

technologies (to ensure adequate skill base for UMTS realisation) 

•  Support R&D on possible health impacts of electromagnetic 

radiation 

Standardisation 

Research and 
Development 

UMTS in the 
international context 

•  Submission of ETSI developed UMTS standard as option for the 

IMT-2000 standard (ITU) 

•  Explore within WRC the expansion of FPLMTS band allocated  for 

3rd generation mobile applications 

•  encouraging global dialogue among industry actors, 

standardisation bodies and administrations to promote 
interoperability of UMTS at global level 

•  ensuring world-wide free circulation of UMTS terminals (MRA 

arrangements, MoU for multilateral rules) 

25 

4.3.  Proposed targets, action plan and timing 

The  two  tables  below  attempt  to  give  an  overview  on  targets,  actors  and  timing  as  a 
general  frame  of  reference,  as  well  as  a  summarised  action  plan  which  identifies  the 
concrete steps necessary to implement the actions proposed in the previous chapter. 

Proposed targets: 

target  ' 
UMTS standardisation phase 1 
license award (first  round) 
IMT-2000 standardisation 
start commercialisation 
extension spectrum allocation 

main actor 
ETSI 
Member States 
ITU 
private sector 
spectrum administrations 

by 
end 1999 
end 1998 
1999 
2002 
2004-2005 

Action Plan for  the Community: 

action 
WRC-97: preparation of agenda WRC-99 
(to include UMTS spectrum allocation) 
Adoption of Council Resolution on present 
Communication setting out political priorities 
Proposal of a UMTS Decision on spectrum and 
licensing conditions 
Implementation of 5th Framework Programme 
Adoption of UMTS Decision 
Mandate to ERC on further  spectrum allocation 
MRA negotiations 
WRC-99: extension of UMTS spectrum allocation 
Review of telecommunication regulatory environment 

by 
Oct.97 

Dec.97 

Jan. 98 

98 
early 1999 
Feb. 99 
continuous 
Oct.99 
end 99 

5.  CONCLUDING REMARKS 

The consultation has confirmed the need to actively pursue at this juncture the discussion 
of the  conditions  to prepare  and  establish  the  future  UMTS  environment.  Although  the 
development  of  UMTS  must  be  market  led  and  driven  by  the  private  sector,  the 
government's  role  in  setting  out  the  appropriate  regulatory  environment  is  important  in 
providing confidence which will generate further  innovation and investments, taking into 
account consumer interests. 

UMTS  is Europe's  answer  to  global  developments  in  the market  for  future  mobile  and 
wireless  communications.  Its  characteristics  of  supporting  Europe-wide  (and  global) 
services  roaming,  including  a range  of multimedia  applications  means  that  UMTS  will 
play a key role in extending the reach of the information society. 

For  UMTS  to  succeed,  industry  has  indicated  a  need  for  certain  aspects  of  the  current 
regulatory  framework  to be clarified,  and for key resource decisions to be taken,  so that 
business  plans  can  be  finalised.  A  strong  home  market  will  help  European  companies 
compete  in  other parts  of the world  and  allow  them to  consolidate the  leading  position 
that they hold today on the world market with GSM. 

The rapid and broad deployment of UMTS will benefit European businesses and all users 
and  assist  in  the  development  of  certain  rural  areas,  by  creating  new  pan-European 
services, stimulating the  growth  in cross-border provision  of goods  and  services. It will 
help European businesses of all sizes and citizens to have access to a further route into the 
electronic economy. 

Policy  makers  today  have  an  exceptional  chance  to  help  shape  a  seamless  mobile 
multi-media  communications  environment  for  Europe  by  setting  out  the  broader 
policy  lines  that  will  create  a  common  growth  basis  for  the  development  and 
introduction of UMTS. This will benefit European citizens and industry as a whole. 

This Communication of the Commission is intended to support political discussions with 
the European  Parliament, the Council of the European Union, the Economic  and  Social 
Committee, and the Committee of the Regions. 

27 

ANNEX I:  LIST OF CONTRIBUTORS TO THE CONSULTATION 

as per  19/09/1997 

Member States or their representative  offices 

ETO 

Italy, Ministry of Communications 

Denmark, Research Ministry 

Portugal, Instituto das Comunicacoes 

Finland, Ministry of Transport and Communications  Sweden, Ministry of Transport and Communications 

France, DPT 

Germany, Bundesregierung 

UK 

UK Home  Office 

Industry, industry associations and others 

Airtel Movil 

Airtouch 

Alcatel 

Autel 

Bayerische  Rundfunk/Mueller-Roemer 

Belgacom 

BT 

Cable & Wireless 

Cegetel 

Cellnet 

CNPF 

Deutsche Telekom 

Diehl GmbH 

e plus 

ECTEL 

Enertel 

Ericsson 

ETNO 

Finmeccanica  SPA 

Finnet Group 

France Telecom 

INMARSAT 

Mannesmann  Mobilfunk 

MATAV 

Nokia 

Olivetti 

One-2-One 

ONP-CCP/Joint industry group 

Orange 

Philips 

Picienne Italia 

Post and Telekom Austria 

Proximus 

Siemens 

T-Mobil 

Telecel 

Telefonica 

Telenor 

Tescher Team 

TIM 

UMTS Forum Manufacturers  Group 

UNICE 

Vodaphone 

WDR 

28 

ANNEX II:  LIST OF ACRONYMS 

ACTS 

CEPT 

DAB 

EP 

ERC 

ETNO 

ETSI 

FPLMTS 

GM-PCS 

GSM 

HTS 

Advanced Communications Technologies and Services 

of 

Postal 

and 

Telecommunications 

European  Conference 
Administrations 

Digital Audio Broadcast 

European Parliament 

European Radiocommunications Committee 

European Telecommunication Network Operators Association 

European Telecommunications Standardisation  Institute 

Future Public Land Mobile Telecommunications  System 

Global Mobile Personal Communications by Satellite 

Global System for Mobile 

High Temperature  Superconductivity 

IMT-2000 

International Mobile Telecommunications 2000 

ISDN 

IT 

ITA 

ITU 

MBS 

MMI 

MoU 

MRA 

RACE 

R&D 

QoS 

SDMA 

SMG 

TETRA 

UMTS 

UNICE 

Integrated Services Digital Network 

Information  Technology 

Information  Technology Agreement 

International Telecommunications Union 

Mobile Broadband Systems 

Man Machine Interface 

Memorandum of Understanding 

Mutual Recognition Agreement 

Research and technology development in Advanced 
Communications in Europe 

Research and Development 

Quality of Service 

Space Division Multiple Access 

Special Mobile Group 

Trans-European Trunked RAdio 

Universal Mobile Telecommunications  System 

Union of Industrial and Employers ' Confederations  in Europe 

WARC/WRC  World (Administrative) Radio Conference 

W-LAN 

WLL 

Wireless Local Area Network 

Wireless Local Loop 

29 

ISSN 0254-1475 

COM(97) 513  final 

DOCUMENTS 

EN 

15  16 

Catalogue number  :  CB-C0-97-543-EN-C 

ISBN 92-78-26010-X 

Office  for Official Publications of the European Communities 

L-2985 Luxembourg 

26