Room for growth

Room for continued growth

Western Europe is the heartland of GSM, which was first developed and standardized in the region. GSM Europe now represents 148 operators in 50 countries with a total subscriber base of 558 million. Kaisu Karvala, chair of GSM Europe and president of TeliaSonera Brussels, talks to TelecomsEurope editor Ian Channing about the region's growth potential, prospects for 3G and the evolving regulatory environment

TelecomsEurope: As the first region to deploy GSM commercially, Western Europe has enjoyed more than a decade of unprecedented growth. Now penetration in the region hovers around 100%, do you expect to see further growth in the Western European GSM market, and if so, what will be the drivers‾

Kaisu Karvala: There is still a lot of potential for growth in areas such as machine to machine and mobile data. I strongly believe we will see some significant growth in those areas, and I hope we will be able to emulate markets such as those in Japan or Korea, where mobile data services have really taken off. However, if we enter into a pure consumer price war all over Europe, we will see markets that are artificially slowing down, as is the case in the Nordic countries.

In Central and Eastern Europe (CEE), there is still considerable room for further growth, what is your view of the potential for this region‾

There is a huge potential for growth. There is lots of space still for pure voice and SMS services to grow. Markets have not been saturated yet. Operators in the region move rather fast and are clever, and there are new entrants with a will to offer the best services. In a lot of countries mobile was the first means of telecommunications people could afford and thus there is terrific hype, in a positive way, in mobile growth. People went from not been connected to a fixed-line to a totally wireless experience. Some of the most innovative services at the moment actually come from CEE countries.

3G networks are opening up across Western Europe, but so far growth has been slow. How do you see the 3G market developing over the next five and next ten years‾

It is true that 3G growth has been slow. In markets where a pure 3G operator is present the trend is faster as they need to put services on the market.

The phones need to be easy to use with very few configuration demands. If one has to have a PhD in technology in to use data services, we have a problem. But like I said, in markets where pure 3G companies have taken the lead, things look great for the consumer experience. Cheap, good phones with a user-friendly, sharp multicolored screen and a solid battery life, that's all we are asking for!

It is absolutely impossible to say where we will be in ten years time. I would assume that emerging technologies will tend to change the linear 3GSM evolution, and we will have many more players in the marketplace and there will be many more non-traditional operators as players. To survive, you have to be more clever and innovative than your competitor, which I see as a great trend for consumers. For us it means that we will have to understand all possible technologies, understand all possible customer offerings and make it into a commercial reality to avoid being left as a bite-pipe.

Few operators in CEE have yet deployed 3GSM although many have announced plans to do so. What is your view on the potential for 3G in CEE‾ What will drive this market‾

Clever services in a few years time. But seriously, I think it is actually rather wise not to artificially speed up the development in these markets. The whole mobile ecosystem is still rather new in some countries, so they would be foolish to go too fast in to new investment cycles. The same applies in CEE. When we as operators offer user-friendly services with low-cost phones, they will actually grow to love time-to-kill services and move into a different wireless experience.

W-CDMA/3GSM has not really delivered on its promises of high-speed mobile data, do you think that operators need to deploy HSDPA/HSUPA before this market will really take off‾

I don't think the main reason is just the speed. It is more about the overall commercial 3G experience. In markets where we have pure 3G operators it is good; in other markets customers tend to stay with what they have. It is clear, however, that there will be huge pressure to deliver faster data speeds and, as you probably know, some operators do already deploy HSDPA (like Cingular in the US). But to answer your question, yes, I do think operators will deploy these technologies to be able to provide high-speed data.

Do you see WiMAX as a potential threat to the long-term prospects of 3GSM‾

All new technologies and wireless transmission systems are in a way "threatening" the existing GSM status quo, but it is all about new possibilities and new positioning. It is about how to balance the evolution and find the right technology mix. At this point, I don't consider WiMAX much more than a great marketing act, but the winner is the one that makes the best technology cocktail.

Technologies don't compete except in the sense that they offer alternative ways (cost and functionality) of providing services. Mobile services are about making complicated technology simple and good value for customers.

As I said before, the future mobile infrastructures will become a cocktail of technologies employed, patchwork networks that will offer customers at different places different - but always optimal - solutions. What these will be in detail is not important to the customers who expect to get the best services possible from their provider at that place.

The competitive aspect is to develop the optimal technology mix, infrastructure and especially attractive services on these platforms.

Therefore, 450-MHz might also become an interesting option for Western Europe. Diversity might become more interesting in the future, but for the time being and for the basic 3G networks all GSM operators in Europe have chosen UMTS/IMT-2000 as their technology choice for 3rd generation networks.

GSM Europe has had and continues to have issues with the European Union/European Commission. Could you address first the overall view that GSM Europe has of the activities of European bodies and then can we address particular issues‾

The EU is at its best when it pursues single-market objectives based on open competition and level playing fields. Much of the regulation effecting mobile operators is now based on competition law, and this we totally support.  Unfortunately we see inconsistent approaches from some NRAs [National Regulatory Authorities] to the application of that regulation and a worrying trend by some to go into reverse and move back toward a sector-based approach.

GSM Europe has taken a position regarding the use of the 2-GHz band, can you elaborate on this‾

Where spectrum has been allocated to IMT-2000 then we believe that is what it should be used for. The 3G traffic will increase heavily in the foreseeable future, therefore any questioning of the UMTS/IMT-2000 extension resources - which will be completely needed for mobile 3G - have to be avoided. While increasing flexibility and efficiency of spectrum use might be welcome, it is of the outmost importance to secure investments and planning for future growth by fair conditions and a level playing field.

Especially it has to be taken into account that technological fragmentation of the 3G extension band could harm the prospects of the evolution of 3G markets in Europe.

Harmonization of spectrum use in Europe has a lot of technical and economic benefits for mobile network operators, the users of wireless broadband services and for the European internal market (for the industry as well as the society). Economies of scale, lower costs/bit, seamless roaming and simultaneous supply with voice, video and data services, are examples of the advantages in deploying a standardized technology in a harmonized band.

Therefore, the mobile industry, GSME members as well as manufacturers are discussing further liberalization of the European spectrum policy with the European Commission. GSME is against fragmentation of spectrum use and for a more harmonized use of spectrum to reap the benefits of economies of scale, roaming and network interoperability.

Another area you have commented on is the Universal Service Obligation and its impact on mobile operators. What is the current situation‾

We are pleased to see that the Commission and most regulators do not see it as appropriate to extend USO obligation to mobile network services. Mobile has delivered more accessibility to more customers through market forces than all the fixed network low-user schemes.

What about the EC's plans for data retention‾

The European Parliament and the Council have agreed on the data retention directive. Our main concern is that consultation with industry has been very limited while the political process was extremely rapid. The end result is a directive that has failed to recognize the complexity of the IP-world and the important issue of costs for industry. We hope that governments will fully involve industry in the implementation process in order to have provisions that operators can actually comply with, and which do not the distort market development and competition.

And the TVWF Directive

The proposed TVWF extends the current broadcasting regulations into the Internet and mobile arena, albeit in modified form. We think that this is an example of bad regulation as it largely duplicates the e-commerce directive. It is also likely to have problems with the interpretation of the new definitions as NRAs try and implement it.

Are there other potentially serious issues that are currently under consideration by the EU/EC which you believe will impact on European mobile operators‾

The review of the whole regulatory framework will have the most impact on all operators, but the impact of any changes are unlikely to be felt until 2008 at the earliest.

What are GSM Europe's main objectives going forward‾ Over the next one to two  years and in the longer term‾

To ensure that the contribution the mobile industry continues to make to the efficiency and effectiveness of the European economy is recognized. To make sure that we have the best regulatory environment possible that enables operators to invest and make reasonable returns and encourages competition. This will help operators deliver innovative services that customers value.