The 3G Mobile Phone Industry in 2004

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Introduction

In mid-2004, the 3G (Third Generation) mobile phone industry seemed to be coming back to life. 3G had made newspaper headlines in the early 2000s following the announcement of major license auctions in Europe. Since then the market had failed to grow as expected. Many operators had paid huge amounts to buy licenses but found it increasingly difficult to make their operations viable. As 2004 drew to a close, operators wondered how the industry would evolve and what applications would be in demand.

Mobile telephony had first taken off in Europe. 3G initiatives were first launched in Europe after the widespread success of 2G.

In case of 2G, regulators and operators had agreed on a single standard, called GSM (Global Standard for Mobile), which replaced dozens of competing standards and allowed easy roaming from one country to another. When GSM emerged as the dominant global standard, European firms, especially Nokia and Ericsson prospered. Then, as the internet boomed in the late 1990s, it was assumed that a mobile-internet boom would follow.

European governments felt that compelling Europe's operators to switch to 3G, instead of offering them more 2G capacity, would ensure that the continent maintained its lead over the rest of the world.

So as 2G networks filled up, regulators offered the operators no alternative but to bid for new 3G capacity. In many cases, operators were effectively bidding for the right to stay in business.

Mobile operators around the world, especially in Europe, paid a total of €109 billion (then $125 billion) for licences to build and operate 3G networks, which offered better performance and more capacity than existing second-generation (2G) networks...

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