3G poses threat to European Union

Economic growth of the EU could be hampered by the cost of building third generation mobile phone networks

European ministers have warned that the costs of building third-generation (3G) mobile networks to support broadband speeds could threaten the economic growth of the EU, unless steps are taken to ease the burden on telecoms operators which paid billions of pounds for 3G licences. If the carriers run into financial problems, it could delay the rollout of 3G mobile services for corporates.

Among suggestions for easing the debt burden are that licence holders should be allowed to share the cost of building 3G infrastructure, and governments should defer payments for the licences.

The German regulator has indicated it may reverse an earlier veto and let licence holders team up to build 3G infrastructure. In the UK, telecoms regulator Oftel said it would wait to see what the operators wanted.

The ability to share the cost of building infrastructure is likely to appeal to the 3G licence holders. The five UK mobile operators paid the government a total of £22.5bn for licenses. A suggestion that governments should refund some costs to operators was rejected because it was deemed unfair to firms who dropped out of bidding when the price became too high.

A recent meeting of the European Parliament decided it should look into ways in which EU policy on 3G networks could be harmonised. It was initially agreed that the EU would have the final word on proposals made by national regulators, but this was later ruled out.

Instead the EU has given itself a two-month period during which it can object to any regulation that it considers contravenes existing European trade legislation. A spo-kesman for the UK Department of Trade and Industry said that this measure would "act as a powerful incentive to regulators to co-ordinate their actions".

Industry figures are divided over 3G's potential. Hans Snook, former head of Orange, has said 3G will not be widely used until 2004. However, he said 3G services are likely to yield huge returns for operators in the long term.

However, Sony chairman Nobuyuki Idei said the industry had over-estimated the potential of 3G. He said it would take a long time for users to warm to the technology because of its complexity, and that the capabilities of current mobile phones already met the needs of many users.