Competition Policy and Scenarios for European 3G

Although Europe has historically been well positioned in mobile communications, a number of challenges have recently arisen regarding the prospects of so-called third-generation mobile systems (3G). Challenges have escalated both in the marketplace and on the financial front for several leading European equipment manufacturers and operators. More notably, the regulatory conditions for 3G in Europe have become severely fragmented, despite long-standing efforts to achieve a common market, and extraordinarily high license fees have been paid to governments in some member states. This has given rise to a major debate over the merits and demerits of the license fees, as well as methods of spectrum allocation, which addresses more than just the European situation. This paper does not seek to add further pros and cons to this debate, but will use the present state of affairs1 as a point of departure. We will propose some solutions for a future possible scenario. The scenario that we have in mind is the possibility of a major take-up of 3G technology whereby various European country markets are profitable for market players. What are the financial conditions in order to achieve profitability in the various markets? In particular, what are the financial conditions determining profitability in an "expensive " license market such as the United Kingdom or Germany? On the basis of such an estimate, wha