Soccer, news … and porn: the 3G revolution is on the way

Date: 25/03/04

By Peter Chapman

TOP soccer action, porn, news and better sound effects is the tasty diet mobile phone bosses hope will turn their expensively assembled '3G' technology into profit.

But as EU operators finally switch on their networks, bringing customers an array of natty video, internet and phone services, industry points to regulatory headaches aplenty.

Christian Salbaing, the managing director of European Telecommunications at Hutchinson 3G Europe, hopes to pull in the punters with deals such as the one he signed with Playboy Enterprises to bring premium adult entertainment to the handset.

However, he told European Voice that his company, which trades under the 'Three' banner in six member states, is now worried that the EU's authorities could be about to deal a blow to new business models aimed at carrying on the mobile revolution begun by GSM.

Salbaing said mobile operators fear they could inadvertently fall foul of EU banking rules that impose strict controls on financial institutions that issue so-called electronic money.

In layman's terms, 'electronic money' means being able to pay for items, not by exchanging coins or notes, but over electronic networks.

In this case, mobile operators want their customers to be able to use their 'pre-paid cards' as credit for buying content, such as downloading a song, a film clip, or a catchy ring tone, over the network.

Instead of fiddling for small change, customers would also be able to buy 'real' economy products, such as a bunch of flowers or even pay to put their car in a multi-storey car park, all via their handsets.

Salbaing said: “There is a very heavy banking lobby out there they say that if you are going to download something, it should be regulated by very heavy bank regulations.

“There is a worry that it is going in the wrong direction - and that broadband services are going to be hindered.

“If you are obliged to become a bank when you provide telephone services, then it is bound to affect business models,” he said, adding that the threat of regulation had already led operators to opt against offering some services.

Commission experts said the telecoms issue would be tackled in a broader legal code for payments in the Union, expected before the end of the year.

Officials say they recognize the need to ensure phone companies are not hit with over -the-top regulations - such as the need to keep detailed records of who makes payments and to whom - for tiny transactions.

Yet they say they must also take into account money-laundering and anti-terrorism concerns raised by the Paris-based Organization for Economic Cooperation and Development (OECD).

Salbaing is also keeping tabs on the way member states plan to manage the allocation of radio-spectrum for mobile services in future.

Companies such as his bid billions of euro for licences to use the scarce radio spectrum they needed to offer 3G services. The payments helped to enrich finance ministries across the EU - and were blamed by many as a factor behind the telecoms industry's debt crisis.

Now, the European Union is examining ways to set up a secondary market for spare radio spectrum so that operators who paid for 3G spectrum would be able to get some of their money back if they wanted to quit a market.

There are also moves to see whether other parts of the airwaves, currently used by so-called 2G services, could also be re-farmed for future 3G services.

Together, this means new operators might, in future, be able to snap-up part of the airwaves at a snip of the price that their predecessors paid.

Not all mobile phone firms oppose moves to relax the spectrum regime, however. A board member at France Telecom, owner of giant Orange, shrugged off the spectrum issue. “If people made mistakes in the past, then c'est la vie,” the Frenchman said.

But former Freshfields lawyer Salbaing said this could skew the market by putting newcomers at an advantage in relation to established rivals.

“It is like going to a Ferrari dealer and being told you must pay €200,000 for a car and then three years later being told it is only 30,000 euro.”

He said Hutchinson 3G Europe would “consider very carefully” the possibility of suing member states if it felt markets had been skewed by future spectrum sales.

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