Europe Unlocks Wireless Potential

lONDON - Telecommunications companies and wireless operators in Europe such as Nokia and Ericsson look set to get a healthy chunk of their 3G license costs reduced, after the European Commission proposed further liberalization of the wireless communication spectrum Wednesday.

The Commission aims to repeal a 20-year-old directive that reserved the use of certain radio frequencies for GSM-standard services, which initially helped make the European standard a success but ended up making spectrum space scarce for new technologies like 3G--"third-generation"--broadband and wireless data services.

"This proposal is a concrete step towards a more flexible, market-driven approach to spectrum management," said Telecommunications Commissioner Viviane Reding. "It will increase competition in the use of spectrum bands and enhance accessibility of European citizens to multimedia services."

Until now, national regulators across Europe have allocated bands in the electromagnetic spectrum according to specific technologies, a process that tends to be excessively bureaucratic and slow to respond to new services and technologies.

The old system also pushed up license fees for operators, whose fierce competition over a limited slice of spectrum led to high prices and equally high losses for 3G investments. Companies including Vodafone (nyse: VOD - news - people ), Deutsche Telekom (nyse: DT - news - people ), France Telecom (nyse: FTE - news - people ) and Hutchison Whampoa (nyse: HTX - news - people ) have desperately battled to reclaim tax compensation on $100 billion worth of European 3G licenses bought in 2000, but last month their appeals were rejected.

If the new proposals are adopted by the European Parliament, the 900 MHz and 1800 MHz bands previously reserved for GSM usage will be opened up to other technologies. 3G services currently use the 2100 MHz frequency, allocated in the 1990s.

"With this decision it's going to be a lot cheaper to deploy 3G," said Matthew Howett, analyst with Ovum Research. "It's cheaper to use the lower frequency and allows you to cover a much wider area," he added.

The European Commission said that the wireless communications sector could see reductions in network costs of up to 40% over the next five years. The trade association GSMA said last month that a 3G network in the 900 MHz band would achieve up to 40% greater coverage for the same costs as within the 2100 MHz band.