Do cheap 3G licenses push coverage?

So far I always thought that high 3G license costs like the 50 billion euros that were spent in Germany would inhibit growth, deployment and use of 3G networks and services. I am not so sure anymore as according to the ITU, 3G licenses were given out for free in Finland with only a modest administration fee of 1000 euros per 25 kHz (per year I assume according to this article).

Even if you consider the difference in population (roughly 80 million Germans vs. roughly 4.3 million Finns), 0.2 million euros for 5 MHz a year is still next to nothing. While Germany has a widespread deployment of 3G networks in 2006, Finland seems to be far behind with only a few major cities covered (take a look here at the GSMA coverage maps). Also, there doesn’t seem to be a big difference in 3G pricing. Only recently, Finish carriers seem to have introduced interesting data tariffs which let you surf the web for 20 euros a month with a bandwidth limited to 128 kbit/s. Full speed access is available for 40 euros a month. Similar offers are available in other countries as well these days where operators have paid a lot more for the licenses.

So to me it looks almost the other way around from what I have initially thought if you only look at these two examples. The more expensive the licenses, the more eager companies seem to be to deploy the technology. After all, if you have spent more money for the licenses then what is necessary for buying and deploying a network it doesn’t seem to hurt that much anymore.

Two more examples to make the confusion perfect:

  • Japan: 3G licenses were given out for free as well according to this Gartner article. But contrary to Finland, 3G is a major hit in Japan these days.
  • France: Only two companies have deployed a UMTS network, with a third operator slowly starting in 2006. Cost for the licenses were 4.5 billion euros per operator. 3G coverage, however, is still limited to major cities in France (see the link to the map above again). Cities below 100.000 inhabitants usually don’t have UMTS coverage by the end of 2006. So in this country, 3G coverage is quite limited despite very high licensing costs.

Strange, though, that end user prices seem to be pretty much on the same level, no matter how much operators had to spend on licenses. Anyone’s got an explanation for this?

Summary: I think it’s pretty obvious that licensing fees do not have the same impact in each country as far as coverage and end user pricing is concerned. There seem to be other factors which are different in each country which have a much more profound impact.

5 thoughts on “Do cheap 3G licenses push coverage?”

  1. Interesting! In France the initial UMTS licence cost was 32.5 billion francs i.e. 4.9 B.Euros. Only two operators contended because Bouygtel dropped at the last moment claiming the costs were much too high. The two other GSM operators won the licence, France Telecom (now Orange) and SFR. Less than 2 years afterwards, a new tender was organized for the last two available licences. But the price had been reduced by the government to 619 Million Euros plus a small percentage of the revenue. Bouygtel was the only contender and they won a licence. At the same time the price of the first two licences was retroactively reduced down to 619 Million Euros. Now there is a new tender for the fourth licence. On Nov. 17th we’ll now if there are candidates for it. Likely there won’t be any and the spectrum will be shared among the three existing operators. Note that France is much more expensive to cover than the other European countries because of its much smaller population density.

  2. Unfortunately, your comments are too simplistic as they do not take account of the wider picture. For example, you need to take account of cdma2000 1xEV-DO which KDDI was able to roll out quickly in Japan, forcing DoCoMo to keep pace as best it could with W-CDMA -look also what happened to the former Vodafone K.K. which didn’t Also, you neglect the role of Hutchison Whampoa which had to be first to market with 3G as it had no GSM networks to fall back on for cash flow, an which therefore stimulated the relatively rapid response by incumbents where it operated. Plus the differences between population and geographic coverage – important in Finland etc etc.

  3. Hello Peter,

    thanks for your comment. You exactly prove my point, there are other factors which have a much more profound impact on the roll out progress of 3G networks. Thanks for the details on what happened in Japan. Compare that to what Pierre has said about what has happened in France. The picture is quite different!
    Best regards,

  4. It is perhaps worth adding that the French case is unusual in europe in that there are ony 3 GSM operators and the third, Bouygues, has fewer than half the number of suscribers of Orange and SFR. Also that the goverment is rnowned for favouring home-grown companies – hence Hutchison kept well away as did Deutsche Telekom and Telefonica. Remember that 3G is useless unless you have a 2G network or the right to roam at favourable rates on an existing GSM network – tricky if the government and/or regulator is unhelpful.

  5. To add to the professors comments – France is a very uncompetitive mobile market. All 3 operators have a very cosy time, MVNOs have not been allowed to make much impact. Compare that with France’s ADSL market, where competition is very strong, products are technically advanced and they have some of the cheapest ADSL in Europe. They need to get their ADSL regulator on the case of the mobile companies…..

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