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									                                 Response to Multimedia Communications on the Move




                                                Response to
                                        ‘Multimedia Communications
                                                on the Move’
                                                     by
                                                Vodafone Ltd1




                                                17 October 1997




1
    Any communications in relation to this document should be addressed to:

    Tim Harrabin, Strategy Executive,
    Vodafone Limited,
    The Courtyard,
    2-4 London Road,
    Newbury,
    Berkshire RG14 1JX.

    email: tim.harrabin@vf.vodafone.co.uk

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Executive Summary
Mobile communications is a thriving competitive business, one of Europe’s, and in particular
the UK’s, major commercial successes. In the UK, competition between the four network
operators and approximately 40 service providers has been fierce with approximately 100,000
customers now changing their supplier every month - this is equivalent to 15% of customers
switching supplier every year. In real terms prices for business users have fallen by over 50%
during the past three years.

UMTS technology will enable the business to grow further by allowing operators to deliver a
wide range of services which cannot be offered using the existing GSM technology. Vodafone
have been enthusiastic supporters of UMTS for many years and share the Government’s
vision to deliver personalised mobile multimedia communications to the mass market
regardless of location, network or terminal.

The transition from analogue to GSM technology required deployment of a completely new
network infrastructure. By contrast Vodafone believes that the UMTS vision will be achieved
most effectively by ensuring a smooth evolutionary path from GSM services and
infrastructure to UMTS.

For example, Vodafone expects GPRS to be deployed in GSM 900 and 1800 networks over
the next few years, offering packet switched services at up to 64 kbit/sec. Introduction of the
UMTS radio interface will allow these services to be extended to 144 kbit/sec and above,
using a core switching and transmission network which has evolved from GSM.

Thus deployment of UMTS technology by existing operators will offer the fastest route to
providing a low cost wideband cellular radio system in the UK. As voice will continue to
represent a major part of the multimedia traffic, the existing operators will not only be able to
introduce new affordable broadband services but potentially reduce the cost of voice
telephony for users, thus making cellular telephony more accessible to the mass market
consumer.

The concept of the UMTS service provider affords a new paradigm in mobile communications
which is very different from the current cellular SP model2 and has all the potential to
stimulate the emergence of new players and new competition in service and content provision.
In the same way that competitive TACS service providers made a major contribution to both
the rate of development of the cellular market in the 1980s and the rapid reduction in prices,
Vodafone anticipates that UMTS service providers will ensure a competitive market for
UMTS service development. In this way consumers and businesses will enjoy the benefits of
new, affordable, multimedia services ahead of their international rivals.

Vodafone believe therefore, that an analysis of the economic issues and the market
environment indicates that the UMTS vision can be most effectively delivered in the UK by
the current cellular operators together with a dynamic new service provider sector which
includes new entrants to the industry. Whilst it may appear that there is insufficient spectrum
for 4 operators, Vodafone believes that innovative use of the unpaired spectrum and UMTS
satellite band, together with any additional spectrum that can be identified by the CEPT or

2
    But consistent with the definition of service provider in the recent DTI publication - Opportunities for Content and Service Provision.



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WRC, could resolve this issue. An auction between the 4 operators could still proceed on the
basis that the different blocks of spectrum would have different dates of availability and
different value.

If however the network operation sector of the market is to be opened to new players,
Vodafone believes that the mechanism for determining spectrum fees should include
provisions for Pioneer Preference, similar to those adopted in the US, where those companies
which had made major contributions to the technology development received licences at a
substantial discount.

Vodafone has made a major contribution to the development of the UK cellular market and,
by building the UK’s second largest telecommunications network, created jobs for over 6000
staff. A larger number of jobs have been created in other sectors of the industry that have
been developed to support Vodafone, such as service providers, dealers and manufacturers.

Vodafone has also made and continues to make a major contribution to the development of
UMTS through its involvement in industry fora and in terms of its significant investment in
research and development initiatives:

 Vodafone provides considerable resource to ETSI standards development.

 Vodafone was one of the original members of the GSM MoU, the organisation of GSM
  network operators which has been so influential in establishing GSM as a defacto world
  standard. The organisation’s new significance is that it allows the world-wide GSM
  community to have a voice in shaping the operator requirements for UMTS.

 Vodafone chairs the GSM MoU subgroup responsible for health and the environment,
  issues which Vodafone has always taken very seriously.

 Vodafone participated in the UK Third Generation Mobile Group, and continues to be
  active in its successor, TAG.

 Vodafone is an influential contributor to the activities of the UMTS Forum, especially in
  the economics study and operators groups.

 Vodafone has been actively engaged in the European RACE and ACTS studies for third
  generation systems, and has lead two projects in the DTI/EPSRC LINK Personal
  Communications Programme (PCP) . Vodafone is a founding industrial member of the
  Technology Foresight inspired Mobile Virtual Centre of Excellence.

In addition to this public collaboration, Vodafone devotes significant resources to
investigating technologies for UMTS. One project of particular significance is a well
publicised CDMA trial to show how a CDMA air interface can be integrated with a standard
GSM core network.

Vodafone is the only UK cellular operator to have established significant international
presence by investing in GSM 900 and GSM 1800 networks in Western Europe, Africa and
Australia. This has been a major contribution to the UK overseas investment account - and
one which Vodafone has every intention of repeating with UMTS. To this end, Vodafone is
laying the foundations for a common position on UMTS amongst its overseas partners.
Looking at the universal aspect of UMTS from a different angle, Vodafone is the only UK


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cellular operator to invest directly in mobile satellite communications. This investment is
providing us with an authoritative understanding of the role and limitations of satellite
communications in UMTS.

The main points of the Vodafone response are as follows:

Competitive Environment
    1.    Vodafone believes that the DTI should have two objectives in licensing UMTS: to
          ensure rapid deployment of UMTS infrastructure at lowest cost to provide a national
          resource3, and to create an environment in which a wide range of innovative service
          providers can develop applications for customers using this resource.

    2.    On the limited evidence available today, a minimum of 2 x 20 MHz per operator will be
          required for initial UMTS service, which is only sufficient to licence three operators
          within the proposed 2 x 60 MHz allocation. However, by innovative use of spectrum
          allocated to satellite UMTS and unpaired spectrum, Vodafone believes that it could be
          possible to license four operators. This would avoid reducing the current level of
          competition in the market.

    3.    Vodafone supports the need for a competitive market place, and due to the spectrum
          limitations this will need to be provided in the service provision sector of the market.
          The model of service provision applicable in the UMTS world represents a major
          evolution from the traditional mobile service distributor seen in the analogue and GSM
          world. Vodafone foresees the need for a wide range of UMTS service providers
          extending from the current billing and customer care operations, through small
          companies offering niche services (eg. road traffic information) to large media
          companies offering video and audio services.

    4.    The opportunity for real-time involvement of UMTS service providers in the provision
          of telecommunications services has an impact on regulation. Vodafone believes that
          those service providers with real-time access to networks should be regulated, possibly
          through a class licence (see section 0).

    5.    Vodafone is concerned that much of the work on UMTS has been focused upon the
          radio interface, although full implementation of the UMTS vision for wired and wireless
          integration will require open interfaces so that the UMTS spectrum licensees and their
          service providers can offer seamless services to customers who may be using CATV
          access or BT lines. In the past Vodafone Group companies have been unable to launch
          innovative services due to the difficulty in agreeing technically and commercially viable
          access to fixed networks4. Vodafone believes that an important part of the consultation
          process will be to establish what is technically possible and the implications for
          regulation to ensure open and equitable access to all communications networks (see
          section 0).




3
    Mobile access to a UK integrated information infrastructure.
4
   Talkland’s Personal Number Service, Vodafone Value Added’s fixed voicemail service and Vodafone Group attempts to establish resale
of PSTN services.



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6.   The DTI should ensure that, prior to making decisions with regard to licensing,
     spectrum allocation and use of standards for UMTS in the UK, it takes full account of
     proposals made by the European Commission, European Council and Administrations
     from other European countries (see section 0).

Spectrum Allocation
7.   On the subject of spectrum planning, Vodafone favours scenario 1 which gives priority
     to full mobility services. All paired spectrum (including part of the band designated for
     UMTS satellite), which will allow operation of UMTS in Frequency Division Duplex
     mode for wide area coverage, should be made available initially to maximise the
     number of operators without causing licensing uncertainty during the auction process.
     The unpaired spectrum should be also made available to the same operators from the
     start to allow operation of UMTS in Time Division Duplex mode of operation or
     asymmetric Frequency Division Duplex mode to add flexibility and capacity in dense
     environments. A final decision on spectrum allocation and the number of operators to be
     licensed should await the selection of the UMTS air interface technology in early 1998.

8.   Vodafone asks the DTI to lead the way in Europe, as it has done with the publication of
     Multimedia Communications on the Move, to gain support for the reallocation of some
     of the spectrum in the UMTS band currently envisaged for low bit rate mobile satellite
     services to terrestrial UMTS (see section 0).

9.   The total spectrum requirement will increase as applications are developed and market
     penetration increases, calling for expansion of the initial UMTS bands. Vodafone’s best
     estimates to date are in line with those calculated in the UMTS Forum (see [4]), and
     Vodafone asks the DTI to support calls for additional spectrum of 185 MHz to be
     identified and allocated (see section 0).

10. On the subject of spectrum clearance, a well defined regime must be established for
    clearance of existing users of the spectrum, with early visibility of the extent of the
    problem. Clearance should be undertaken by the DTI under the provisions of the
    Wireless Telegraphy Bill (see section 0).

11. On the question of spectrum sharing, no attempt should be made to share common
    spectrum between licensed and deregulated services. Deregulated high speed cordless
    applications of UMTS could be accommodated above 3 GHz (see section 0). Vodafone
    consider that common use of spectrum by competing operators is unlikely to be a
    practical proposition for UMTS. This position is supported by results of a research
    project on the subject undertaken for Vodafone (see section 0).

12. On the subject of spectrum refarming, Vodafone’s view is that it must be a commercial
    decision by the operators, subject only to the need to maintain quality of service to
    existing users.




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    Licence obligations
    13. Vodafone has been influential in the development of GSM [13] and its establishment
        outside of Europe. A similar influence and commitment would be applied to UMTS.
        Vodafone believes it is in the best interest of the consumer and operator that ETSI seeks
        wide international involvement in UMTS standards development, and that considerable
        effort is made to establish a standard that can be adopted in common with other regions
        of the world. For example a common position with Japan should be in the best interest
        of the UK consumer because Japan shares the same radio frequencies and plans to
        launch services in 2000. This opens up the possibility that in 2002, the UK customer
        would benefit from proven technology, a wider choice of terminals, and lower cost
        services arising from a more competitive market in infrastructure.

        In this context, Vodafone asks the DTI to help provide a single forum for UK industry to
        better influence developments within the ITU (see section 0). If ETSI UMTS can
        achieve the level of international support experienced with GSM standards, then clearly
        Vodafone can support the DTI intention that UMTS licenses will require ETSI standards
        to be implemented.

    14. Competition to provide the best coverage has led to increased investment in both GSM
        900 and GSM 18005 networks and to the success which the DTI notes in section 6.9 of
        the consultation document. Vodafone believes that compulsory national roaming would
        reduce the competitive environment, especially as the same customer benefit can be
        achieved through UMTS service providers who will be able to offer service on networks
        belonging to different operators - both UMTS and GSM.

    15. Given the present level of definition of the technology, a figure of 80% coverage of the
        population is appropriate. Vodafone recommends the coverage roll-out obligation be
        strengthened to 3 years (see section 0).

    16. While strongly supporting voluntary sharing of masts where appropriate, Vodafone is
        opposed to any form of obligatory mast sharing, since it serves neither the environment
        or competition (see section 0).

    17. On the proposed duration of the licence Vodafone considers 15 years to be too short to
        ensure appropriate levels of investment, and favour a 25 year (minimum) licence.

    18. Vodafone supports the proposal that broadcasting should not be restricted, and also
        considers that the UMTS Telecommunications Act licence should allow direct
        interconnect with overseas operators (see section 0).

    Licensing Process
    19. In the interest of spectrum efficiency, Vodafone recommends that all spectrum should
        be licensed UK wide (see section 0)

    20. Vodafone supports the position that existing mobile telephone operators should be
        eligible for a UMTS licence, because these players will be able to deploy the technology

5
 A UK cellular operator announced recently that coverage is the most important selection criteria for its customers and that in response it
was accelerating its investment programme



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        most rapidly and at lowest cost. Moreover Vodafone does not oppose eligibility being
        extended to BT provided measures are in place to ensure fair competition and equal
        access to BT’s fixed network where this is needed for UMTS services, and provided
        Cellnet is not allowed to bid independently of BT. (see section 0).

    21. Vodafone believes that opening the service provision sector to full competition will be
        the most important area to consider. Vodafone anticipates a wide range of new entrants
        in this sector, including IT and media companies, transport operators and large corporate
        users. By providing these service providers with open access to all UMTS operators, a
        highly competitive market will ensue with the rate of UMTS roll out accelerated, and
        costs forced rapidly downwards.

    22. Vodafone does not support the concept of a royalty auction because it is expected that
        UMTS will be deployed in many cases as an extension to existing networks and it will
        therefore be very difficult to agree a common basis for calculation of the revenue arising
        from the radio interface6. However, due to the uncertainty of the rate of development of
        mobile multimedia services and the resulting financial risks for operators, Vodafone
        proposes an escalating annual fee during the period of the licence (see section 7.4).

    23. Vodafone agrees that any auction must be objective, fair and transparent and does not
        object to the principle of a multiround simultaneous auction. Further, Vodafone believe
        that by including the unpaired and satellite spectrum it could be possible to design a
        viable auction for 4 operators and 4 licences.

    24. Vodafone believes that if new entrants participate an the auction, contribution to the
        development of UMTS by existing mobile operators should be recognised through a
        mechanism similar to the US Pioneer Preference.

    25. There have been some spectacular spectrum auction failures, and indeed serious doubts
        now exist regarding the success of US PCS auctions. At this stage Vodafone does not
        intend to add to the considerable debate upon the subject, but proposes that a
        comprehensive study is undertaken and that the resulting proposals for an auction or
        alternative mechanism for determining spectrum fees are made available for
        consultation. The TAG is an appropriate forum for progressing this issue.

    26. It is too early in the consultation process to define all the information which Vodafone
        would require prior to an auction. However, the following will be important -
        cleanliness of spectrum to be auctioned, approach to licensing of future spectrum,
        support for UMTS operators to gain access to BT and other fixed networks, the position
        regarding UMTS service providers, and the future regulatory regime (OFTEL/OFCOM,
        etc.).




6
  For example consider the case of an Internet access package offering 2 hours usage from either fixed or mobile terminals for a flat monthly
fee.



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Contents


1. INTRODUCTION .............................................................................................................................................. 9

2. UMTS CONTEXT AND TIMESCALES ....................................................................................................... 11

3. UMTS DEFINITION ....................................................................................................................................... 11
3.1 THE NATURE OF UMTS SERVICE....................................................................................................................... 11
3.2 SERVICE PROVISION .......................................................................................................................................... 13
3.3 SERVICE ENVIRONMENTS .................................................................................................................................. 14
4. SPECTRUM ..................................................................................................................................................... 15
4.1 SPECTRUM REQUIREMENTS ............................................................................................................................... 15
4.2 SPECTRUM PLANNING AND USE ......................................................................................................................... 15
4.3 SPECTRUM QUALITY AND CLEARANCE .............................................................................................................. 16
4.4 SPECTRUM SHARING WITH CORDLESS ................................................................................................................ 16
4.5 SPECTRUM SHARING BETWEEN OPERATORS ...................................................................................................... 17
5. STANDARDS AND RESEARCH ................................................................................................................... 17
5.1 ETSI STANDARDS ............................................................................................................................................. 17
5.2 INTERNATIONAL STANDARDS ............................................................................................................................ 18
5.3 VODAFONE CONTRIBUTION TO UMTS R & D AND STANDARDS ........................................................................ 19
6. LICENSING POLICY ..................................................................................................................................... 20
6.1 ENSURING A COMPETITIVE MARKET .................................................................................................................. 20
6.2 ELIGIBILITY OF EXISTING OPERATORS ................................................................................................................ 20
6.3 CONSORTIA ....................................................................................................................................................... 21
6.4 COVERAGE AND ROLL-OUT OBLIGATIONS .......................................................................................................... 21
6.5 MAST SHARING ................................................................................................................................................. 22
6.6 NATIONAL ROAMING ......................................................................................................................................... 22
6.7 REGIONAL LICENCES ......................................................................................................................................... 23
6.8 SATELLITE COVERAGE ....................................................................................................................................... 23
7. AUCTIONS....................................................................................................................................................... 24
7.1 PRINCIPLE OF AN AUCTION ................................................................................................................................ 24
7.2 PRE-QUALIFICATION .......................................................................................................................................... 24
7.3 AUCTION DESIGN AND PUBLICITY ...................................................................................................................... 25
7.4 LICENCE DURATION AND PAYMENT .................................................................................................................. 26
7.5 INFORMATION FOR BIDDERS AND DUE DILIGENCE.............................................................................................. 26
8. REGULATORY ASPECTS ............................................................................................................................ 26

9. LONGER TERM DEVELOPMENTS ........................................................................................................... 27
9.1 ADDITIONAL UMTS SPECTRUM ........................................................................................................................ 27
9.2 SPECTRUM REFARMING ..................................................................................................................................... 27
9.3 FREQUENCIES ABOVE 3 GHZ ............................................................................................................................. 28
10. REFERENCES ............................................................................................................................................... 29




1.




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Introduction
Vodafone is pleased to see the DTI entering a new phase in its consultations over UMTS, the
next generation of mobile communications, by publishing and inviting comment on
‘Multimedia Communications on the Move’. The DTI has in its paper raised a number of
important issues. Vodafone welcomes this and has taken the opportunity to respond to them
directly. Besides the issues discussed in the DTI paper, there are several others which
Vodafone believes merit further detailed consideration before any regulatory and licensing
decisions are made, and discusses these in its response. Vodafone sees this response as the
first step in the new phase of the consultation process, and looks forward to discussing the
issues raised in greater depth over the next few months.

The DTI press notice which accompanied the publication of the consultation paper
summarises the paper in terms of five main proposals. Vodafone’s position with regard to
each of these proposals is stated below, and thereby set the scene for the more detailed
discussions that may be found in the subsequent sections of this response.

 a) Subject to the successful passage of the Wireless Telegraphy 1997 Bill, the spectrum for
    Third Generation should be offered by auction during financial year 1998-99. The
    main stages of an auction are set out, and licenses with a proposed duration of 15 years
    should be awarded to the successful bidders following the auction.

A primary aim in awarding licenses for UMTS must be to encourage more use of mobile
communications through rapid deployment of UMTS infrastructure which can deliver
multimedia services at an affordable cost, and thereby stimulate further investment in the
industry, and the export opportunities that flow from such investment. Vodafone also
recognises the desire of regulators to see the value of the UMTS spectrum reflected in revenue
generated from licenses. From both points of view, pitfalls experienced in other parts of the
world leading to successful bids failing to be translated into successful revenue generating
networks, must be avoided. Provided these can be avoided, and subject to a well designed
auction methodology, Vodafone does not object to an auction. The proposed timing of the
auction is appropriate provided the currently envisaged timescales for UMTS standardisation
are maintained. Concerning the proposed duration of the licence, Vodafone believes that 15
years is too short to ensure appropriate levels of investment, and favours a 25 year (minimum)
licence (the 15 + 10 approach) as is the case for current GSM 900 and GSM 1800 cellular
licenses.

 b) Spectrum issues are considered in detail. On the basis of the widely held industry view
    that a Third Generation operator will need some 2 x 20 MHz of spectrum, and that
    paired spectrum is limited to 2 x 60 MHz, it is initially considered that at least three
    Third Generation licenses will be available to provide services on a national basis.
    Views are being sought on spectrum requirements as well as on detailed spectrum
    planning for the Third Generation systems.

Vodafone recommends that final judgement on the spectrum planning, the amount needed per
operator and consequently the number of operators to be licensed, should wait until 1998,
when the UMTS radio technology should be better defined. This may provide the opportunity
to licence more than three operators (for example by innovative use of unpaired and satellite
spectrum).



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 c) The Government proposes that, subject to meeting pre-qualification criteria to enter the
    auction, any individual company or consortia, including BT and the existing four mobile
    phone operators, should be eligible to bid.

Vodafone supports the position that existing mobile telephone operators should be eligible for
a UMTS licence. Their experience should be viewed as an asset to ensuring rapid and lowest
cost deployment of UMTS infrastructure. Moreover Vodafone does not oppose eligibility
being extended to BT provided measures are in place to ensure fair competition and equal
access to BT’s fixed network where this is needed for UMTS services. Vodafone considers it
inappropriate however for BT and Cellnet to be permitted to bid separately. Vodafone also
considers it inappropriate for Cable & Wireless Plc, Cable & Wireless Communications Plc
and One2One (Mercury Personal Communications Ltd.) to be permitted to bid separately.

 d) The Government would welcome bids from new entrants to mobile communications in
    the UK. In order to ensure a level competitive playing field, the Government proposes
    that all Third Generation operators should be required by a condition in their licence to
    enter into national roaming agreements with each other from the start. This means that
    if a customer is not in range of his own operator’s network, then he could seek to roam
    onto another Third Generation operator’s network in the UK to complete his call.

Vodafone does not support the need to reduce entry barriers unless it is in the interest of
consumers and business customers. Because UMTS infrastructure can be deployed most cost
effectively alongside existing GSM 900 and GSM 1800 networks, and because competition
will force prices towards cost, it is in the customers’ interest that as many licences as possible
are made available to existing operators. Furthermore, coverage is a critical basis for
competition in the mobile industry and obligatory national roaming would reduce the
incentive to roll out coverage as fast as possible. UMTS service providers, which define the
virtual home environment, will be in the best position to offer seamless national roaming. It is
therefore in the interests of the consumer that new entrants should be encouraged in the
service provider sector.

 e) All previous mobile phone licenses have included a coverage and roll-out target in
    order that operators make both effective use of the spectrum, and also provide a
    reasonable level of service to their customers who rightly expect to be able to use their
    phones as widely as possible. The Government proposes to apply a coverage and roll-
    out obligation for Third Generation services of 80% of the population, six years after
    the commencement of service. On the basis of commencing service in 2002, the target
    date to meet would be December 2007.

Experience to date strongly suggests that timely coverage is the key to adoption of mobile
services. This is likely to be even more the case in the mature market into which UMTS is
launched. The Government is therefore right to set reasonable coverage and roll-out
obligations. To meet the potential market demand, Vodafone suggests the roll-out obligation
is strengthened to 3 years. Given the present level of definition of the technology, the 80%
population coverage target seems to be appropriate.




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2.     UMTS Context and Timescales
In its recent communication On the further development of mobile and wireless
communications [2], the European Commission asked the question ‘Is this the right moment
to define a strategy for the introduction of UMTS, or would regulatory action today be
premature?’ In its response [3], Vodafone insisted that regulatory action was urgently needed
if Europe’s position as a world leader in mobile communications was not to be eroded, and a
clear and fair regulatory framework for the introduction of UMTS would give key players in
the industry the much needed green light to focus and accelerate their investment in UMTS.
The DTI’s decision to propose and invite comment on timescales and regulatory conditions
for the introduction of UMTS in the UK is therefore to be applauded.

There are however dangers associated with the UK Government taking the lead over other
administrations. A critical mass of commitment is needed throughout Europe (and beyond) if
UMTS is to be a success. This was true with GSM, and is likely to be even more so with
UMTS. The commitment is essential to encourage new players in UMTS service and content
provision, and to ensure availability of price competitive products. To achieve this a common
approach is needed to many of the issues raised in the consultation paper, not only technical
issues, such as allocation of spectrum for unlicensed applications, reverse band operation, etc.,
but also timescales. Indeed it is recognition of this that led to the formation of the UMTS
Forum to advise the Commission on UMTS regulation, common standards, and timescales.

It is Vodafone’s understanding that the European Commission will respond to the comments
it has received on its communication [loc. cit.], in October 1997. A response to the UMTS
Forum report [4] is also expected at that time. Vodafone understands that the Commission’s
response will be a ‘Statement of UMTS policy and strategy’, which will explain the
Commission’s position on licensing and regulation. Moreover, Vodafone believes that the
communication will be followed on 2nd December by a European Council resolution on the
subject.

Vodafone asks the DTI to ensure that prior to making any final decision with regard to UMTS
in the UK, it takes full account of proposals made by the European Commission, European
Council and administrations from other European countries, with a view to achieving
maximum alignment of UMTS regulation and timescales across Europe.



3.     UMTS Definition
3.1    The nature of UMTS service

The main driver for UMTS, and the one that is emphasised in the consultation paper, is
mobile multimedia. Vodafone anticipate that the demand for information, images and audio
whilst on the move will grow, either as services in their own right, or to enhance the use of
telephony services. Over the past few years there has been remarkable growth in IT
awareness, and in the way IT is used to enhance services and improve their presentation. This




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is already having an impact on mobile communications7, and Vodafone expects that it will
continue to do so.

We must however not lose sight of the fact that the demand for mobile communications is in
the rapid growth stage and is likely to continue to remain so for the next few years. Mobile
communication has become a normal part of business life for a vast number of companies
both large and small, and many companies have come to rely on the cellular telephone to the
extent that their competitiveness depends upon it. Moreover, with growing domestic
penetration the cellular telephone is becoming more and more a part of ordinary daily life,
especially amongst the younger generation. There is every indication that this trend will
continue, with an ever increasing demand placed upon cellular communication capacity.

As an example of expected levels of penetration of mobile communications, in a recent report
[4] the UMTS Forum gives a figure of 50% penetration in Europe within the next 10 years.

Based largely on a study conducted by Analysys [8], the UMTS Forum has estimated that in
2005 the mobile market in Europe will consist of 200 million users, producing 104 billion
ECU of revenue and generating 6 thousand million Megabytes of traffic per month.
Multimedia will account for 16%, 23% and 60% of these figures respectively. Put another
way, multimedia services will consume 60% of the spectrum, will only account for 23% of the
revenue, and yet will only be used by 16% of customers (all of whom will also consume
telephony services). In order to ensure affordable multimedia services for UMTS customers it
is essential that spectrum is priced appropriately. Simple examination of the Analysys figures
suggests that spectrum for multimedia services should be priced at under 40% of that for
voice8.

A clearer picture of the way in which the market may drive UMTS may take some time to
emerge. There may not prove to be a single dominant multimedia application. This
uncertainty must be accepted and reflected in a UMTS which is designed to accommodate
change from the start. This has fuelled the notion that UMTS must be designed to allow
innovation in the services that are offered, the technology used to create the services and the
way in which the services are presented. Rather than providing prescribed services, UMTS
must be designed to:

      provide tools which can be used by service providers, operators, multimedia content
       providers and users, alone or in collaboration, to create and personalise services;
      be flexible enough to adapt to rapid and varied changes in demand for the way
       information is accessed, processed, communicated and presented;
      support flexible addressing9 and media interworking10;
      be capable of providing interactive services in conjunction with other systems11 ;



7
    This is illustrated by the GSM higher rate data services HSCSD and GPRS, and by the emergence of intelligent mobile terminals.
8
    Based upon the simplistic calculation of 23% / 60%.
9
    For example an e-mail address may be used to receive voice or fax calls.
10
     For example incoming faxes may be delivered as e-mails.



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      ensure that a customer’s services remain the same irrespective of the UMTS network that
       delivers them12.

UMTS must be a platform capable of being used to provide a broad range of mobile
information services. Vodafone encourages the DTI to endorse this flexible approach to the
nature of UMTS, to provide a regulatory environment which encourages increased and diverse
use of mobile communications to maximise benefits to UK customers - an environment which
encourages an integrated information infrastructure to flourish, and allows the market to
provide the services demanded by the users.



3.2          Service provision

Fundamental to much of the thinking in both the UMTS Forum [4] and ETSI [5] is that
UMTS will differ significantly from second generation systems in the way in which services
may be provided. The model for UMTS service provision envisages network operators acting
on behalf of, or in conjunction with, service providers to deliver telecommunications services
to users, including access to content providers. This significant move away from the
traditional tight integration of service provision and network operation in cellular
communications13 will provide the means for new entrants to gain access to the market. It
encourages the emergence of independent ‘mobile multimedia’ content providers, and allows
independent service providers to provide services over different UMTS networks. Here
service provision may range from conventional subscription provision through to real-time
location management and involvement in delivery of the service14.

The consultation paper also envisages a three level model of service provider, network
operator and content provider, but the model seems to be different in the boundaries
separating service provider and network operator roles from that outlined above. The
difference is apparent in a number of statements in the consultation paper, but is probably best
illustrated by considering roaming and location management. In the ETSI model the service
provider needs to negotiate ‘roaming agreements’ with network operators to allow him to
provide service to his customers over the networks belonging to those operators15. However,
in the consultation paper reference is made to network operators entering into roaming
agreements. This suggests a different and tighter coupling between network operator and
service provider than envisaged in the ETSI model, a model which Vodafone supports. It
should be noted that this does not contradict the current trend of network operator and service
provider consolidation because these are a new type of service provider which will occupy a
larger part of the value chain.



11
  For example, UMTS may be used to provide one path in an interactive service, the other path being provided in a different band or even
over a fixed line.
12
     This has given rise to the UMTS concept of Virtual Home Environment (VHE).
13
  It must be stressed that the logical model should not be interpreted as mandating a particular commercial model - service provision and
network operation may still be provided by the same organisation.
14
     If this model were applied to GSM, then broadly speaking the service provider role would include operation of the HLRs.
15
     It is ETSI’s intention to provide functionality so that ‘automatic roaming’ may be possible.



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Service provision may well develop much more along the lines of the Internet model than on
the conventional air-time resale model. This offers the opportunity for the emergence of new
players and new competition. It is important that these opportunities are not lost by making
unnecessary assumptions about the structure of the business, or locking the business into a
particular structure by inappropriate regulation. Another example where the usual commercial
model may be different is where part of the mobile market might be addressed by operators
selling access for mobile originated calls on a pay as you go basis using electronic purse
technology. Users would not require a subscription, or a home network, or a service provider,
and would be free to choose any network which traded using their particular electronic purse.

Acceptance of the separation and the nature of the service provider and network operator roles
as in the ETSI model does have regulatory implications. For example the service provider may
need access to international signalling systems in order to perform location updating and
direct incoming calls. Service providers with this capability should be subject to regulation,
perhaps through a class licence, whilst one providing only subscription services, as is the case
today, would not.



3.3       Service environments

A fundamental tenet for UMTS has been integration of telecommunications services across
different types of access networks, including cordless, cellular, mobile satellite and fixed line,
and integration of different types of services like telephony, broadcasting and information
services. The primary aim of service integration is to enable subscription to different services
from a single service provider and, in the case of radio access, to allow use of a single
terminal with roaming between the different environments. The latter has been recognised as
a feature of UMTS for which there is significant customer demand16.

It is recognised that UMTS will be most effectively deployed alongside existing GSM
networks, providing for complementary services and additional capacity. Multimode
terminals which can access GSM and UMTS networks are likely to be available from the start
of service.

In order for users to reap the benefits of service integration and multimode operation, the
UMTS service providers will need to be able to offer bundled telecommunications services.
These services may be offered over a variety of networks, both fixed and mobile, and may
include a combination of telecommunications, broadcasting and IT services. It is therefore
essential to create an environment within which UMTS service providers have the opportunity
to combine access to different networks.

What is achievable in practice depends upon what is technically realistic, and the appropriate
open access to fixed networks such as BT and CATV by UMTS service providers. This is
recognised in principle in the consultation paper. Vodafone believes that an important part of



16
   UPT has also been considered in the context of service integration. The major problem with this is that its proponents want to allow
access to all advanced UMTS services from existing terminals. This imposes technical constraints which, for example, prevent even the
most modest security being provided to services which are vulnerable to severe misuse. The UMTS capable radio access terminal is going
to be new; the cellular industry is not insisting that UMTS be accessible over TACS or NMT450. The same degree of realism should be
applied to wired access before UPT is given any further consideration in the context of UMTS.



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the consultation process will be to establish what is technically possible and the implications
for regulation to ensure open and equitable access to all communications networks.



4.     Spectrum
4.1    Spectrum requirements

On present evidence, Vodafone supports the general industry view that a minimum of 2 x 20
MHz per operator will be required for initial UMTS service. It must, however, be recognised
that the amount of spectrum needed will depend on the choice of technology, and this choice
has yet to be made. There are also indications that 2 x 20 MHz may give little flexibility to
cope the complexities of real-world deployments. Thus Vodafone reserves the right to revise
this figure as the UMTS air-interface standard becomes clearer.

The following points must also be considered when estimating the spectrum requirements of
an operator:

  The minimum amount of spectrum per operator in the early stages of rollout is
   determined more by uneven traffic distributions than by absolute traffic levels. Traffic
   levels in London can vary by a factor of 100 within a distance of 10 km. Wider
   bandwidths imply fewer channels and hence difficult frequency planning problems which
   are not easily solved, even with CDMA systems.
  Current estimates, perhaps unrealistically, assume that the spectrum lost due to guard
   bands will be minimal. The larger the channel bandwidths in UMTS the more significant
   this loss of spectrum may become. This problem can only be quantified fully when the
   air interface has been selected.

The total spectrum requirement will increase as the mass market is reached, calling for
expansion of the initial UMTS bands. Vodafone’s best estimates to date are in line with those
calculated in the UMTS Forum (see [4]), and Vodafone urges the DTI to support calls for an
additional 185 MHz of spectrum to be identified and allocated. The DTI should retain the
flexibility as to whether this is paired or unpaired for asymmetric services.



4.2    Spectrum planning and use

In paragraph 4.7, the DTI propose that all 155 MHz of spectrum identified for UMTS (see [6])
should be made available in one stage. In paragraph 4.8, they question whether all this
spectrum should be used for full mobility applications, or whether some should be allocated to
deregulated high data rate services. This is followed in paragraph 4.9 by a discussion of
spectrum planning in the event that all of it is allocated to full mobility applications.

With regard to the first point, an authoritative response depends on the air-interface
technology which is as yet largely undefined. The capabilities of the chosen radio access
technology will affect the best way to plan the spectrum. At present, it is generally believed
that Frequency Division Duplex (FDD) systems offer the most appropriate technology for
wide area access, with Time Division Duplex (TDD) being applicable to small area


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applications, and being required to make best use of the unpaired spectrum. Vodafone will
press within ETSI for both capabilities to be in all UMTS phones. Therefore given that the
paired spectrum set aside for UMTS is 2 x 60 MHz, and given the present state of uncertainty
with regard to the air-interface technology, it seems reasonable that the 2 x 60 MHz paired
spectrum should be offered as 3 lots of 2 x 20 MHz. These 3 paired 2 x 20 MHz sub-bands
should be made available in an initial stage to allow the build out of wide area coverage.

It is essential that the two sub-bands of unpaired spectrum are also used for full mobility
services. Vodafone’s current proposal is that the unpaired spectrum should be divided and
assigned to the licensed operators allowing them to make use of TDD mode of operation to
meet demand in localised areas, or asymmetric FDD to cater for imbalance in demand
between downlink and uplink.

Deregulated applications of UMTS are discussed in section 0.

As noted in paragraph 4.14 of [1], it has been suggested that the duplex direction in UMTS be
reversed from the conventional arrangement in which the mobile station transmits in the lower
band. If an FDD technology without a fixed duplex spacing is adopted, a reversal might allow
use of the greater bandwidth available in the lower band to support asymmetric services. In
line with ERC/TG1, Vodafone recommends that a decision on duplex direction is taken only
after the radio access technology has been chosen and potential interference to adjacent
services has been considered.



4.3    Spectrum quality and clearance

In the light of the broadband nature of UMTS services, the opportunities for sharing with
existing services in the band by geographical and frequency separation seem small. Thus it is
important that a clear regime is established for re-locating existing users. This must address
who is to bear the costs of each relocation, what measures are to be taken to ensure co-
operation of the incumbents, and what regulations will govern interference issues where
sharing is attempted. Experience with re-engineering the spectrum at 1.8 GHz has shown that
this issue should not be underestimated. Vodafone recommends that planning of relocation of
existing users should begin immediately. Clear information on the requirements for re-
location in each part of the band will be required. Provision for DTI funding of clearance
programmes is included in the Wireless Telegraphy Bill and should be used for this purpose.



4.4    Spectrum sharing with cordless

In both paragraphs 4.10 and 4.12, the DTI raise the issue of deregulated high data rate
wideband applications such as cordless UMTS for indoor applications.

While Vodafone recommends that priority in spectrum allocation be given to full mobility
services, Vodafone recognises that there will be demands for allocation of spectrum to
unregulated cordless UMTS applications. Indeed, one of the stated aims of UMTS is to
provide seamless integration of cordless and cellular applications. However, there are two




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reasons why Vodafone believes that the spectrum currently designated for UMTS should not
be shared with deregulated cordless applications.

Firstly, the market continues, rightly, to demand increasing quality of service from mobile
networks. Another stated aim of UMTS is to provide a service quality approaching that of
wired systems. The nature of radio communications makes this latter aim a challenge for any
operator and, if they are to rise to it, it is vital that they have full control of the factors
affecting the quality of their network. Interference from unregulated applications could
seriously impact the ability of cellular operators to guarantee provision of high quality
services. This factor in particular outweighs all other considerations.

Secondly, the difficulties of providing wide area cellular coverage for high bit rate services are
exacerbated at higher frequencies. Therefore all of the spectrum in the 2 GHz band should be
used for regulated/managed services. Spectrum above 3 GHz is particularly suited to short
range applications where high data rates can be supported. Vodafone would therefore
recommend that deregulated applications of UMTS be placed in this part of the spectrum.



4.5          Spectrum sharing between operators

In paragraph 4.20 of [1], the question of spectrum sharing arrangements between licensees is
raised. Many technical arguments have been presented both for and against sharing of
common spectrum by licensed operators, or mixed bathing as it has come to be known.
Vodafone has taken an active interest in this subject, has sponsored research on it [9] 17, and
further research should be encouraged. Key issues are the ability for operators in a shared
environment to take responsibility for the quality of the service they offer, and to have the
level of control of the spectrum they need to realise the innovative services envisaged by
UMTS. In the light of current information regarding the problem, Vodafone considers that
common use of spectrum by operators is not a practical proposition for UMTS.



5.           Standards and Research
5.1          ETSI standards

A situation has arisen where the European mobile communications industry has been faced
with the danger of a more rapid development of third generation standards in other parts of the
world, especially in Japan. Such developments risk European industry losing the undoubted
lead it has achieved in second generation systems with the huge success of GSM. With the
help of the UMTS Forum and the MoU 3 GIG, ETSI SMG has now established a framework
which should deliver standards for UMTS within the timescales foreseen by the industry. It
will however take at least a few more months for the direction of the standards to crystallise.
This is true of both the UMTS air-interface, where difficult decisions will have to be made at




17
     A copy of this report will be made available to the DTI.



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the end of this year, and with the core network, where the direction is still not clear18. As has
already mentioned in earlier sections, until some stability in the characteristics of the UMTS
technology is achieved, a number of questions relating to spectrum and infrastructure
requirements which are relevant to regulation cannot be properly answered. With regard to
gaining stability in the characteristics of the UMTS technology, this must not be seen as just a
question of gaining agreement within the ETSI SMG technical committees on the nature of
the air interface and the core network. It is essential that there is commercial support for the
subsequent development of the standards. In this context there are four other important
aspects of stability. Firstly, IPR issues will have to be resolved early. Secondly, operators and
manufacturers will need to have a clear understanding of the relationship between UMTS and
GSM so that they can effectively plan their investment in these technologies. Thirdly, there is
an urgent need to define the open interfaces needed between the various parts of UMTS
(particularly between service provider and network operator) and between UMTS and other
telecommunications systems. Finally, the relationship between UMTS and other third
generation technologies will need to be clear. This is particularly important with regard to
developments in Japan, both in respect of technology and timescales.

The development of open interfaces is also important between entities within the network, for
instance between the basestation and controller, as these interfaces are required to ensure a
competitive market in UMTS infrastructure, delivering cost effective solutions.

ETSI SMG, with its broad representation from telecommunications operators, manufacturers
and regulators is the correct body to set and develop UMTS standards. The formula has
proved to be successful, delivering what has now become in GSM a defacto world standard.
It is essential to build upon this success, and ensure that UMTS benefits from GSM, both
technically and as a dominant world standard for third generation systems. The industry must
work to ensure that ETSI standards for UMTS achieve the level of international support
experienced with GSM. In fact, in the interests of customer terminal supply at the very least,
the aim should be for compatibility with Japanese standards. If these efforts succeed then
Vodafone will wholeheartedly support the affirmation by the DTI that UMTS licences will
require ETSI standards to be implemented.



5.2       International standards

There is undoubtedly a preference for a single third generation technology, not least because it
facilitates global roaming and economies of scale in equipment manufacture. This desire has,
to a certain extent, delayed progress with UMTS, perhaps more so than with other third
generation standards. This situation should not be allowed to continue. It must be recognised
that there may be regional variations in third generation systems. On the other hand, the
industry must strive to achieve as much interoperability as possible, and minimise the number
of different standards, if the benefits of universality are not to be lost. For this reason efforts
to foster co-operation between Europe, Japan and the USA with initiatives like the IMT 2000
family concept should be encouraged. A common position with Japan should be in the best
interest of the UK consumer because Japan shares the same radio frequencies and plans to


18
  Although a recent announcement by a group of the major European manufacturers to support a common development from the GSM core
network is a move in the right direction.



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launch services in 2000. This opens up the possibility that in 2002, the UK consumer will
benefit from proven technology, a wider choice of terminals, and lower cost services arising
from a more competitive market in infrastructure. A key factor in co-operation and co-
ordination of third generation standards is the ITU. The DTI is urged to help provide a single
forum to enable UK industry to better influence third generation developments within the
ITU. Where possible, co-ordination with other European countries should be sought in order
to maximise influence.



5.3    Vodafone contribution to UMTS R & D and standards

Vodafone has made and continues to make a major contribution to the development of UMTS
through its involvement in industry fora and in terms of its research and development
initiatives. Vodafone provides considerable resource to ETSI standards development, both
within SMG, the technical committee responsible for GSM and UMTS, and beyond in for
example the technical committee for telecommunications security. Vodafone provides a vice-
chairperson for SMG and the chairpersons for two of its technical sub-committees. At the
technical working level Vodafone is active in all of the principal technical committees, and
has made significant contributions to all phases and all aspects of GSM. Vodafone is actively
involved with ETSI’s evaluation of the candidate technologies for the UMTS air-interface,
and provides the chairperson and the primary technical contributions for one of the five
concept groups.

Vodafone was one of the original members of the GSM MoU, the organisation of GSM
network operators which has been so influential in establishing GSM as a defacto world
standard. Within the MoU Vodafone is actively involved in many of its subgroups including
that responsible for third generation systems. Within that group Vodafone was instrumental
in formulating the notion of virtual home environment, a concept which has become
fundamental to UMTS and which distinguishes it from GSM in the way services are treated.
Vodafone also chairs the subgroup responsible for the impact of the GSM radio technology on
health and the environment, issues which Vodafone has always taken very seriously.

Vodafone participated in the UK third generation mobile group (3GMG), and helped write the
report which formed he basis of the DTI’s paper ‘Developing third generation mobile and
personal communications into the 21st century’. Vodafone continues to be active in TAG, the
successor to 3GMG. Within Europe Vodafone is an influential contributor to the activities of
the UMTS Forum, especially in the economics study and operators groups.

On the research front, Vodafone has been actively engaged in studies for third generation
systems since 1991. Vodafone was a partner in the European RACE 2 project Mobilise, and
leads the ACTS project ASPeCT. The latter project is concerned with security of UMTS, an
aspect which is of fundamental importance if innovative services for commercial transactions
over UMTS are to be realised. Vodafone has actively supported the DTI/EPSRC LINK
Personal Communications Programme (PCP) by leading two projects, one concerned with
evolving GSM to provide UMTS like data services. In 1992 the Technical Director of
Vodafone served on the PCP programme committee. Vodafone is a founding industrial
member of the Mobile Virtual Centre of Excellence (VCE), a technology Foresight inspired
association of UK universities and companies to further research in mobile communications.
Vodafone holds a position on the Executive Committee of the VCE and chairs the programme


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committee responsible for the work on service metrics - work which Vodafone pioneered, and
which Vodafone believes is of major importance to UMTS.

Beside this public collaborative research, Vodafone is devoting significant resources to
investigating technologies for UMTS. Two projects of particular significance are Vodafone’s
CDMA trials with a US company, and ODMA technology work. The trials are intended to
show how a CDMA system can be integrated with GSM to provide a CDMA air-interface to a
standard GSM core network. This is fundamental to an understanding of an evolution from
GSM to a UMTS with a CDMA air-interface. The opportunity driven multiple access
technology (ODMA) work is concerned with fundamental capacity and coverage enhancing
techniques for UMTS. This work forms the basis for the ETSI concept group mentioned
above.

Following the example set by Pioneer Preference in the US, Vodafone believes that
organisations that have made significant contributions to the development of UMTS should
benefit in the licensing process.



6.     Licensing Policy
6.1    Ensuring a competitive market

The world of mobile communications in which UMTS is to be born is far different from that
in which TACS and later GSM and PCN were launched in the UK. Operator competition has
been successfully achieved, and the value chain for UMTS is conceptually different from
previous systems, with opportunities for new players and competition in the service and
content provision parts of the business. The focus for competition should now switch from
furthering network operator competition, to promoting increased and more diverse use of
mobile communications and the rapid deployment of new services. In the context of UMTS,
the key to this is the range of opportunity in service and content provision. Vodafone suggests
that the Government’s highest priority in awarding licences for third generation systems
should be to ensure that licensees provide maximum benefits in terms of the availability,
diversity, quality, and cost of the services they offer. Fair competition should be based on the
principles of open network provision, and Vodafone would encourage the regulators to ensure
this.



6.2    Eligibility of existing operators

Paragraph 6.3 of [1] recalls the announcement made last year by the DTI that no reason was
foreseen why Vodafone, along with the other three mobile phone operators in the UK, should
not be free to compete for a licence to operate UMTS, and this has lead to concerns about
effective competition.

The existing mobile operators can build on their experience, harness their expertise and
integrate and complement UMTS with their existing services and infrastructure. The
incumbent operators represent the fastest way of introducing UMTS, and with the least
environmental impact. This is to the benefit of customers. Indeed there is a strong argument


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to say that, from the perspective of the user, this is the most advantageous way to offer UMTS
(see section 0). It enables mobile communications to move on rapidly to offering new
services to more people. Moreover it provides the opportunity to be able to offer the new
services in the way the user wants them to be offered, namely integrated with voice based
services. Vodafone is strongly of the opinion that such opportunity should not be sacrificed
because of concerns over competitive advantage.                  A highly competitive mobile
communications market has already established in the UK, and this will not be eroded by
licensing existing operators.

It is the Government’s view, paragraph 6.4 in [1], that BT should be allowed to bid for a
UMTS licence either individually or as part of a consortium including Cellnet. Vodafone
does not oppose this view. Provided measures are in place to ensure fair competition, and
provided Cellnet is not allowed to bid independently of BT, the potential advantages for the
user outweigh other considerations.



6.3    Consortia

Under the topic of consortia bids for UMTS licences, the DTI asks for comments on two
specific issues. The first issue, paragraph 6.5, concerns the multi-level commercial structure;
the second, paragraph 6.8, is that the Government believes that companies will see merit in
forming consortia to bid for licences.

Vodafone has discussed the multi-level commercial structure envisaged for UMTS at some
length in section 0. It permits a split of service provider and network operator roles. It gives a
possible range of types of service providers, including service providers with real-time
involvement in service provision. This, when coupled with new approaches to content
provision, offers the potential for significant innovation in mobile communications. Although
Vodafone welcomes the prospect of diversity in service provision and supports the need for
open network interfaces, Vodafone would not expect to see any form of mandatory separation.
Moreover Vodafone considers that a class licence would be required to regulate service
providers that have enhanced capability which gives them real-time involvement in service
provision.

On the question of consortia bids, Vodafone considers that, given the nature of UMTS, these
should be permitted. However Vodafone see the benefit of consortia mainly in service
provision, rather than network operations. Moreover, it is important to ensure that consortia
do not themselves adversely influence the need for competition in UMTS in content and value
added service provision. This must form part of eligibility or pre-qualification considerations.



6.4    Coverage and roll-out obligations

In paragraph 6.12 of their document, the DTI request comments on their proposal for coverage
and roll-out obligations. Experience to date strongly suggests that timely coverage is the key
to adoption of mobile services. This was particularly noticeable in the UK with the move
from TACS to GSM, which only began to gather momentum once equivalent coverage had
been achieved. This is likely to be even more the case in the mature market into which UMTS



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is launched. A rapid roll-out of networks will be essential to encourage innovation in service
and content provision, and as such is fundamental to the success of UMTS. The Government
is therefore right to set reasonable coverage and roll-out obligations. To meet the
requirements of the market Vodafone would suggest the roll-out obligation for wide area
cellular UMTS service provision is strengthened to 3 years. The 80% population coverage
target seems to be appropriate. These targets will need to be considered again once the UMTS
technology is more well defined.



6.5    Mast sharing

Vodafone is entirely in agreement with the position that environmental considerations should
play a significant role in determining UMTS policy.

Due to the requirements of vertical separation between antenna systems, and the resultant
increase in height and size of the mast, there has been increasing consensus amongst
environmental organisations and local government planning officers that mast sharing does
not always offer the least environmental impact. Improvements in antenna and support
structure design have enabled lightweight masts supporting less visually obtrusive antennas.

Solutions often found to be environmentally preferable have been to collocate two
installations of the same height, with lateral separation between the support structures, or to
place the second installation at a completely separate location, in both cases taking advantage
of screening from existing buildings or trees. The result is that the combined impact of two or
more separate structures can be less than one mast.

Vodafone is committed to voluntary radio base station mast sharing with other operators
where this benefits the environment and do not consider that obligatory sharing is the best way
forward.



6.6    National roaming

In paragraph 6.20, of the consultation paper, it is stated that the Government proposes to
include provision in UMTS licences to ensure national roaming, and invite comments on the
proposal.

Vodafone agrees that there are circumstances where the ability to roam between competing
national operators may be beneficial to customers. On the other hand, with any form of
obligatory national roaming, there is a danger that one operator will exploit the position and
rely on another to provide coverage wider than that explicitly demanded under its licence. In
this event competition suffers and customer benefit is illusory. Indeed the customer is far
better served where there is a strong commercial incentive to maximise coverage. Customers
showing preference for the networks with good coverage has proved to be a remarkably
effective incentive for rapid network deployment to date, and there is no reason to believe that
will not continue to be the case.

The brand image of an operator depends critically upon the ability to handle calls in poor
signal areas - operators will be concerned that their brand is damaged by poor call quality on


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the roamed network. Furthermore, smart terminals and the electronic purse will enable users
to access any available network on a pay as you go basis. Competition between operators will
ensure that tariffs are made available for such a service.

The possibility of separation of service provision from network operation, as discussed in
section 0, complicates the issue even more. With that scenario roaming takes on a different
meaning. Service providers will enter into commercial arrangements with network operators
for their services to be delivered to their customers. Pressure on network operators to provide
coverage will be applied by service providers in response to demands placed on them by their
customers, and this will include both UMTS to UMTS and UMTS to GSM. Thus roaming is
best achieved through service providers rather than operators.

In summary, Vodafone does not consider that there is any benefit to the customer with
obligatory national roaming between operators. Any roaming agreements should be
considered to be a free commercial decision for operators and service providers, as it is with
international roaming, subject only to consideration of anti-competitive or unlawful
behaviour. Vodafone believes that such an environment will ensure that national roaming is
available to customers, and the rate of roll out of networks is maximised.



6.7    Regional licences

In paragraph 4.5 of [1], the DTI ask whether spectrum should be made available nationally or
on a regional basis. In the light of concerns about the limited spectrum available in which to
offer UMTS service, the loss of efficiency that would result at boundaries between regional
operators would be unacceptable. While regional licensing may make sense in a country with
isolated cities separated by large lightly populated areas, in a compact country, such as the
UK, the need to co-ordinate frequency planning with neighbouring regions make it totally
impractical. This is well illustrated by experiences of frequency co-ordination along borders
in Europe. In the interest of spectrum efficiency, Vodafone recommends that all spectrum
should be licensed UK wide.



6.8    Satellite coverage

All of the mobile satellite systems which plan services to hand-portable terminals before 2001
offer similar services to 2nd generation cellular systems, although at a reduced data rate. This
is true regardless of the band in which they operate. None of them approach the data rates
required for UMTS. In coverage terms they will be complementary to terrestrial cellular
networks, and will benefit countries outside of Western Europe which have large geographic
area and limited infrastructure.

For these reasons Vodafone considers that further consideration must be given to the balance
between the allocation of spectrum to the terrestrial and satellite components of UMTS.




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Priority must be given to terrestrial service, even if that results in the amount of spectrum for
satellite service being significantly reduced19.

Vodafone asks the DTI to lead the way in Europe, as it has done with the publication of its
Multimedia Communications on the Move, to gain support for reallocation of the UMTS band
currently envisaged for low bit rate mobile satellite services to terrestrial UMTS.

Specifically Vodafone asks the DTI to consider making the frequency bands 1980-1995 MHz
and 2170-2185 MHz available for terrestrial UMTS. This spectrum, or part thereof, has been
identified to be vacated by fixed terrestrial services by the year 2005 for subsequent satellite
use. It would be more effective economically to use this spectrum for terrestrial UMTS.



7.         Auctions
7.1        Principle of an Auction

It is Vodafone’s firm conviction that, as far as the economy of the United Kingdom is
concerned, the highest priority in awarding licences for UMTS should be to ensure increased
and more diverse use of mobile communications through rapid deployment of lowest cost
UMTS infrastructure, rather than maximise revenue generation. Vodafone does not see that
this is incompatible with a spectrum auction and believes that a viable auction could be
designed for the 4 current operators to bid for 4 licences as different blocks of spectrum are
likely to have different availability and value. If new entrants participate in an auction, then
Vodafone believes that contribution to the development of UMTS should be recognised
through a mechanism similar to the US Pioneer Preference.



7.2        Pre-qualification

Pre-qualification must confirm financial viability, technical fitness, and suitability to hold
Telecommunications and Wireless Telegraphy Act licences. Above all it must provide
absolutely convincing evidence that the bidder has the experience needed to deploy a UMTS
network in the UK which will meet customer expectation and add significantly to the nation’s
information infrastructure. This must include the following:

 proof that the bidder has made significant contributions to R & D and international
  standardisation of UMTS.20 If this is not taken into account, then it is likely that further
  collaborative innovation in cellular communications (eg. 4th generation); will be stifled to
  the detriment of UK consumers and cellular, industry including the indigenous
  manufacturing base.



19
   The possible simultaneous use of down-link satellite spectrum for terrestrial service, for example in indoor environments, where satellite
signals are not going to penetrate to provide an acceptable quality of service should be considered further.
20
   In this respect we would draw attention to the statement made by the DTI in [10]: ‘Contribution to R & D and international
standardisation may be significant factors in the Government’s consideration of who should receive licenses to operate third generation
systems’.



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 a guarantee that the bidder’s deployment of UMTS will make a significant addition to an
  integrated information infrastructure in the UK.



7.3    Auction design and publicity

Experience to date indicates that if an auction is to be successful and achieve the goals set for
it, then it needs to be carefully designed to be sensitive to the particular circumstances in
which it is held. There does not appear to be a universal panacea.

The US PCS auctions [11] failed in their declared aim to bring new entrants into mobile
communications. Several analysts believe this to be due largely to the fact that existing
operators had already achieved 16 - 20 % penetration. This supports Vodafone’s view that the
auction should be designed primarily for the current operators.

The Australian 500 MHz auctions have been hailed by many as a success, and by some as a
model for the future [12]. That particular auction was however characterised by the fact that
there were more than 800 lots on offer spread over some 17 regions, that in comparison to the
number of lots there were few bidders, and the licences were for private mobile radio. Thus
the circumstances were significantly different to those that characterise UMTS in the UK.
Moreover, in the case of both the US and the Australian auctions, many critics believe that the
desire to ensure that licenses only went to those best able to deliver benefit to the customer
was very much a secondary consideration. As a consequence, in the US licence awards failed
to be translated into successful networks. This must not be allowed to happen in the UK.

As far as the auction design is concerned, Vodafone reserves judgement at the moment as to
which method is the most appropriate for the circumstances although Vodafone does not
object in principle to a simultaneous multiple round auction. However, in order for UK
industry to gain confidence in the proposed auction process, the DTI must consult widely and
in depth with the industry. Consultation needs to address pre-qualification criteria, auction
design and publicity. Principles that need to be established prior to designing the auction
process include the following:

 the total amount of spectrum which the Government anticipates will be made available for
  UMTS services, and the timescales for release;

 how the spectrum is to be divided into auction lots - a decision which cannot be made until
  the UMTS air-interface is better defined;

 reserve prices;

 secondary trading.

Vodafone advises that the DTI establish an open process to consider options for the design of
the auctions. The scope of this review should include other mechanisms for determining
spectrum fees in order to confirm whether an auction is likely to achieve the Government’s
objectives with the least risk. The UK TAG would be a suitable forum in which to take this
forward.




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7.4       Licence Duration and Payment

It is Vodafone’s view that 15 years is too short a period of licence certainty to ensure an
adequate return on the substantial capital investment required to deploy UMTS. UMTS
requires a higher level of investment both per unit area and per customer than GSM, which
enjoys an effective 25 year minimum licence period incorporating a rolling 10 year notice
period. Vodafone considers that a UMTS spectrum licence should offer at least the same
minimum duration and notice period. Clauses within the licence could allow early withdrawal
or penalties if licensees fail to meet roll out obligations.

Vodafone does not support the concept of a royalty auction because it is expected that UMTS
will be deployed in many cases as an extension to existing services and it will therefore be
very difficult to agree a common basis for calculation of the revenue arising from the radio
interface21. However, due to the uncertainty of the rate of development of mobile multimedia
services and the resulting financial risks for operators, Vodafone recommends that payment
of the licence should be made over the period of the licence in the form of an escalating
annual fee.



7.5       Information for bidders and due diligence

It is too early in the consultation process to define all the information which Vodafone would
require prior to the auction. However, the following will be important:

 a copy of the licence;

 arrangements for spectrum clearance;

 details of other services adjacent to the band, or remaining in the band;

 approach to licensing of future spectrum;

 support to UMTS operators to access BT and other fixed networks;

 the future regulatory regime (OFTEL/OFCOM etc.);

 penalties for licensees failing to achieve target;

 action in the event that an auction is abused in a similar fashion to the Australian TV
  spectrum auction.



8.        Regulatory Aspects
The licensing structure for UMTS should follow closely that used for second generation
systems. If a licence is awarded to an incumbent, like Vodafone, then there should only be a


21
    For example consider the case of an Internet access package offering 2 hours unlimited usage from either fixed or mobile terminals for
fixed monthly fee..



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need for a new schedule to their Wireless Telegraphy Act licence, and some modifications to
the Telecommunications Act licence.

The UMTS Telecommunications Act licence should allow broadcasting and direct
interconnect with overseas operators. As Vodafone outlined in section 0, one of the strengths
of UMTS will be the capability to support interactive services in collaboration with other
systems, including broadcasting systems. It is essential that the UMTS licence should allow
broadcasting if this capability is to be effectively exploited.

UMTS will be international. It will support international roaming like GSM. It will go
further and through the Virtual Home Environment provide the user with a service which,
wherever the user goes, should be indistinguishable from that received at home. It would
seem quite extraordinary if the UMTS Telecommunications Act licence did not allow the right
of direct international interconnect.

The separation of the network operator and service provider parts of the mobile
telecommunications business should be preserved in UMTS licences. Current licences do
require mobile operators to account for these activities separately, so as to ensure they are
operating fairly in their dealings with their in-house and independent service providers. Given
the market structure envisaged for UMTS (see section 3.2), it is appropriate to retain this
accounting separation for all UMTS operations. Service providers with real-time access to
networks should be regulated through a class licence.



9.     Longer Term Developments
9.1    Additional UMTS spectrum

In paragraph 8.4, the DTI raise the issue of allocation of additional spectrum for UMTS
service when it becomes available. The point is made that any such spectrum would have to
be allocated in a fair and transparent manner, bearing in mind the minimum spectrum required
by any operator. This factor is certainly recognised by Vodafone. As stated earlier in section
0, Vodafone does consider that, in order to offer the range of services envisaged under UMTS,
it is highly likely that operators will need more spectrum. Vodafone would urge the
government to make known to potential bidders the amount of additional spectrum which it
anticipates will become available, and when and how it will be licensed.



9.2    Spectrum refarming

In paragraphs 8.6 - 8.8, the DTI raise the question of refarming the 900 MHz spectrum
allocated to GSM service to UMTS. Vodafone’s view on this is that this should be a
commercial decision, subject only to maintaining quality of service to existing users. If by
introducing UMTS based technology Vodafone can show a benefit to its consumers, by
offering more services or supporting more users, then Vodafone should be free to do so.
Under the terms of its current licence, Vodafone should in any case not be obliged to refarm at
less than 10 years notice.




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A subject that is related to refarming is that of evolution of GSM as a technology in its own
right. It must be recognised that GSM will continue to evolve, and this evolution needs to be
supported. The nature of the evolution is likely to be strongly influenced by technical and
commercial developments in UMTS, so elements of UMTS technology are certain to become
a part of GSM. Where GSM can be used to provide UMTS type services over a wider area,
then subject to consumer demand it is likely to be used to do so. As Vodafone has stated
already on a number of occasions, UMTS is itself an evolution of GSM, so the two
technologies really should be considered together. It is only the need for a new licence that
makes us consider them separately.



9.3    Frequencies above 3 GHz

In section 8.9, the DTI return to discussing the possible spectrum planning scenario whereby
the spectrum identified for UMTS at 2 GHz is used for full mobility applications, and that
deregulated high data rate wideband applications use spectrum above 3 GHz. Views are
sought as to whether Mobile Broadband Systems (MBS) or the Broadband Radio Access
Network (BRAN) project could provide complementary services to UMTS. In response
Vodafone would note that informal contacts between representatives of ETSI SMG and
BRAN suggest that BRAN might form part of the UMTS family, providing a high data rate
radio access for local area applications. This is a move which Vodafone welcomes and will
encourage through its active involvement with ETSI.




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10.     References
 [1]    Multimedia Communications on the Move, DTI, 31 July 1997
 [2]    On the further development of mobile and wireless communications, European
        Commission, COM(97) 217, 29.05.97.
 [3]    Comments to the EC ‘On the further development of mobile and wireless
        communications’, Michael Walker, Vodafone Ltd, 13.06.97
 [4]    A regulatory framework for UMTS, Report no. 1 from the UMTS Forum,
 [5]    System concepts and reference model for UMTS (UMTS 21.01), ETSI, February
        1997
 [6]    ERC Decision 30 June 1997 on the frequency bands for the introduction of the
        UMTS, DEP/ERC (97) 07.
 [7]    Developing third generation mobile and personal communications into the 21st
        Century, DTI, 13 February 1997
 [8]    UMTS Market Forecast Study, Analysys - Intercon, March 1997
 [9]    Shared spectrum, phase1, CTIN, The University of Adelaide, 13 August 1997
 [10]   Mobile phone spectrum over the next decade, DTI, February 1996
 [11]   Spectrum auctions: An idea whose time has passed?, Shosteck Cellular/PCS
        Strategies, Vol. III, No.3, May-June 1997
 [12]   An analysis of the Australian 500 MHz auction, Stephen Nelson, CTIN, The
        University of Adelaide, June 1997
 [13]   GSM Q - The GSM Industry Journal, Issue 7, October 1997, page 24




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