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31 May 2001

Autorité derégulation des télécommunications

UMTSResults of the application

procedure

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UMTS - 31 May 2001publication of the results by Autorité de régulation

des télécommunications (ART)

Outline of the presentation

- UMTS and the development of the mobile telecommunications market

- The introduction of UMTS in Europe

- The introduction of UMTS in metropolitan France

- The results

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I - UMTS and the development of the mobile telecommunications market

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1 - The mobile telephone market today

Strong and consistent growth:

Mobile telephone ownership rate in France

1,4% 2,2%4,2%

10,0%

19,2%

34,3%

40,4%

49,4%52,1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

déc-93 déc-94 déc-95 déc-96 déc-97 déc-98 déc-99 déc-00

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A move towards a rich and diversified service offering:

• the SMS market takes off (SMS : Short Message Service)

• the hesitant first steps of mobile Internet services (Wireless Application Protocol – WAP, i-mode)

• a developing offer for data transmission services through the move from GSM to GPRS (General Packet Radio Service)

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2 – The third generation (3G) concept

1990 2000

1G: analogue systems

2G: GSM then GPRS

3G: UMTS

~10 kbps~30-40 kbps

384 kbps - 2Mbps

High-speed voice and multimedia

VoiceLow-speed data

VoiceData in packet modePermanent connection

Voice

WAP

Type of services

Speeds

Standards

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• high speed and generalised data transmission

• mobile payment

• location-related services

• multimedia: video telephony and multimedia messages

• personalisation

• international mobility

3 – Expected contribution of 3G to the mobile telephone market

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• On the global level, ITU (International Telecommunications Union) began preparing for the introduction of 3G in 2000, 10 years ago already, under the generic name "International Mobile Telecommunications 2000" or IMT 2000

• The long time required to standardise a wireless interface shows that it is impossible to reach total agreement on a single global standard: so 3G is designed as a family of standards (5 in all), called IMT 2000

• UMTS (Universal Mobile Telecommunications System) is, within IMT 2000, the 3G standard developed by standardisation bodies and industry, primarily from Europe, Japan, Korea and (in part) the United States

4 - UMTS and the third generation

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II The introduction of UMTS in Europe

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1- Political commitment to coordinated introduction of UMTS in Europe

The decision of the European Parliament and Council of Ministers dated 14 December 1998:

– requires that Member States take all necessary measures to allow the coordinated and progressive introduction of UMTS services by 1st January 2002 at the latest

– while leaving it up to each State to determine the means it will use to do so (number of operators, selection process, etc.)

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2- Current status of the introduction of UMTS in Europe

State Method of allocation Status No. of licenses available No. of licenses granted No. of GSM/DCS operators License duration (years)Germany Auction complete 4 to 6 6 4 20Austria Auction complete 4 to 6 6 4 20Belgium Auction complete 4 3 3 20Denmark Auction 4 to 6 4

Spain Beauty contest complete 4 4 3Finland Beauty contest complete 4 4 3 20 (network) - 10 (frequencies)France Beauty contest 4 3 15Greece Auction 4 3Ireland Beauty contest 4 3Italy (1) Auction complete 5 5 (1) 4 (1) 15

Luxembourg Beauty contest 4 2Netherlands Auction complete 5 5 5 to end 2016

Portugal Beauty contest complete 4 4 3 15United KingdomAuction complete 5 5 4 to end 2021

Sweden (2) Beauty contest complete 4 4 (2) 3 (2) 15

(1) Italy: one GSM operator not chosen (Blu)

(2) Sweden: one GSM operator (Telia) joined forces with a UMTS operator (Tele 2) following the licensing process

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3- Payments

– total amounts paid for licenses:

(1) Spain: evaluation of amount depends in part on the sums initially set and on the share of additional payments put in place

– payment schedule:• immediate payment (Germany, United Kingdom, etc.)• staggered payments (France, etc.)

Total paid for licenses (euros/inhabitant)

0100200300400500600700

State Total sale of licenses (euros)Germany 50.8 billionUnited Kingdom 38.4 billionFrance 19.8 billionSpain (1) 14.1 billionItaly 12.2 billionNetherlands 2.6 billionAustria 832 millionBelgium 450 millionPortugal 400 millionSweden 46 000Finland 0

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III The introduction of UMTS in metropolitan France

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• January-September 1998: Commission consultative des radiocommunications UMTS working group

• February-May1999: ART public consultation on UMTS – over 30 contributions

• 3 March 2000: ART decision proposing the publication of an application procedure notice

• June 2000: transmission to ART by the Government of the amounts and payment schedule for 3G operators; this notice requires that ART formally adopt a new decision

• 28 July 2000: new ART decision proposing the publication of an application procedure notice

• 18 August 2000: publication of the application procedure notice

• 31 January 2001: deadline for the submission of applications to ART

• 31 May 2001: publication of the results of the procedure by ART

1- Timetable for the introduction of UMTS in metropolitan France

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• Technical constraints inherent to the availability of frequencies:

• the progressive freeing by the Armed Forces of UMTS frequencies will initially make available 40 MHz duplex and eventually 60 MHz duplex for FDD technologies

•10 MHz duplex seems to be the minimum technically required for true commercial opening, initially limiting the number of technically possible authorisations to four

• the provision of true high-speed services requires that the operator have enough frequencies: it is preferable to eventually allocate 15 MHz duplex per operator rather than 10 MHz duplex which seems to be too restrictive technically

• All European Member States are committed to ensuring that the introduction of UMTS allow at least one new player enter the mobile telephone market with respect to those already present with the GSM technology; on the other hand, the economic conditions required to develop mobile networks seem to make it difficult to allow more new players to profitably enter the market, as the European market currently seems to confirm.

2- Why four authorisations in metropolitan France?

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3- The selection method: beauty contest

How it works:

•Selection is based on a comparison of the applications presented by candidates.

•Each application is rated according selection criteria defined in the application procedure notice. Chosen candidates are those whose applications receive the highest overall ratings.

•The result is explained in a public report.

•The primary selection criteria to which the chosen candidates agree become obligations in the authorisations they are granted.

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IV The results

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Two candidates:

- France Télécom Mobiles S.A. (FTM)

- Société Française du Radiotéléphone (SFR)

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Criterion Scale

Date of commercial rollout and coverage at this date 15Service offering 50Relations with service providers 30

Relations with subscribers and service users 15Price offering 15Network size 15Scope and speed of network deployment 100Quality of service 15Aptitude of the project to optimise the use of frequency resources 15Capability to provide users with international mobility 15Action planned to protect the environment 15Employment 25Coherence and credibility of the business plan 75Coherence and credibility of the project 100TOTAL 500

Fourteen criteria with a pre-defined rating scale

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Coverage: rapid and large-scale deployment, greater than the minimum requirement

Coverage rate of the metropolitan population

0%10%20%30%40%50%60%70%80%90%

100%

T1+2ans T1+5ans T1+8ans

(T1: authorisation delivery date)

FTM : service à 144 kbit/s bidirectionnel

SFR : service à 144 kbit/s montant et 384 kbit/s descendant

Obligations minimales : service à 144 kbit/s

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Service offer

Offers which include:

• telephone service

• innovative services available progressively

• high speed: 144 kbps and 384 kbps• multimedia: video telephony / multimedia messaging / Internet access• mobile payment• location-related services• personalisation and virtual domestic environment

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Commercial launch date

Candidate Announced commercial launch dateSFR March-02FTM June-02

Naturally, the commercial launch at these dates will depend on the availability of terminals.

The commercial launch dates as announced in the applications are:

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Relations with service providers

• partnership strategy with content and service providers in accordance with the openness principles described in ART's recommendation on the development of mobile Internet

• in SFR's case, possibility of opening the network to mobile virtual network operators (MVNO)

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Environment and health

• commitments to share with other operators and the reuse of second generation sites: 90% of existing GSM sites will be reused

• commitments to camouflage antennae

• the candidates' suggestions go beyond the planned measures regarding exposure to radio frequencies by the European Council's recommendation dated 12 July 1999

• information with regard to radio frequencies

• financial contribution to, and active participation in, scientific research into the impact on health of exposure to radio frequencies

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Employment

• Direct and indirect job creation forecast by the FTM and SFR projects in France (FTM group, SFR group and suppliers):

approx. 30 000 jobs

• Does not include new jobs created in other economic sectors thanks to the development of 3G, estimated by candidates at several thousand positions

• Almost half of FTM and SFR employees dedicated to 3G will be located outside the Paris region

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Selection criteria FTM rating SFR rating Scale13 14 1537 42 5020 24 3011 13 1511 12 1511 12 1580 85 10012 11 1511 11 1513 11 1511 13 1521 18 2554 64 7574 80 100

Ratings assigned the candidates for each criterion

Date of commercial rollout and coverage at this dateService offeringRelations with service providers

Relations with subscribers and service usersPrice offeringNetwork sizeScope and speed of network deploymentQuality of serviceAptitude of the project to optimise the use of frequency resourcesCapability to provide users with international mobilityAction planned to protect the environmentEmploymentCoherence and credibility of the business planCoherence and credibility of the project

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Result of the procedure for the introduction of third generation mobile communications systems (UMTS)

Given the analysis of the qualification and selection criteria, both candidates have been accepted:

SFR (410 points)

FTM (379 points)

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