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2nd April , 2007

Europe : The European Commission confirmed that revenue from mobile services grew at 4.6%, though at a slower pace than last year. While take-up and usage of mobile phones continued to increase, the mobile voice market is showing clear signs of maturing. Prices have continued to fall as a result of intensifying competition although there is scope for more progress in some areas. Mobile penetration has now exceeded 100 per cent and stands at 103% when compared to 95% penetration last year. There are now 478.4 million mobile subscribers in the EU. There are signs that 3G take-up is increasing. There continues to be downward pressure on mobile termination rates through regulatory intervention in most Member States.

European consumers continue to benefit from lower prices and innovative services as a result of good progress in the implementation of Europe's telecoms rules. However for consumers and providers to reap the full benefits of Europe's internal market, more competition, a more consistent and speedy application of remedies and regulators that are more independent are necessary, says the European Commission's 12th report on the EU's telecom markets, issued last Friday.

"The opening of telecom markets to competition is certainly one of the EU's success stories as can be seen by the downward trend in tariffs and better services. However, whilst 2.3% growth of the sector and 5% additional investment are good, they are not good enough in times when Europe's competitiveness is a stake." commented Viviane Reding, EU Commissioner for Telecommunications. "This is why this year's reform of the EU's telecom rules must focus regulation on those key bottlenecks where competition is still not effective. In a sector where technology transcends national borders, regulators should pave the way for pan-European economies of scale that are in the interests of both operators and consumers."

Number Portability

The report found that more than 31.4 million mobile customers (up by 6.3 million) made use of their right under EU law to keep their number, when changing subscription from one operator to another. Of all Member States, Spain has the highest number of consumers choosing to do this (9.21 million). For fixed-line telephones, more than 15 million customers in the EU also switched operators in this way (compared to 7 million in 2005). In Sweden, it is already possible for consumers to retain their number, when switching to VoIP services.

3G and data services

There are signs that 3G take-up is increasing. 70 operators are now offering 3G on a commercial basis and 3G services are now available in all Member States. While Japan retains the highest penetration of 3G services, Europe now has the highest number of subscribers. It is estimated that there are around 45 million 3G subscribers in the EU, indicating that Europe has overtaken Japan as leader in terms of subscriptions.

3G penetration in Europe is highest in Italy, with nearly 20% of total mobile subscribers now using 3G networks for services. Penetration for 3G services is also high in Portugal, Luxembourg, Ireland, UK and Sweden.

Mobile markets are maturing

Revenue growth was 4.6% in 2006. With 478.4 million mobile phones in use, penetration in Europe is now at 103% of population (up from 95% in 2005). Penetration is highest in Luxembourg (171%), Italy (134%) and Lithuania (133%).

Lack of a level-playing field for operators

The Commission's report also points to some of the most burning regulatory issues that are still unresolved:

- Lack of truly independent national regulators: in particular in Poland and Slovakia. In other Member States, political influence over the day-to-day work of the national regulator continues to be cause for concern.

- Delays in imposing remedies to competition problems: in some cases (Italy, Portugal, Greece and Germany) caused by lengthy legal appeals against the decisions of national regulators.

- Very different remedies for similar competition problems: Broadband bitstream-access offers remain inconsistent across the EU, and call termination charges vary significantly from country to country.

- Inefficient and fragmented management of radio spectrum: Radio spectrum supports services worth over €200 billion. An EU-wide approach to managing radio spectrum could generate up to 0.1% of additional GDP growth.

- Incomplete deployment of the 112 emergency number: In 2006, the Commission had to start infringement proceedings against 13 Member States.

Cross-border competition, economic growth and consumer benefit could be enhanced substantially if the EU moved from 27 different national systems to a more consistent regulatory approach throughout Europe. Market players already generate today around 1/3 of their revenue in Member States other than their own.

The Commission says that it will address these issues with the reform of the EU Telecom rules, planned for summer this year.