M-Commerce: Advantage, Europe

Surprise! Europe will almost certainly take the lead in mobile commerce. It has become commonplace to contrast the speed and alacrity with which the United States has embraced the Internet with Europe's relative conservatism and to marvel at the Americans' appetite for innovation. Europe, it seems, is doomed to play catch-up. Or is it? No one disputes the leading role that the United States has taken thus far in the Internet revolution. But mobile commerce--that is, electronic commerce conducted on mobile phones--is the next big Internet development. And in mobile communications, the United States trails behind Europe. There is little doubt that Europe has been laboring under two disadvantages in the Internet world. The first is metered calls. The cost of local calls is included in the flat monthly fee paid by Americans to their telecom suppliers, which means that they get to surf the Internet for no additional phone charge. Europeans, however, pay for local calls by the minute. Even before Americans went on-line, they spent on average about three times longer chatting on the phone than Europeans did. Europe's second disadvantage has been lack of competition in the telecommunications industry. Recent research to explain the different penetration rates of the Internet in different countries concluded that it is the regulatory environment and its influence on competition that is the single biggest factor--more important than proficiency in English (most content is in English). [1] As a result, in Finland and its neighboring Nordic countries, where competition between telecom service providers has been intense for some time, Internet penetration is higher than it is in the United States. The Finns boast 881 Internet hosts per 10,000 inhabitants, compared with 784 in the United States. Compare that with some European markets where competition is more recent: 26 in Greece, 42 in Italy, and 43 in Spain, for example. Broadband access is a prime example of how regulation can impede Internet development. High-speed broadband services can be delivered to consumers over the old copper telephone network by installing new electronics in the exchange. In the United States, regulations have forced phone companies to allow competitors to install the necessary electronics; the competitors then use the phone companies' local loop to deliver their own broadband services. This unbundling has increased competition and speeded up deployment. By contrast, the deployment of these new kinds of electronics is only now getting under way in Europe. Internet development in Europe has therefore been slow, not because Europeans are stodgy, but because the competitive conditions are unfavorable. The truth of this assertion is demonstrated by Europe's lead over the United States in mobile communications, an area in which Europe has the regulatory advantage. Over a decade ago, European regulators mandated a uniform technological standard for digital mobile communications--GSM (Global System for Mobile Communication)--and they have done the same for the next generation of phones, which will enable high-speed data transmission and a much wider range of multimedia services. The first license for the new standard, UMTS (Universal Mobile Telecommunications System), was granted in Finland last year, and the United Kingdom and Spain are in the process of awarding their licenses. Even before these UMTS networks are rolled out in 2002 and 2003, software upgrades to the current networks will enable data transmission at speeds that are five to ten times that of a normal fixed telephone line. A single standard is important because it encourages mobile communications: the same phone can make and receive calls in Greece and Portugal. A single standard also creates economies of scale for operators and service providers, which can sell their products to many more consumers. …