GSM: Global System for Mobile Communications

In the 1980's an international working group tasked by most European PTT administrations started to develop a common standard for cellular networks. A joint standard allows international roaming across the many European borders, until then only realized on a regional scale by the analog NMT-standard. The main advantages of a digital system are a larger user capacity per unit of spectrum, ease of implementation of sophisticated encryption, authentication, and other security features, and robustness against radio channel imperfections. A Pan-European standard further provides economies of scale in mass production of handheld and car terminals, which would never have been achieved in the fragmented national markets in Europe. In the early 1980's, these two objectives were seen as the most critical success factors for achieving a much larger penetration of mobile telephone services in Europe. A third factor has been the introduction of competition in the monopolistic European markets - a cultural import from the US. In 1992, the new standard for Pan-European digital cellular telephony, GSM, saw its first operational successes.

Present Status

"The only truly unified European plug is wireless: The GSM antenna" :-)

1994
In the autumn of 1994, 102 operators in 60 countries were committed to GSM. The networks already in operation had 3 million subscribers, almost half of them in Germany. The commitment to GSM is formally expressed by a Memorandum of Understanding (MoU). In Europe, this is arranged for by the Commission of the European Communities (CEC), which took great pains to ensure that common frequency allocations were made in the 900-MHz band in the (then) 12 member states and in many other European countries.

GSM MoU Members (October 1994)
Region Signatories Countries
Europe 57 29
Arab States 10 10
Asia Pacific 29 17
Africa 6 4
total 102 60
Later, the GSM standard was also adopted outside Europe, notably in important Asia-Pacific countries such as Singapore, Malaysia, India, Hong Kong and Australia, and in the Middle East and Africa. Taiwan, Thailand and New Zealand consider the GSM standard, or have already imposed it for at least one of their competing cellular networks. Accordingly, the old acronym GSM was taken to mean Global System for Mobile Communication.
Early 1997
 In early 1997, GSM reached a penetration of 25% of the world market for mobile communications. 198 networks were operational in 75 countries. The number of subscribers exceeded 30 Million. Tri-band handsets, capable of operating in the 900, 1800 and 1900 MHz band allow global roaming. The price of dual-band and tri-band handsets are 10 to 25 percent above the price of a single band set.
End of 1997
 By the end of 1997, GSM had 60 Million subscribers in 110 countries, giving GSM a 35% share of the world market in mobile telephony. The US GSM system PCS 1900 had 670,000 subscribers.
1998
 The GSM Association announced that GSM attracted 135 Million subscribers worldwide in 1998. This system had a share of 45% of the cellular market, and 62% of the digital cellular market. Approximately 90 Million handsets have been be sold, out of which 30 Million unit replace older technology, or fashion-sensitive design. Ericsson, Nokia and Motorola dominate the market with shares of 25, 24 and 20 percent, respectively, followed by Siemens, Panasonic, Philips and Sony.
1999

In Finland and several other countries the number of cell phones exceeded the number of wireline (POTS) subscribers. The GSM Short Message Service (SMS) takes of. In Germany alone 2 million SMS messages are sent each month. News and information services are started for instance by Nokia and CNN. The WAP protocol for wireless web browsing is gaining lots of attention.

Fierce compention between operators, particulary after many countries have tird and fourth operators. US firm estimate that a mobile subscriber represents a value of 2,000 to 12,000 USD.

Churn sales (replacement od existing phones) becomes a very significant portions of all phone sales. New features are dual and tri-band phones, and SMS. Good news for the phone manufacturors but, operators are worried as they see subscribers move within one or or two years to a competitor.

See Also: The economics of cellular radio.
GSM coverage and the operators.

Why a Pan-European standard?

The general advantages of international standards, MoU's and mutual roaming agreements for public mobile telephony are increasingly appreciated by different operators and markets. Where the inception and implementation of such conventions lag behind, operators on their subscribers are denied some of the following mutual benefits: Such benefits have caused the annual growth of mobile communications markets to exceed 60% in many countries. No other telecommunications sector can boast similar growth rates at present. The infrastructure supply market is dominated by the few international manufacturers who combine expertise in both radio transmission and national switching systems. One of these manufacturers, L.M. Ericsson of Sweden, has some 40% of the cellular network market in the world, including a major proportion of the older networks using the American analog standard AMPS. The terminal market, on the other hand, is subject to the typical supply principles and economics of consumer electronics: short product development times and a 'killing' competition, due to eroding profit margins on microelectronics commodity products in the late 1980's. The resulting drop in consumer prices assists in developing the service market much faster than in the past. Several (US) operators even provide a terminal for free as part of a subscription for a certain minimum period of time.

At January 1st, 1995, commercial GSM telephone service was already offered in sixteen countries. The major transit routes in Europe had been reasonably covered within one year after the first GSM service went on air in 1992, despite initial delays in type approval of the first telephone handsets with their complicated software. Some services are restricted to voice-type, i.e., circuit-switched, connections. A simple (packet-oriented) service allowing transfer of short data or alphanumeric (i.e., paging-type) messages is also becoming available. Moreover, a set of data rates have been defined as bearer services in GSM and are supported at a later phase of the market introduction of GSM.

Strikingly, the fastest take-up of GSM has been in Germany, where the national economy has been strained in the wake of the unification of East and West. After only six months of operation in December 1992, Mannesmann Mobilfunk announced the 100,000th subscriber to its GSM-network, known as D2. In May 1993, 220.000 users subscribed to D2. Mannesmann's competitor in Germany, Deutsche Telekom, still holds the national monopoly on both public analog mobile telephony and the fixed telephone network. Some 90% of all telephone calls to or from mobile users in Germany originate or terminate in the latter, and Telekom's analog cellular network, C1, is already virtually saturated by its 800,000 subscribers. Nevertheless, Telekom's own GSM- network, D1, initially attracted fewer subscribers than the competing D2 network. The successful marketing of the D2 network services and the associated initial offer of the 'Handy' portable GSM-terminal at a price of less than $ 1400 (including 15% tax, deductible for business users) was designed by D2's American shareholder, AirTouch, a daughter company of Pacific Telesis. Despite more advanced features consistent with the all-digital technology, the lightweight 'Handy' could thus immediately be sold cheaper than a - heavier - handheld terminal for the analog C1 network. The early explosion of the GSM market in Germany caused a shortage of GSM terminals, especially portables, in other European countries, resulting in initial waiting lists and loss of network revenues.

In 1997, the total number of subscribers reached 40 Million worldwide. In May 1997, shortly after the introduction of PCS 1900, nine US operators had 400,000 subscribers, with nearly 2000 new customers signing every day. Mid 1997, they covered more than 300 cities with more than 20,000 inhabitants.

Competition

The German case illustrates the general trend towards increased mobile network competition on the European continent, often spurred by more experienced business partners from the less monopolistic Anglo-American shores of the Atlantic Ocean. Clearly, the international GSM-standard and MoU, with strict technical interface specifications and interworking requirements, paved the way not only to international cooperation and roaming, but also to local rivalry between competing cellular network operators. Introduction of network competition was indeed one of the GSM policy objectives of the CEC in Brussels. This regulatory change is the third key factor in the dynamics of European mobile communications, next to the more technological driving forces perceived by the founding fathers of GSM a decade ago, but it raises new technical issues including tariffing, and service-related problems such as portability of numbers between competing operators. At present, European companies as Finnish Nokia, German Siemens and Ericsson of Sweden have the lion's share of deliveries of GSM base stations and digital switching equipment. The GSM switches can readily be interconnected with Intelligent-Network (IN) nodes, so that new competitive service offerings can be extended into the fixed network. These include such features as storage of voice-mail messages to or from mobile subscribers who have temporarily logged out of the network, and call forwarding.

While GSM was originally intended and designed mainly as a vehicular system, it is now mostly marketed as a system for handheld use. Thus, the market success of GSM success may temper the initial growth of PCS in Europe, until the 900 MHz band becomes locally saturated. In the US, the PCS standard based on GSM technology is known as PCS-1900. It presently offers the most attractive prices for handsets and network infrastructure, due to the world-wide takeup of GSM.

The active presence of some of the most successful US Bell Operating Companies (BOCs) in the consortia licensed by countries committed to the GSM-standard can be taken as an American acknowledgment of the dominance of European manufacturers in the rapidly growing market for digital mobile network technologies. Conversely, the awards of such licenses in several countries of the European Union can also be seen as a European acceptance of the greater American service-provision experience and marketing skills. The remarkable role of the BOCs abroad suggests that innovative technologies embedded in common standards are not enough to develop a modern mobile service market. This is confirmed by consideration of the evolution of another digital service in Europe, mobile data communications.

History

Features and Services

See also:

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