In the 1990s, the 'second generation' (2G) mobile phone systems emerged. Two systems competed for supremacy in the global market: the European developed GSM standard and the U.S. developed CDMA standard. These differed from the previous generation by using digital instead of analog transmission, and also fast out-of-band phone-to-network signaling. The rise in mobile phone usage as a result of 2G was explosive and this era also saw theadvent of prepaid mobile phones
In 1991 the first GSM network (Radiolinja) launched in Finland. In general the frequencies used by 2G systems in Europe were higher than those in America, though with some overlap. For example, the 900 MHz frequency range was used for both 1G and 2G systems in Europe, so the 1G systems were rapidly closed down to make space for the 2G systems. In America the IS-54 standard was deployed in the same band as AMPS and displaced some of the existing analog channels.
In 1993, IBM Simon was introduced. This was possibly the world’s first smartphone. It was a mobile phone, pager, fax machine, and PDA all rolled into one. It included a calendar, address book, clock, calculator, notepad, email, and a touchscreen with a QWERTY keyboard. The IBM Simon had a stylus you used to tap the touch screen with. It featured predictive typing that would guess the next characters as you tapped. It had apps, or at least a way to deliver more features by plugging a memory card into the phone.
Coinciding with the introduction of 2G systems was a trend away from the larger "brick" phones toward tiny 100–200g hand-held devices. This change was possible not only through technological improvements such as more advanced batteries and more energy-efficient electronics, but also because of the higher density of cell sites to accommodate increasing usage. The latter meant that the average distance transmission from phone to the base station shortened, leading to increased battery life whilst on the move.
The second generation introduced a new variant of communication called SMS or text messaging. It was initially available only on GSM networks but spread eventually on all digital networks. The first machine-generated SMS message was sent in the UK on 3 December 1992 followed in 1993 by the first person-to-person SMS sent in Finland. The advent of prepaid services in the late 1990s soon made SMS the communication method of choice amongst the young, a trend which spread across all ages.
2G also introduced the ability to access media content on mobile phones. In 1998 the first downloadable content sold to mobile phones was the ring tone, launched by Finland's Radiolinja (now Elisa). Advertising on the mobile phone first appeared in Finland when a free daily SMS news headline service was launched in 2000, sponsored by advertising.
Mobile payments were trialed in 1998 in Finland and Sweden where a mobile phone was used to pay for a Coca Cola vending machine and car parking. Commercial launches followed in 1999 in Norway. The first commercial payment system to mimic banks and credit cards was launched in the Philippines in 1999 simultaneously by mobile operators Globe and Smart.
The first full internet service on mobile phones was introduced by NTT DoCoMo in Japan in 1999.