Second generation Digital networks

In the 1990s, the 'second generation' (2G) mobile phone systems emerged, primarily using the GSM standard. These 2G phone systems differed from the previous generation in their use of digital transmission instead of analog transmission, and also by the introduction of advanced and fast phone-to-network signaling. The rise in mobile phone usage as a result of 2G was explosive and this era also saw the advent of prepaid mobile phones

In 1991 the first GSM network (Radiolinja) opened 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.

Coinciding with the introduction of 2G systems was a trend away from the larger "brickle" phones toward tiny 100–200g hand-held devices, which soon became the norm. This change was possible through technological improvements such as more advanced batteries and more energy-efficient electronics, but also was largely related to the higher density of cellular sites caused by increasing usage levels. This decreased the demand for high transmission powers to reach distant towers for customers to be satisfied.

Personal Handy-phone System mobiles and modems used in Japan around 1997–2003

The second generation introduced a new variant to communication, as SMS text messaging became possible, initially on GSM networks and eventually on all digital networks. The first machine-generated SMS message was sent in the UK on 3 December 1992. The first person-to-person SMS text message was sent in Finland in 1993. Soon SMS became the communication method of preference for the youth. Today in many advanced markets the general public prefers sending text messages to placing voice calls.

2G also introduced the ability to access media content on mobile phones, when Radiolinja (now Elisa) in Finland introduced the downloadable ring tone as paid content. Finland was also the first country where advertising appeared on the mobile phone when a free daily news headline service on SMS text messaging was launched in 2000, sponsored by advertising.

The first data services appeared on mobile phones starting with person-to-person SMS text messaging in Finland in 1993. First trial payments using a mobile phone to pay for a Coca Cola vending machine were set in Finland in 1998. The first commercial payments were mobile parking trialled in Sweden but first commercially launched in Norway in 1999. 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 content sold to mobile phones was the ringing tone, first launched in 1998 in Finland. The first full internet service on mobile phones was introduced by NTT DoCoMo in Japan in 1999.