The story began at the end of the ‘70s at the Friedrich-Alexander University of Erlangen-Nuremberg, with the idea of sending music signals over telephone connections.
In 1987, the University of Erlangen-Nuremberg and Fraunhofer IIS joined forces in a research alliance as part of the EU-sponsored EU147 EUREKA project for Digital Audio Broadcasting (DAB). This yielded the first milestone: the LC-ATC codec (low complexity adaptive transform coding) that allowed for real-time encoding of stereo music.
Developing the OCF algorithm (optimum coding in the frequency domain) was a further milestone . OCF already bore many of the hallmarks of the future mp3 codec. With a few enhancements, the basic structure of the OCF was made into a feasible technique.
In 1989, the Moving Picture Expert Group (MPEG), an international standardization organization, was planning to introduce an audio standard, and OCF was put forward. MPEG received a total of 14 audio coding proposals, and the participants were encouraged to combine their contributions. This resulted in a total of four potential candidates, two of which were MUSICAM from the Institute for Broadcasting Technology IRT and Philips, and ASPEC (adaptive spectral perceptual entropy coding). ASPEC was the outcome of further improvements to OCF by Fraunhofer IIS in addition to contributions from the University of Hanover, AT&T and Thomson. Following exhaustive testing, MPEG proposed combining MUSICAM and ASPEC in establishing a family of three coding techniques: layer 1 would be a low-complexity variant of MUSICAM; layer 2 would be a MUSICAM coder; and layer 3 (later called mp3) would be based on ASPEC. The technical development of the MPEG-1 standard was completed in December 1991.