Telecoms operators will compete for third generation mobile phone licences through a "beauty contest" rather than a UK-style auction, which may have resulted in high prices for consumers, telecoms regulator Ms Etain Doyle has decided.
Ms Doyle said yesterday she had opted to allocate four third generation licences on merit rather than to the highest bidder - as a means of keeping down costs for consumers. One licence would be reserved for a new entrant to the market to boost competition, she added.
Third generation or 3G mobile telephony offers connection speeds up to 200 times faster than current rates. This enables mobiles to download data at much quicker rates than on second generation or GSM phones.
Ms Doyle said a beauty contest was the best way to ensure the delivery of competitive prices, choice and quality. A UK-style auction which generated high fees might impact on prices for consumers, she added.
The decision means telecom companies seeking to provide 3G services in the Irish market will not have to pay huge fees, estimated by analysts recently at about £500 million per licence, and the exchequer is unlikely to benefit from a huge windfall.
Ms Doyle said the price of the licences would be set in the autumn and would reflect international comparisons and further consultation with the industry and the Department of Finance.
Under the legislation the Minister for Finance, Mr McCreevy, must give consent to the proposed cost of a licence put forward by the regulator.
But Ms Jemma Houlihan, analyst with ABN Amro, said the maximum operators would have to pay per licence was probably £100 million, taking into account international practice and the population of the Republic. She said an additional £200 million would be required to roll out a network for the new technology.
The decision to proceed with a beauty contest was welcomed by many domestic telecoms operators. Esat and Eircell both argued strongly against an auction in consultation documents submitted to the regulator. Ms Doyle's decision is likely to strengthen the hand of the incumbent operators, who already have extensive networks, in their bids for new licences.
The Eircell submission noted the "excessive bidding" in the UK auction and claimed that one operator, BT Cellnet, a sister company of its arch rival Esat Digifone, had overbid for licences to raise the costs for competitors.
Several companies operating in the Republic have expressed an interest in obtaining the new licences, including Princes Holdings, MCI Worldcom and NTL:.
However, some of the big telecoms operators already holding third generation licences in the UK such as Orange and Vodaphone could express an interest in the Republic, according to Ms Houlihan.
"It would make sense because of the high volume of telephone traffic between the UK and Ireland," she said. "It would enable them to provide economies of scale."
Ms Doyle said the benefits of a "beauty contest" were that factors to encourage competition could be included as part of the selection criteria. She said these would include roaming on existing networks, reselling airtime and virtual network operators.
A pre-qualification round is to be included to ensure that the licences were awarded to the strongest players, said Ms Doyle. She said the timetable to award the licences would be delayed by two to three months. This should be completed in early 2001.
To help to free up existing spectrum to make way for 3G services, the existing 088 analogue mobile phone network, which has 90,000 subscribers, will cease operations between 2002 and 2003.
