Telecoms regulator Ms Etain Doyle changed the format of the competition for third generation (3G) mobile phone licences after she was warned of possible legal action by operators.
Consultation papers released yesterday by the regulator's office show Esat Digifone warned that her proposals left the competition open to legal action by unsuccessful applicants.
The competition is due to start early next year for the issuing of four 3G licences offering high speed Internet access over mobile devices.
Digifone singled out the director's plan to judge operators in the competition, in part, on their willingness to allow virtual mobile operators access to the networks of licence holders as liable to challenge.
Virtual operators, such as Imagine or Virgin Mobile, do not own a licence or an extensive network but instead buy airtime and piggyback on existing networks.
The Digifone report attacked the regulator's virtual mobile operator plan as "significantly and fundamentally flawed" and warned the director that legal action could delay the deployment of the technology.
"The director should expect that the unsuccessful applicants . . . will rely on the inclusion of these selection criteria as a basis on which to challenge a licence award."
The director subsequently changed her plans and decided not to make access for virtual operators part of the selection process for all four licences on offer.
Earlier this week she decided to allow telecoms companies to bid for two different types of licence in the competition, which is due to begin early next year.
One of the licences on offer, type A, will contain the proposals to make access to virtual operators part of the selection criteria. Extra spectrum will be made available to an operator choosing this route.
However, the willingness to accommodate virtual operators will not be a factor in the selection process for the three remaining licences.
Budget Telecom and Worldcom both strongly supported the plans of the regulator to support virtual operators.
The regulator would not release Eircell's consultation document, which was signed confidential.
