NETWORKS: A €300 million Government plan to subsidise the building of fibre optic networks in towns outside Dublin could derail the upcoming competition to award third-generation (3G) mobile phone licences. It also amounts to an unwitting cross-subsidising between two competing sectors of the telecoms industry, several leading mobile phone companies have claimed.

Vodafone, Digifone and Meteor have joined forces to lobby on the issue and called for an urgent review of the State's broadband policy, which was unveiled last week by the Minister for Public Enterprise, Ms O'Rourke.

This three-phase plan, which was developed by an interdepartmental review group comprising members of several Government departments, would part fund the rollout of €300 million fibre networks in 123 Irish towns with a population in excess of 1,500.

The first phase is already under way with the announcement of a €60 million project involving local authorities in 19 towns from Donegal to Wexford to Clonmel. The town links will facilitate consumers, educational establishments and businesses with "always on", low-cost, high-speed internet services.

But the mobile firms, who prepared a joint paper to deliver to the interdepartmental telecoms infrastructure workshop, believe the plan has an almost exclusive focus on the fixed telecoms sector. They are also angry at what they describe as a disjointed Government policy that will see the Department of Finance reap a €394 million windfall from the sale of 3G licences while the Department of Public Enterprise offers grants worth millions of euro for infrastructure that will benefit fixed-line operators.

"The Government approach represents a potential unwitting cross-subsidising between two competing sectors of the telecommunications industry," Vodafone Ireland chief executive Mr Paul Donovan said yesterday.

"Such a policy could render uneconomic certain investments in wireless technology in favour of a competing technology. Moreover, it could serve to derail the third-generation licensing competition," he added.

The competition to award four 3G licences - which will enable operators to offer innovative multimedia services to mobile handsets - will begin at the end of March. The Government hopes to raise €394 million over 15 years from the sale, although it is not certain if the licences will be popular following the downturn in the global telecoms industry.

"Vodafone has already flagged its concerns about the 3G licensing process and has questioned whether Ireland can sustain four or five network operators given the significant amount of network investment required and the onerous rollout conditions of the licensing process," Mr Donovan said.

"Will the Government step in when these networks are half-built and the money has run out to subsidise the costs of finishing them? . . . We urge a significant review of this policy to include equal consideration of wireless as a potential gap-closing technology."

A Department of Public Enterprise spokesman rejected these criticisms and said the subsidised networks would be available to all mobile operators.

"We see it as useful for 3G licence holders to roll out their networks and use it as backhaul capacity," he said. "No one telecoms company will be able to monopolise this infrastructure as it will be managed by an independent broadband broker.

"The advice from the Infocomms advisory committee was that we needed to invest in fibre quickly. We think that supply will prompt demand in these towns."

But some independent telecoms experts have sympathy for wireless operators, who are major competitors of fixed-line telecoms operators.

Mr Harry McDermott, director of Mason Communications, said there was an element of justification in their claims regarding the finances. "Mobile operators will have to fund their networks without subventions from the State, in comparison to fixed networks who can apply for grants," he said. "However, their claims are a bit overstated as fibre networks can offer capacity way above what is currently possible with 3G networks, so its difficult to argue against the subvention.

"There are also different types of applications for each technology, and the high bandwidth applications delivered over mobile will not be undermined by metropolitan area networks."