It is a truth universally acknowledged that, ahead of tomorrow's Budget, Mr Charlie McCreevy has more money than he knows what to do with. No one would suggest, however, that he should go onto the street, find a wealthy businessman, and give him a large chunk of the Budget surplus. Yet that, in another context, is precisely what the State seems set on doing.
With very little debate, an immensely valuable State asset is about to be given away to a few corporations. We are, it seems, so dazzled by the huge sums that the State has to spend that we are happy to give some lucky billionaires the equivalent of about £500 for every woman, man and child in the country.
This astonishing act of charity to needy corporations arises from the development of faster, more sophisticated mobile phones with a much better Internet capacity.
The emergence of so-called third-generation mobile phones requires a new set of licences. In most of the major European economies, these licences have been auctioned off, producing huge amounts of money for governments to spend on social services or on reducing their national debts. Telecom companies have been willing to pay vast sums for the licences because they reckon the market will be very big and very profitable.
In Germany, the auction raised over €50 billion, in the UK, €36 billion. Even in Italy, where the auction was widely condemned as a fiasco, the public purse benefited by more than €12 billion. Breaking down these figures into the money earned per head of population, they range from €210 in Italy to €614 in Germany. These figures suggest the Irish licences should be worth at least €500 for everyone in the State.
Astonishingly, there is to be no auction here. In July, the telecoms regulator, Ms Etain Doyle, announced that companies will compete for third-generation mobile phone licences through a "beauty contest" rather than an auction . She said she had opted to allocate four third-generation licences "on merit" rather than to the highest bidder. 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 affect prices for consumers, she added.
This means that the four licences will simply be awarded to the lucky corporations at a fee to be set by Ms Doyle and Mr McCreevy. At the time of Ms Doyle's announcement, analysts suggested the fee would be at most £100 million. Yet even this bonanza does not seem to be enough for the telecoms industry. Mr Oliver O'Connor, an adviser to Eircell, argued on this page recently that the appropriate licence fee would be - wait for it - nothing at all. Zero, zilch, nada. We should just take a public asset worth about £2 billion and transfer it into private hands free of charge.
No one doubts that Ms Etain Doyle made her decision in what she believes to be the public interest. Her argument is that, if companies have to pay high prices for the licences, they will charge high prices to consumers. The problem with this argument is that it assumes the converse is also true - companies getting the licences cheaply will charge low prices. I can't think of a single economist who would buy this argument for a minute.
Companies charge the highest prices they can get away with. A good analogy would be to suppose that you paid £50,000 for your house, which is now worth £250,000. You're going to rent it out. Do you charge one fifth of the market rent because you were lucky enough to buy the property at a relatively low price? The telecom companies in Ireland will charge something close to what they're charging in the UK, where they've paid billions for the licences.
And we don't even need to look outside the Irish telecoms market to know why the decision not to auction off the licences is misconceived. When the last mobile phone licence was being awarded, the cost was kept low, supposedly to prevent big multinationals from slapping big bids on the table and muscling everyone else out of the way. Esat Digifone got the licence. What happened? British Telecom bought Esat for two billion. A big multinational ended up with the licence anyway, and Mr Denis O'Brien, rather than the Exchequer, got the true value of the asset that had been given away so cheaply.
There is another dimension to all of this. Public confidence in the process of awarding licences to business interests has been shaken by the revelations about Century Radio emerging from the Flood tribunal. While no one questions the integrity of the telecoms regulator, a straight auction, with the licence going to highest bidder inspires a lot more confidence than a "beauty contest" in which the criteria, however well drawn, will always be somewhat subjective.
Unless there is an auction, what we will get is a simple transfer of a communal asset - a part of the electromagnetic spectrum - into private hands for vastly less than it is worth. If this is allowed, we are either so smug that we can think of nothing to spend two billion pounds on or so demented by the cult of wealth that we are willing to fork out as much money as Mr McCreevy will give away in the Budget tomorrow just to create a few more billionaires.
fotoole@irish-times.ie