User groups slam broadband auction plans

The UK government will be turning its back on the interests of consumers if it goes ahead with its proposed auction of broadband spectrum for fixed wireless services, according to prominent user groups.

Both the Telecommunications Managers Association (TMA) and the Telecommunications Users Association (TUA) are concerned that the auction, planned for September, will follow the pattern of the third generation (3G) mobile auction earlier this year, which lead to huge sums being paid for licences. They argue that consumers will ultimately pay for these high prices.

Instead of the open-ended auction, which they say will delay the rollout of new services, the user groups propose an auction in which the government sets a minimum price and invites sealed bids above the price.

David Harrington, director general at the TMA, said: "This 'sealed bid' approach will prevent the huge spiralling costs we saw in the spectrum auction caused by companies adopting a macho, 'I can bid more than you' attitude."

Broadband fixed wireless access enables users to have faster and cheaper internet and multimedia access because it uses radio links instead of a telephone line. Expected services include high-speed internet and video on demand.

In April, the government announced that it will award three regional fixed wireless licences in an online auction to be held in September. Ecommerce minister Patricia Hewitt said awarding licences by auction ensures that they are taken up by those operators best placed to develop services more efficiently.

With the method proposed by the TMA and TUA, the successful bidder would pay an initial capital sum followed by annual payments. Companies which demonstrate that their entry into the market will enhance the development of the competition should be given precedence.

However, analysts have said they do not expect the auction to generate such huge bids as the spectrum licence auction, held earlier this year. Vodafone bid £5.96bn to win the most lucrative 3G licence.

John Matthews, an analyst at Ovum, said: "It is extremely unlikely that we will see those sorts of figures in this auction. The fixed broadband market is not as explosive market as the mobile market. This auction should be a much more sedate affair."

Companies which could be interested in bidding for the licences include Energis, Colt, Thus, MCI WorldCom and possibly new entrants from the US, said Matthews.