Users will pay for inflated 3G bids

The race to secure a next-generation mobile phone licence could harm the UK's position as a leading information society, warns telecoms and IT consultant Ovum.

The company also said bids in the UK's government's third generation (3G) licence auction, which have reached £18.5bn so far today, are too high and consumers will pick up the cost.

The 3G auction has so far raised more than five times what the UK government expected and there are fears that operators will have spent so much on licences that they will not be able to afford the cost of building networks.

Ovum analyst Andrew Parkin-White said: "My original estimate for the total bids was £3.2bn. With such large bids the end-user price will be high. Licences are now costing more than businesses can allow and are greater than network building costs."

Ovum said the current dotcom frenzy is to blame for driving the bids so high, but predicts that the race to win the licences will be over "within a week or 10 days at the most".

The consultant also warned consumers that many emerging technologies, such as Wap and 3G, are overhyped and predicts that many users will feel disappointed and let down with services.

Ovum analyst Mary Ann O'Loughlin said: "It is not realistic to think the internet can be replicated on to the mobile. Many services will fail to match consumers hopes and we expect there will be a backlash when they can't do what they had hoped."

After Round 121 of the auction, TIW, owned by Dolphin and WorldCom, is leading the bids for Licence A with £3.91bn. Vodafone is leading B, the licence with the most bandwidth, with a £4.5bn bid. Telefonica is leading C with a £3.4bn bid. NTL leads D with £3.3bn and Orange leads the bid for E with £3.4bn.