The dispute is threatening to wreck the Government's plans to make Britain the first country in the world to introduce the new mobile phones, which will be able to show live videos and access the Internet at high speeds. It also means the Treasury will have to wait longer than expected for the estimated pounds 1.5bn the auction is likely to raise.
The row, which is threatening to turn into a fully fledged trade war between the US and Europe, centres on rival technological standards that have been developed for the phones. The first, called W-CDMA and produced by Ericsson, has been adopted by the European Telecommunications Standards Institute, the industry body.
However, Qualcomm, the aggressive US manufacturer, claims it owns the intellectual property on which W-CDMA is based. Qualcomm is promoting a rival standard, called CDMA2000, which it argues is further advanced.
The outcome of the debate will decide whether the US and Europe will adopt incompatible standards or whether the phones will be able to work in both continents. Mobile phone operators in the UK are reluctant to take part in the Government's auction until the row is cleared up. "It's clear that we aren't going to commit to bidding until we fully understand what the standards are," one operator said yesterday.
The Government had been hoping to invite bidders early next year before holding the auction in May or June. But that timetable now looks optimistic.
Yesterday Dr Pekka Tarjanne, secretary-general of the International Telecommunications Union, the global industry body which has the final say on standards, said a compromise could be thrashed out by the end of March.
"I am optimistic we can see convergence towards one global standard. Some understanding has been shown of the need to have a framework," he said.
However, he was contradicted by Sven-Christer Nilsson, chief executive of Ericsson, who said: "I don't think we will see a full convergence of standards. But we will see a way of existing together and permitting both standards."
This puts Ericsson on a collision course with Qualcomm, which will only release its patents if a single, compatible standard is agreed. "We will only license for a converged standard," said Bill Bold, Qualcomm's vice- president in charge of government affairs.
Ericsson claims its technology does not infringe Qualcomm's patents, and is planning to bring the matter to the courts in April next year.
Meanwhile, the issue is in danger of spilling over into a trade row between the US and Europe. Charlene Barshefsky, the US trade representative, warned earlier this year that she would invoke the World Trade Organisation if European manufacturers appeared to be protecting their markets by adopting different standards.Reuse content