Outlook: Why not a mobile phones free-for-all?

THE GOVERNMENT is getting itself into a right old pickle over licences for the next generation of mobile phone networks, known in the industry at UMTS. Already it has delayed the licencing process once and now there is every prospect of the new technologies becoming bogged down in lengthy court room litigation.

This is highly damaging. Finland, the spiritual home of mobile telephony, has already doled out the new licences and other European countries are chasing hard. By dragging its feet, Britain loses first mover advantage in one of the world's fastest growing industries. Furthermore, since the next generation of mobile technology is so much more advanced than existing networks - offering reliable internet access, televisual functions and all sorts of other whizzo things - failure to roll out the new networks as rapidly as others might lead to a more general loss of economic competitiveness.

As we report opposite, One2One is seeking a judicial review of the so called "right to roam" - the stipulation that if any of the existing four mobile phone networks apply for a new licence they must allow other licencees to use their infrastructures to connect customers, at least in the early years.

Unsurprisingly, this is seen as deeply unfair by existing operators. In essence, they are being asked to cross subsidise newcomers, who with a quite limited initial investment outlay would have the opportunity to cherry pick lucrative mobile markets like London and other cities while still having access to the national networks built by others.

This might just about be seen as reasonable with the two earliest mobile operators, Vodafone and Cellnet. They have already made a great deal of money out of their initial duopoly and it could therefore be argued that to demand they subsidise new entrants in the interests of greater competition is not unduly oppressive. But the two later entrants, Orange and One2One, have yet to turn a penny's worth of profit and for them it seems a bit rough. All four in any case believe the right to roam would be an infringement of their licences.

Both the DTI and Oftel believe right to roam to be essential if new entrants are ever to catch up with the existing incumbents and provide a competitive spur to lower prices. Moreover, they think that without it, there is a real danger new entrants won't apply for the licences at all. This may or may not be right. The cost of building a national network from scratch could be anything up to pounds 2bn, according to industry estimates - a tall order for entrepreneurs but not much more than small change for Deutsche Telekom and other elephants thinking of throwing their hats in the ring.

However, as ever with governments, there is a large element of double talk here. At the Treasury's insistence, the DTI is planning to auction the spectrum needed for these licences in a process that could yield between pounds 1bn and pounds 2bn for the Exchequer. This, it has to be said, is a rather bigger deterrent to new entrants than the risk of building a new national network from scratch, amounting as it does, to a tax on these businesses that will inevitably be passed on to the consumer.

There is no good reason why the airwaves should be auctioned in this way. They don't belong to the Government nor are they a scarce resource that needs to be rationed. Indeed there is a quite reasonable case for saying the licencing process should be abandoned altogether, allowing a giant free for all. Technically this would be quite feasible. It would also allow for a very rapid, unregulated introduction of the new technologies.

Are ministers brave enough to opt for this daring but enlightened approach? Unfortunately this seems rather unlikely. It is not just the prospect of pounds 2bn of auction proceeds which says they won't. It is also the misguided belief that new industries and technologies have to be regulated and licenced, so that the politicians can meddle and bend them to their public policy ends. It scarcely needs saying that economically the effect is rarely anything other than harmful.

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