Consumers will have to wait at least two years and probably longer before they will be able to use third generation (3G) mobile services in the Republic. Although the competition to award four 3G licences will begin shortly, there is little appetite among providers for a speedy introduction of the technology.
The cost of building networks and buying licences around Europe has plunged mobile firms heavily into debt and undermined their efforts to deploy experimental new technologies.
Operators have launched 3G in Japan and the Isle of Man but technical glitches have marred the introduction of services to consumers. Mobile operators here have not even begun to offer GPRS services (general packet radio service) - the forerunner to third generation technologies. During the dotcom boom, the delivery of multimedia services such as video conferencing on mobile devices fuelled huge interest in the mobile industry. But the bursting of the dotcom bubble and a credit crunch for telecoms firms has fundamentally changed the 3G landscape.
The structure of the competition to award four 3G licences here reflects these new realities by proposing significantly lower fees than previously expected and introducing a series of incentives to ease the burden on mobile firms.
Initially, the Minister for Finance, Mr McCreevy, had expected to net a windfall from the sale of the licences. However, the competition announced yesterday will net a combined total of just £310 million over a 15-year period. Mobile companies will pay just £115 million in upfront payments before the introduction of a moratorium to allow them finance the construction of networks.
Despite leaks to the media which tended to downplay these deferred payments, the competition structure represents something of a victory for Ms Etain Doyle, the telecoms regulator, in her year-long dispute with Mr McCreevy. She has persistently argued for lower licence fees to attract a fourth operator into the Irish market. Deferring payments over 15 years will significantly reduce the cost to firms.
By applying an industry standard 9 per cent discount to the deferred payments, the real cost to operators will be just £21.6 million for licence A and £58.1 million for each licence B. This is equivalent to a per capita cost of £52, a figure comparable to other EU states such as Denmark. However, it should be noted that the Department of Finance typically uses a 5 per cent discount rate.
Ironically, if the competition had been staged as first intended in early 2001, the Exchequer may have netted significantly more cash upfront. The one-year delay may also result in an embarrassing official censure from the European Commission, which is seeking the award of all 3G licences before January 2002.
The competition structure will also encourage network infrastructure sharing to cut the huge costs of rolling out a 3G network. The licence duration has also been extended to 20 years and companies will not have to provide widespread services until 2005/06. Initial reactions from mobile operators to the proposed charges were negative but, significantly, no operator has ruled itself out of the competition. Several international players may also be interested, including Orange, Hutchison Whampoa and Vivendi.
The ESB, which has a customer relationship with most householders and an extensive network of sites, is another strong candidate.
One of the more intriguing aspects of the competition will be whether operators decide to bid for Licence A - which is cheaper but includes extensive roll-out requirements of 80 per cent national coverage - or Licence B, which is more expensive but allows operators a phased roll-out to just 53 per cent of the population by 2008.
