The intervention of the European Commission held up the competition for the second mobile phone licence. Colm Keena reports
When the then minister for transport, energy and communications, Mr Michael Lowry, announced the competition for the State's second mobile phone licence in early 1995, he said the price of the licence would be set by the market.
This did not turn out to be the case, and how this change came about is one of the matters which will be heard in evidence during the public sittings of the Moriarty tribunal.
Although Mr Lowry said the level of the fee would be decided by the market, he also said the awarding of the licence would not be an auction. The main criterion would be the ability of the applicant to develop the market.
The opening up of the telecoms market was a European Union project. In his statement to the Moriarty tribunal, the former secretary of the Department of Transport, Energy and Communications, Mr John Loughrey, said the Department knew in 1994 that the European Commission was against high fees, and especially high fees which were not charged to the incumbent mobile phone operator.
In other words, the Commission believed that charging a fee to the winner of the licence, without charging a fee to Eircell, the incumbent operator, would be unfair. However, Mr Loughrey also said the Department of Finance wanted the maximum possible return from the new licence.
An aide-memoire on a second mobile phone licence presented to the government by the then minister, Mr Brian Cowen, in November 1994 had favoured not burdening the new entrant to the market with a high entrance fee. It was felt that this would lead to higher consumer charges and less real competition.
When the rainbow coalition government picked up the issue after the collapse of the Fianna Fáil-Labour coalition, Mr Lowry and the minister for finance, Mr Ruairí Quinn, discussed the pricing of the new licence. No final agreement was reached, but figures subsequently produced by the Department of Finance were predicated on the State getting £25 million from the licence competition, according to Mr Loughrey.
When Mr Lowry announced the competition for the State's second mobile phone licence, he set Friday, June 23rd, as the deadline for applications.
On April 27th, 1995, the European Commissioner responsible for competition, Mr Karel van Miert, wrote to Mr Lowry setting out the Commission's view on the matter of fees. He said that charging a fee to the new entrant without charging the same fee to the incumbent operator was a distortion of competition. This exact matter, he said, had led to infringement proceedings being opened against Italy.
According to Mr Loughrey, this letter from Mr van Miert led to the licence competition being put on hold. Negotiations between the Commission, his Department and the Department of Finance ensued. Mr Martin Brennan, the civil servant who chaired the project group which assessed the six submissions received for the licence, told the tribunal in his statement that Mr Lowry was not involved in resolving the issue.
He also said Mr Lowry was "furious" about being put in a position where the competition process had to be halted.
The result of the negotiations which followed Mr van Miert's letter was an agreement that the new licence would cost £15 million and that Eircell would have to pay £10 million for the licence it already had. A new deadline was then set for the competition. Friday, August 4th, at noon.