Bidding in the Government's auction of "third generation" spectrum licences for mobile phones has now reached over £16bn. But good news for the Treasury may mean bad news for users on prices and availability of services.
The auction was expected to raise at least £2.5bn, but, because the bidders are paying so much for their licences, there is concern that they will have to increase their charges to pay for them.
Andy Peck, marketing strategy director of Smith Group, which advised the Government on the auction, said, "The value of the bids has surprised everyone. We calculate that the winners will have to recoup £2,000 to £3,000 off each customer, to pay for their bids and build their third generation networks."
Peck added, "People expect to pay a premium for mobile Internet, but not 0898 costs just to check a train time, so there should be concern about the costs which will be levied by the operators."
On changing suppliers, Peck said users should sit tight for now, as the auction winners may not have true third generation services on offer until 2003. He said enhanced data services would first come with General Packet Radio Service (GPRS) over existing GSM networks.
The Telecommunications Managers Association (TMA) expressed concern that the chancellor Gordon Brown did not do enough in his budget to encourage suppliers to build better technology networks.