MPs warn of 3G mobile price sting

The Public Accounts Committee believes that 3G operators may have to merge to avoid going bust, and the subsequent lack of competition could mean price hikes for customers

Mobile phone users may pay excessively large bills if they upgrade to a third-generation (3G) phone, as a result of the amount of money mobile operators spent to win 3G licences.

The Public Accounts Committee published a report on Friday that warned that some 3G licence-holders may be forced to merge to avoid going out of business. This would lead to a lack of competition in the mobile market, and the committee fears it would give the remaining 3G operators the chance to sting customers.

"There may yet be further mergers or takeovers between the five licensees," said the committee. "It will remain important to ensure a competitive market if the consumers are not to be left with an excessive share of the high cost incurred by the companies."

The auction of five UK 3G licences took place in spring 2000. BT, Vodafone, Orange, One2One and Hutchison 3G paid a total of £22.5bn in order to fight off competition from other companies and win a licence each.

Although the government refuses to admit it, it is widely believed that these five companies paid too much. Analysts have said that this is very bad news for the mobile sector, and could hamper the rollout of 3G.

It is thought that some of the 3G licence-holders have been privately lobbying the government in an attempt to win some financial assistance or more generous license terms. There seems little chance of any of the £22.5bn being returned, though, as the chancellor of the exchequer, Gordon Brown, has already used it to pay off some of the national debt.

According to the department of trade and industry, though, 3G will still be a success in the UK.

"All of the UK operators are proceeding with the roll-out of their 3G networks and we expect that UK consumers will be among the first in the world to benefit from 3G services. The auction process brought a new entrant into the market, which will bring benefits to customers through increased competition and innovative services," said a DTI spokesman.

The public accounts committee recommended that 3G operators should share networks wherever possible, and also be permitted to trade 3G spectrum.

A recent government-commissioned report advised that spectrum trading should be permitted. The government has not yet publicly responded to this report.

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