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Britain's 3G bill could top £50bn

Analysts calculate that the extra cost of building a 3G network and then subsidising the handsets will be more than the £22.5bn paid for the licences
Written by Graeme Wearden, Contributor

A year after spending between £4bn and £6bn each acquiring a 3G licence, the five network operators who hope to bring third-generation Internet services to the UK have been warned that the total bill could top £50bn.

According to consultant group Northstream, which specialises in wireless technology, the five UK licence-holders will have to spend a total of £16bn to construct a 3G network. They have already been roundly criticised by analysts for paying £22.5bn for the licences, with some suggesting that this threatens the future of telecommunications in Europe.

Northstream carried out its research for Business AM, and chief executive Bengt Nordstrom told the paper that there would be a proliferation of new mobile masts across Britain as 3G is rolled out. "If everyone builds their networks according to their current plans, Britain would look like a pincushion from above," he said.

Network operators are already being advised to share 3G infrastructure, and therefore cut costs. BT Wireless is understood to have initiated talks with other mobile operators about this, and the UK Government is keen on the idea.

Northstream also warns that the expense won't be over once the networks are constructed.

Mobile companies claim that 3G, with its constant high-speed Internet connection, will deliver compelling new applications to mobile phones such as fast full-colour Web surfing and video-conferencing. But Northstream warns that the expense won't be over once the networks are constructed, and that there will be a big marketing bill.

The rapid growth in mobile ownership in the UK is partly due to the generous subsidies paid by the network operators to encourage people to buy a handset -- a policy which has recently been cut back as the companies try to make more money from their users. Northstream believes that similar subsidies will be needed for 3G, and that this could cost £12bn or more -- pushing the combined bill for licences, network and marketing over the £50bn level.

Northstream don't suggest a figure for the total worldwide cost of 3G. With the bill for buying 3G licences in Europe nudging £90bn, the total bill could be truly massive. However, this doesn't necessarily mean that 3G will be an embarrassing failure, as some analysts claim. The UMTS Forum published a report late last month that estimated that revenues from third generation mobile phone services could net over £200bn per year for telecom operators around the world by 2010.

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