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BT accuses government over 3G 'tax'

Argument over 3G heats up as BT launches bitter attack, claiming the auction process was nothing but a back-door tax
Written by Jane Wakefield, Contributor

Argument over 3G heats up as BT launches bitter attack, claiming the auction process was nothing but a back-door tax

In one of the harshest attacks yet on the hugely expensive auction for third generation mobile licences, BT Ignite's chief executive Alfred Mockett today accused the government of using the auction to tax consumers.

The 3G auction in the UK raised £22bn for government coffers which chancellor Gordon Brown intends to use to pay off some of the national debt. According to Mockett, the huge price paid by telcos in order to get their hands on spectrum has had an impact on the current slump in the telecoms market.

Mockett believes the auction was little more than an excuse for government to impose a backdoor tax. "It amounted to a pre-paid tax on consumers," he said at a keynote speech delivered at the annual Economist Telecommunications Conference in London.

"The auction was played in an artificial market and operators paid twice as much for licences than they would for building the networks. We were obliged to bid or face becoming a bit player in our own market. The cost of the licence was the cost of staying in business," Mockett said

He is sceptical about European governments' reasons for holding the auctions. "Which finance minister could resist the urge to retire the national debt in one fell swoop?" he asked. Across Europe the 3G auctions raised a total of £62bn, about half of which was spent in the UK and Germany, the first two countries to hold auctions.

Earlier this month consultancy group Northstream claimed that the five UK licence holders will spend a total of £16bn building 3G networks and with telcos feeling the pinch of the economic downturn there have been suggestions that bitter rivals will have to become friends in order to finance the network building.

The idea of network sharing is one that is endorsed by BT's Mockett. The EC's Information Society Commissioner Erkki Likkanen also agrees that network sharing may be essential to ensure a fast rollout of 3G services. But the UK government opposes the move, keen to see a variety of networks on offer in order to keep the market competitive. It has also rejected the idea of paying back some of the money spent on spectrum.

In the current climate Northstream predicts that at least one of the UK's five licence holders is bound to fail.

BT's attack comes on the day it acts to sort out its cumbersome £30bn debt, asking shareholders to stump up £5.9bn and offering yet another restructuring which will include the demerger of BT Wireless.

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