Second time lucky for licence auction

The UK Government is trying for the second time to sell off high-speed wireless internet licences, with the sale slammed by users.

The Government failed dismally to sell off most of the 42 wireless internet licences around the country in an auction late last year. The licences were designed to give companies high-speed broadband access without the need for new cabling.

However, user concerns that only the licences serving large urban areas would prove attractive to operators were proved right. The Government was left with over half of them unsold, most without even attracting bids.

The licences which were sold were barely over their reserve price. Instead of raising an estimated £1bn from the sale, the Government raised a paltry £36m, and over half the country was left without a wireless internet operator.

User groups such as the Communications Management Association (CMA) wanted the licences to be sold at modest prices in a 'beauty contest' auction, which would have seen bidders try to convince the Government that they intended to offer universal access that also covered rural areas.

In the second sale, the Government will allow operators to buy the remaining 23 licences for the undisclosed reserve prices. If more than one company wants to buy a specific licence, then there will be another auction.

CMA director general David Harrington said: "Whether the existing operators which have paid more for their licences will now be asking for a refund is anyone's guess."

Harrington said he believed the average reserve price could be around £2m. He described this as a "tax on broadband access" that the broadband economy, which e-minister Patricia Hewitt hopes will be flourishing by 2005, could have done without.