The auction for 28Ghz Broadband Fixed Wireless Access (BFWA) licences will start on 5 September, amid fears that ballooning bids will push the price of the service sky-high and discourage take-up.

Bloor Research analyst Matt Hanrahan warned that carriers may over-bid for the licences in a repeat of the 3G rush. "This is just real estate in the sky. These companies will have to charge sky-high prices."

A spokesman for the TUA condemned the auctioning off of licences and said a "beauty contest" would allow companies to put forward details of their plans. "It is the Government's duty to encourage the rapid development and deployment of BFWA, not by imposing an indirect tax on the industry - which will inevitably be passed on in the form of inflated prices to consumers - but by adopting a benign regime for the allocation of spectrum," he said.

Research analyst at Analysys, Eddy Murphy, warned those bidding for licences that price would be the most important selling point.

"There may be other stumbling blocks for companies such as security or the inconvenience of having an antenna installed, but it will depend on the price at which the service is offered," he said.

Kim Howells, Minister for Competition and Consumer Affairs, claimed that the auction provided "a fast, transparent, fair and economically efficient way of allocating the scarce resource of radio spectrum".

A spokeswoman for the Department of Trade and Industry said that an auction would allow the market to determine the right price for the licences.

"I don't think you can compare it to 3G and we're not expecting the proceeds to be anywhere near that figure," she said.

Reserve prices range from £4m per licence in London, with all other licences costing at least £1m, except for Northern Ireland which will cost just £100,000.

Each licence will last 15 years and have a bandwidth of two times 112Mhz.

The Government has also added 'use it or lose it' conditions which mean that operators have to offer services to 10 per cent of local units by the end of June 2002.

Bids are not expected to reach the levels of the 3G licences, which netted £22.5bn for the UK Government. However, with bidding in different regions costing anything from £4m down to £100,000, the Treasury can expect at least £78.3m from the process.

See also:

Radio spectrum auction delayed

The UK government has decided to delay the fixed wireless radio spectrum auction, which was due to begin next Monday, to allow it to review applicants in more detail.  10 Oct 2000

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