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Friday, 10 November, 2000, 13:01 GMT
New broadband auction begins
radio transmitter BBC
More of the radio spectrum is being auctioned
By BBC News Online internet reporter Mark Ward

The first round of bidding began on Friday in the next UK Government sale of part of the radio spectrum but it was cut short after one of the competing companies called for a recess.

Auction entrants
Broadnet UK
Chorus Communications
Energis Local Access
FirstMark Communications
Formus Communications
Norweb Telecom
Unica BFWA
Winstar Communications
This time entrants are bidding for the right to offer local high-speed wireless services to homes and businesses.

The auction, which is set to resume on Monday, is expected to raise up to 1bn for the government.

Although the sell-off will generate far less money than the third-generation mobile phone licence auction, some commentators are worried that the cost of the licences will be too much for some of the companies bidding.

In total, 42 licences for broadband fixed wireless telecommunications services are being auctioned.

Static points

The technology uses radio to offer high-speed net connections that run in excess of 2 megabits per second.

This is far faster than the data rates possible over third-generation (3G) mobile networks, and it might even be faster than the ADSL connections that BT and many other firms are starting to offer.

The technology goes by the name of "fixed wireless" because it uses radio to communicate between static points and does not let people roam like they can with a mobile phone.

Winning companies are expected to offer the high-speed services to businesses and homes in areas outside major conurbations that are too expensive to cable up.

High-speed ADSL services are not available to many people in these areas because they live too far away from local telephone exchanges.

Regional returns

For the purposes of the auction, the UK has been split in 14 regions and three licences are available in each region. In total, 10 companies are bidding in the auction, but only four are planning to bid for a licence in every region.

Since the original list of entrants was announced, two companies have dropped out.

In the auction for 3G licences, successive bids were faxed in to the Radiocommunications Agency which was overseeing the sale.

The fixed-wireless auction is much more complicated so the RA has set up a system that uses secure net links to accept bids.

To maintain the momentum of the auction, bidders have to keep up a minimum amount of activity in each round.

Small companies

There will be four to five rounds per day and the auction could last for weeks. A total reserve price of 78m has been set on the 42 licences. Regions expected to be more lucrative have a larger reserve price.

Each of the licences for London has a starting price of 4m; those in Northern Ireland are starting at 100,000. The auction could raise up to 1bn for the government.

There is renewed interest in the auction because of delays to the roll-out of high-speed ADSL connections and the time it is taking to connect customers.

Although the auction will raise far less than the sell-off of 3G licences, some fear that the price may be too high for some of the relatively small companies planning to bid.

Earlier this year, the Broadband Wireless Association wrote to the government warning that an auction may not be the best way to distribute licences and the high price could stifle the nascent market.

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