The UK government's handling of the sale of 3G licences has been vilified by experts who have predicted that the cost of the services will rocket.

The attack came from US technology guru and industry analyst Professor Nicholas Negroponte as he slated the UK over the auction process which led to revenues of £22.5bn. He said that as companies strive to recover their investments, research and development funds would be redirected and technical innovation stifled.

Labelling the prices paid for 3G licences "a disaster", he urged other countries not to follow the UK's example, as such a tax on internet technology was "unsustainable", and said that the likelihood of costs being passed onto users meant the UK was "screwing its children and grandchildren".

Negroponte said that the cost levied against next-generation developers had no value associated with it because there are "no new products or infrastructure". He said this amounts to an indirect tax on future technology of more than £650 per subscriber.

Dale Vile, a Bloor Research analyst, said in a report that although the five players who won the auction - Orange, BT, One2One, Vodafone and TIW - acquired a 20-year licence, they will not want to wait 20 years to see a return on their investment. He added that their only route to cost recovery would be "front-end loaded, which will almost certainly lead to substantial charges being passed on to users in the short to medium term".

Even if the £650 per subscriber overhead were spread over the 20-year period, amounting to a monthly £2.70 per subscriber, "this does not take into account the cost of money or the usage ramp-up curve", said Vile.

He added that financial analysts at Close Brothers had calculated that average revenues per user would need to be at least £100 per month for companies to see a return.

The Department of Trade and Industry said it was often accused of letting licences go too cheaply. "This time we decided to let the industry itself put a value on them," said a spokesperson.

First published in Network News