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 recent third-generation (3G) rush. "This is just real estate in the sky," he said. "These companies will have to charge sky-high prices."

A spokesman for the Telecommunications Users' Association condemned the licence auctioning and said a "beauty contest" would allow companies to put forward details of their plans.

"It is the [UK] 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.

Eddy Murphy, a research analyst at Analysys, 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, government 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 government. However, the Treasury can expect at least £78.3m from the process.

First published in Network News