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Paying for the packet racket

3G network sharing will cut costs but not prices

Yesterday's deal between BT and Deutsche Telekom to share the cost and infrastructure of future mobile networks could cost the public dear and create a mobile network cartel.

The mobile telecommunication subsidiaries of BT and Deutsche Telekom plan to co-operate on building their 3G (third-generation) mobile phone networks, the companies announced yesterday, in an attempt to offset the enormous costs both companies have incurred in buying 3G licences.

There are situations where consumers will benefit from network sharing, for example to reach unprofitable, remote areas. But sharing network costs to save money will create a de facto cartel that cannot benefit the consumer to the same extent that full competition would, according to analysts.

"It will definitely translate into higher prices for the consumer," explained Michelle de Lussanet, an analyst at market-watcher Forrester. "It does not promote a very competitive market. In any situation where there are fewer players there are going to be higher prices [and] they're never going to compete to the same degree they would have done in an open market."

Also sharing mobile networks could lead to less than fantastic network quality. "With [GSM, the current mobile system] we see that high network quality is used as differentiator," said de Lussanet. "But if you're sharing then that's no longer possible – [there's] not so much incentive to raise quality."

Any firms that share networks will be under close scrutiny from telco regulators. "It creates a cartel, absolutely," agreed de Lussanet. "This is what regulators are extremely afraid of."

The two companies plan to share new and existing base stations, including sites, masts and antennas, in major urban areas. The companies also intend to co-operate on the initial building of their 3G infrastructure and to allow users to roam between their networks.

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