Excessive fees levied for third-generation mobile licences and a fragmented legal and regulatory market threaten Europe's lead in wireless technologies, according to the European Information Society Commissioner.

Mr Erkki Liikanen, who spoke at a Chambers of Commerce of Ireland briefing in Dublin yesterday, believes it will be at least three or four years before Europe becomes a global competitor in all forms of Internet access.

"As far as broadband is concerned the US has a clear lead; as far as Internet access is concerned there is a difference of about a year-and-a-half," says Mr Liikanen. "Their penetration rate is about 40 per cent while ours is about 28 per cent. In the mobile area we are stronger."

But Europe's lead in wireless technology is under threat following a series of competitions to award third-generation mobile licences, which will raise at least #130 million from telecoms operators.

Third-generation mobile technology will enable operators to offer a range of high-speed Internet and multimedia services to mobile handsets at speeds many times faster than conventional phones.

But concerns about the effectiveness of third-generation technology, the expense of rolling out these networks and growing doubts about the public's willingness to pay extra for these services has plunged the telecoms industry into crisis.

"Licence costs are high [in Europe] so if you compare the position to Japan, which is Europe's main competitor in wireless and where the licences were given out for free, then that gives a competitive advantage to their companies," says Mr Liikanen.

The situation for several European telecoms operators such as British Telecom, which is saddled with about £30 billion sterling in debt, is so bad that several companies could face bankruptcy, severely undermining Europe's wireless ambitions. Mr Liikanen, however, has other ideas and may make his mark as saviour of Europe's telecoms operators. Last week he launched a dialogue between member-states, telecoms operators and the Commission, designed to facilitate the roll-out of third-generation networks.

Several commentators believe the Commission is privately urging member-states to defer third-generation licence payments as a means to promote a speedier roll-out of the technology. But throwing a lifeline to companies that willingly pledged such high prices could prove legally and politically difficult.

"What the Commission can do is dependent on the legal competence that we have," he says. "The rights to licences were given to the various member countries. So we should look case by case at what kind of constraints the licence conditions put in that context."

Mr Liikanen has proposed that operators should be allowed to share infrastructure and networks to reduce roll-out costs, although this raises some competition concerns and may increase prices for consumers.

"There we are open, positively open," he says. "But we must respect competition principles so there cannot be abuse of dominant positions. From a consumer point of view the big question here is that there is service for all."

It has been reported that the Commission will urge the European Investment Bank to invest in the roll-out of third-generation technology and Mr Liikanen does not completely dismiss this suggestion.

"The European Investment Bank is an independent bank and has been investing in the development of infrastructure in telecommunications in Europe and of course we think the whole information communications technology sector is important," he says.

"If the Bank continues to invest in that [technology and telecoms infrastructure] we would find that a positive factor of course, but they have their own rules and principles."

The debate over third-generation licence fees is particularly appropriate in the Republic, where Minister for Finance, Mr McCreevy, and telecoms regulator, Ms Etain Doyle, remain at loggerheads over the proposed fees to charge for third-generation mobile licences.

Ms Doyle favours a much lower fee to encourage more companies to apply for licences, while Mr McCreevy is keen to maximise the amount that the licences can generate for the Exchequer.

However, such differences may be academic, according to Mr Liikanen.

"The market conditions have changed so these peak prices will not be seen no matter what the form of the contest, whether it's an auction or beauty contest," he says. "It's now for the Irish authorities to judge on the basis of this experience what is best for the sector but it is clear that these prices will not be achieved anyhow."

Under new proposals promoted by Mr Liikanen, such decisions may rest with the Commission rather than national regulatory authorities or local politicians. A series of proposed laws, which were debated in Luxembourg last week by national ministers, would enable the Commission to overrule national regulators.

"I would push for the Commission to have this power It's important to have a more coherent internal market. The fragmentation of the market has been the real problem - it creates uncertainty and is a burden for the investors.

"We've got to get the regulatory conditions right to get a strong market. There are 15 different ways to decide licence fees, licence conditions vary and even the internal market is fragmented. This increases costs."

It is understood the Commission is also keen to gain powers that would enable it to step in if it thought that telecoms prices were too expensive or services were inadequate in certain countries.

Several national governments and regulators are resisting these proposals, but the European parliament is supporting the move, which could strengthen Mr Liikanen's position.

The standardisation of European regulatory powers across the 15 states is central to a three-pronged approach that Mr Liikanen believes is important to lay the foundations for the success of the e-Europe initiative.

Promoting investment in research and technology (particularly in third-generation and e-content areas) and unbundling the local loop will also form much of his platform for the remaining three-and-a-half years in the position.

Mr Liikanen recently launched a European initiative to encourage the telecoms and Internet industry to develop multimedia services to support the creation of digital content. The Commission has set a deadline of June 15th for initial proposals.

Content becomes of prime importance in the Internet age because that is where you do business, explains Mr Liikanen.

The e-content programme has a #100 million budget and will particularly support initiatives in areas that support access to public sector information, multilingual or multicultural content for third-generation, Internet or broadcasting.

Mr Liikanen is best known for promoting the process known as unbundling the local loop or enabling competitors to access local telecoms networks. Last year, the Council of Europe agreed to a regulation making it mandatory in all member-states by January 1st.

But the process, which is intended to encourage telecoms operators to provide innovative broadband services such as high- speed Internet and multimedia services, faces strong resistance from incumbent operators including Eircom.

There has not been enough movement yet, admits Mr Liikanen.

"Some countries are moving faster than others, but still we must get an answer on prices for every single country and then agreements on co-location in practice to happen.

"There are four countries where everything is moving rather smoothly, seven where there has been an agreement on prices, but it is a process everywhere."

The Commission is expected to publish a report on the process of unbundling the local loop shortly for all member-states.