The Supreme Court has begun hearing an appeal against the High Court's quashing of a decision by the Director of Telecommunications Regulation to award the third mobile telephone licence to Meteor Communications.

The appeal, taken by the director Ms Etain Doyle and by Meteor, of CityWest, Dublin, opened yesterday before the five-judge court, presided over by Mr Justice Keane.

The hearing is expected to last at least two weeks.

In the High Court last October, Ms Justice Macken quashed the award of the licence to Meteor and remitted the matter to the director for consideration.

In a 247-page reserved judgment on the 50-day challenge by British telecommunications company, Orange Communications Ltd, the High Court found the director's decision to grant the licence to Meteor in October 1998 was objectively biased and unreasonable, and also ruled that the director's failure to give Orange adequate reasons for the refusal of the licence to Orange was wrong in law.

In opening the appeal yesterday, Mr Donal O'Donnell SC, with Mr Gerard Hogan SC, for the director, outlined a detailed analysis of the tender process for the licence and the background of telecommunications liberalisation against which it came about.

He said the Office of the Director of Telecommunications Regulation had been established in 1996. The position of director was statutory but independent and the intention was to regulate the market, those within it and the scarce telephone resources. This was against a background where the Republic was moving from a State-run telecommunications monopoly to an open and truly competitive market where, it was understood, benefits would accrue to consumers.

In October 1997, after advertisement and compliance with the public procurement regime, a firm of Danish consultants, AMI, was appointed to assist the director in the process of allocating the third mobile telephone licence. AMI were consultants of enormous experience and had been involved in some 20 such tenders.

Detailed tender documentation was issued in December 1997. Mr O'Donnell said that a combined or dual band licence - both GSM and DCS1800 - was on offer.

He said the tender documents outlined a very detailed scheme regarding what the tenderer was invited to do and a lot of information was provided regarding the market and regulatory scheme.

A two-stage process was involved - firstly, a minimum admission process and secondly, comparative evaluation of the bids which made it to the second stage. There was no issue regarding the entitlement of the two bidders - Orange and Meteor - to progress to the second stage.

Counsel argued there were misunderstandings throughout the High Court decision about the tender procedure. He said the licence award was determined on the basis of the best application method which was treated by the European Commission as the best way, at this stage, of allocating mobile telephone licences. The evaluation methodology applied was a highly developed system for ensuring, insofar as possible, that nothing distorted the result and to identify, delimit and divide into small component aspects those matters where some form of subjective judgment was made.

The best application method stimulated innovation and competition, Mr O'Donnell said. Instead of dictating what should be done to ensure competition, this method of awarding a licence got the market to say how it could best generate activity. The purpose was not just to identify the best person to hold a licence, it was to stimulate competition in the entire market and maximise the benefits for the consumer and economy.

The appeal continues today.