An important decision will soon be made by the Government on the price it wants to charge for licences for the next generation of mobile phones. It could scoop up hundreds of millions of pounds in fees for the already-bulging Exchequer. Alternatively, the aim of the Government to promote an information society could be reinforced by promoting fast, open access at low cost. Which will it be?

The new, third generation, or 3G, services promise high speed, portable video, Internet and commercial transactions for consumers at 100 times present speeds. But there is a lot of uncertainty about the timing and extent of 3G usage.

The Director of Telecommunications Regulation, Etain Doyle, decided that licences would be awarded by "beauty contest" rather than by auction: four will initially be awarded to companies chosen on criteria relating to the range, quality and price of services.

While Ms Doyle is shortly to propose a fee that should be charged for each licence, final approval is needed from the Minister for Finance and the Government.

There is a lot of dispute among economists as to whether a competitive auction or a beauty contest is the most efficient way of pricing 3G licences. That dispute is irrelevant for the Republic's fee decision.

Wildly different valuations of 3G licences have been made by European companies in auctions to the point where over-optimistic valuations are already causing financial stress for the "winners".

The price per capita ranges from €621 in the UK and €619 in Germany, to €173 in the Netherlands, €87 in Austria and €209 recently in Italy.

In an auction, private businesses take a view of the likely future profits, and the associated risks in achieving those profits, to arrive at a value now. Given the beauty contest here, the Government alone can make that uncertain, very risky judgment about the value and timing of future revenues from 3G services.

In my view, it is in no position to do so and would be better off not even trying.

An alternative that must be considered is the example from Sweden and Japan, where licences are being awarded at virtually no initial cost.

Sweden included instead a 0.15 per cent tax on turnover, as it materialises. This would be entirely consistent with Government policy to make Ireland a leading information society and e-commerce hub.

The Government badly wants an information society. It has committed £1.95 billion under the National Development Plan to research and development, including £560 million for a Technology Foresight Fund. There is £30 million for implementation of information society initiatives this year. The Government is providing premises plus £28 million for an initiative with MIT's MediaLab Europe. And £60 million was devoted to a joint venture with Global Crossing to bring broadband infrastructure, the so-called "fat pipe", to Ireland.

It cannot make sense, at the same time as these initiatives - particularly the partnerships with private companies - to load a fee burden on other companies which will develop the next generation of mobile technology in the country. It would be more consistent with national strategic interests to challenge them to develop and roll out the technology fast.

Sometimes our self-congratulation hides the fact that we rank 19th out of 55 countries in the IDC/World Times Information Society index. There is no coincidence between the Swedish attitude to the 3G licence and its already leading position, along with other Nordic countries, in Internet and mobile technology.

Similarly, in Japan, 3G will be rolled out next year, one of the earliest in the world, and free of licence fees.

If the fee were zero or close to zero, licences would be awarded based on demanding performance promises by the mobile telecoms companies on prices and access for all consumers. There would have to be strict enforcement and monitoring of these promises.

But if a fee were charged now, companies would inevitably try to recover it from consumers later. A zero fee approach would also gel with the development of public/private partnerships.

The Government is inviting private sector consortia to build and finance over £1 billion worth of roads. More spectacularly, a multibillion-pound metro system will be organised by such a partnership.

The State is commissioning roads which private companies will design, build, operate and finance. Commitments to services levels will be made in contracts, while the private sector aims for profit. The companies will not be asked to pay the State for the use of land or road capacity, as that cost would be passed on to consumers.

The same approach can be taken to the roll-out of what will probably be a strategic technology. No attempt would be made to capitalise possible earnings up front. The State would have the patience to benefit from the outcome. Financially this would mean VAT and other tax receipts.

There will be objections to free licences. First, there is fear. Public servants and politicians fear a windfall for telecoms companies - another Esat, if you like. The need to guard against windfall profits or windfall capital gains is valid.

The Government could use a form of claw-back for any sale, as with Telecom Eireann, or a windfall tax.

As for profits, it could charge a levy on turnover, as is the case in Sweden.

Second, the use of a State asset like spectrum should in principle be paid for. However, 3G spectrum is not a fixed asset like land. As part of the electromagnetic spectrum, it was always there, just unrecognised. It was valueless until the technology to use it was developed. The State certainly cannot use it on its own. And the same technology is capable of multiplying capacity in the future, so that it is not a fixed, scarce resource. Pricing it now as if it were fixed and scarce for the long term would be wrong.

Third, there is the objection that international companies such as Vodafone and BT would develop 3G services in the small Irish market anyway as they roll out in Britain and beyond.

So why not get money for the Exchequer from their share-holders? This is a matter of how we see the development of vital national infrastructure and the role in that of private companies.

If we don't want to be especially competitive, an incubator for new technologies, then let us take the money and go along at the same pace as elsewhere.

But if we want to offer a leading-edge environment for communications technology, then we should rather engage with 3G operators as partners in development. Their nationality is irrelevant.

In short, the question boils down to a short-term financial gain to the Exchequer versus a medium-term strategic interest for the country. Existing policy tends towards the latter.

The Government should follow through by charging a zero fee for 3G mobile phone licences.

Oliver O'Connor is a business consultant and advises Eircell. The views here are his own.