Ihug will today mount a High Court challenge against next month's government auction of radio spectrum.
The company is seeking an injunction to force a judicial review of the planned auction of 2GHz mobile spectrum from July 10. Spectrum earmarked for both second and third-generation cellular service is to be auctioned, with one parcel set aside for Maori.
Ihug director Nick Wood says the government has ignored industry calls for a cap, or acquisition restriction, on new licences in the second-generation spectrum.
Wood says the government's current mobile spectrum strategy is seriously flawed, because it will probably prevent new players from entering the market now.
"The government has already agreed to a cap of 15MHz for third-generation spectrum in the auction," he says. "But third-generation technology is still under development, and may not be ready for at least another three years.
"Without a similar cap for second-generation spectrum, new and innovative local bidders like Ihug are likely to be shut out. Real competition would be delayed for at least another two or three years, allowing major players like Telecom and Vodafone to continue to dominate."
Wood warns New Zealand consumers could miss out on big savings on mobile charges and telephone line rentals, simply because of a continued lack of competition.
He says mobile phone users in this country should be enjoying the same low charges available in overseas markets where competition is stronger.
Telecommunications Users Association of New Zealand chairman Ernie Newman told National Radio this morning that his organisation backed Ihug's view.