Ofcom signals the start of race to buy up analogue TV airwaves

The sale of the airwaves currently occupied by analogue TV kicked off last week, when the media regulator launched the auction with a workshop for players from the media and telecommunications industries.

Analysts said the offer of analogue TV's spectrum by Ofcom was the most important sale of a national asset for years.

Television companies and mobile phone companies will vie for the frequencies on offer. Some observers have even drawn parallels with the auction of 3G spectrum for mobile phones, which raised £22.5bn at the height of dot.com fever in 2000.

The Government has plans to stop any broadcasting of television using the analogue signal, with Britain going digital-only in regional phases between 2008 and 2012. That means the frequencies used for analogue TV will be freed up.

The sale of the TV spectrum is expected to raise hundreds of millions of pounds for the Treasury. Whether it will produce a multi-billion pound bounty is as yet unclear.

Ofcom is offering 112 MHz of capacity, more than the 100 MHz that came with the 3G sale. Amit Nagpal, of the consultancy Analysys, which is advising Ofcom on the sale, said: "It is very valuable spectrum but this is not the year 2000."

Those attending the Ofcom event were told that the regulator wanted the distribution of the TV spectrum to be decided by market forces, unless significant public policy issues come to light. The auction could take place as early as next year.

The spectrum is currently used to broadcast five terrestrial TV channels - BBC1, BBC2, ITV, Channel 4 and Five.

Airwaves are a finite resource and these stations now use nearly half of the most valuable bands of spectrum below 1GHz.

The present allocation of the spectrum goes back to a plan originally devised in the 1950s and it could now be put to a number of television and non-television uses. Mr Nagpal said: "There are so many possible uses for the spectrum but the award process is designed so that the market, and not the regulator, decides."

The airwaves could be deployed for new mobile-phone services over 3G, transmitting high-quality video and interactive media to handheld devices. Other uses may include wireless broadband services or TV for mobile phones, using the DVBH technical standard. Robyn Durie, regulatory counsel at T-Mobile, said: "If I was betting on it, it's more likely to be used for something like DVBH than 3G."

The spectrum could also be used for offering High Definition channels, which offer a much better picture, on the Freeview digital terrestrial platform. Or it could add more regular stations to Freeview.

Analysts said that Freeview's long-term attractiveness to consumers, versus pay-TV platforms, depended partly on how well it did out if this auction.

BSkyB, the leading pay-TV operator, will launch HDTV later this year, a move that it expects to be a major draw to consumers as it works towards its target of 10 million subscribers.