THE government’s money-spinning auction of Britain’s television airwaves may be scrapped under plans being considered by the communications minister Lord Carter.

Instead of selling slices of spectrum to the highest bidder, Carter is examining proposals to give away spectrum to companies in exchange for a pledge to invest nationally in super-fast broadband access.

The idea is expected to form part of his interim Digital Britain report, due for release on January 26, which will propose a range of measures to prepare the country for the future boom in internet commerce.

Failing to hold an auction would mark a departure for the government, which scooped the jackpot in 2000 when five mobile-phone operators spent a collective £22.5 billion for 20-year licences to carry third-generation (3G) services.

This time it is selling the old UHF band, which currently carries the analogue TV signal that will be switched off in 2012. The so-called “digital dividend” was expected to raise anything up to £5 billion at auction. Ofcom, the telecoms regulator, has already recruited the Morgan Stanley investment bank to drum up international interest ahead of a sale in 2010.

The new scheme is being promoted by Nesta, the National Endowment for Science, Technology and the Arts. Under its “Spectrum for Speed” strategy, Jonathan Kestenbaum, Nesta’s chief executive, argues that giving away licences to the value of £5 billion with strings attached would accelerate the roll-out of broadband to remote and disadvantaged parts of Britain at speeds of up to 100 megabits a second.

“The case for this type of deal is compelling,” Kestenbaum said. “In unprecedented economic times, we have to think imaginatively about how we can invest in big infrastructure projects while not cutting off large swathes of communities from economic and social development.” Nesta said the plan could create 600,000 new jobs over the next five years.

Carter will impose a service obligation on broadband operators and mobile firms to provide basic broadband for all, but he has hinted the government would have to play a financial role in launching high-speed networks.

His view conflicts with a report from Francesco Caio, the former Cable & Wireless chief executive, who said it should be the telecoms industry, not government, that stumps up billions for new networks.

By giving away spectrum the government would not reap any income, but nor would it have to contribute to broadband spending later on.

BT has already committed £1.5 billion to replacing some of its copper wires with fibre-optic cables, but that would only cover 40% of the population. Virgin Media’s cable network covers roughly half the country.

Ofcom’s attempts to redistribute spectrum have been mired in controversy. The regulator is being challenged by mobile firms Vodafone and O2 over plans to take back part of their mobile spectrum and sell it to rival firms so they can launch their own 3G services.

“The auction model has been largely discredited,” said one source. “It was seen as doing more harm than good last time around.

The Digital Britain report will also talk up the prospect of Channel 4 securing its future through a partnership, possibly by merging with rival Five.

In addition, Carter will sketch out regulations forcing internet service providers to collect information on illegal downloaders and pave the way for further consolidation in the regional newspaper industry.

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