The 20 per cent of the population denied mobile broadband access will stand a much better chance of being able to log on when the Government clears the way today for an auction of airwaves best suited to wireless data.

The plan to improve broadband coverage in areas where it is uneconomic to build high-speed fixed-line networks was at the heart of the Government’s Digital Britain White Paper. Spectrum is the raw material needed to deliver wireless broadband to sparsely populated regions.

The rising popularity of mobile broadband services and smartphones, such as Apple’s iPhone, that rely on internet access has highlighted the value of prime spectrum.

The recommendations will be made by Kip Meek, the Government’s spectrum adviser, and Stephen Timms, the Communications Minister, who will set the ground rules for future auctions of the frequencies that carry wireless data. The proposals will involve capping the amount of spectrum that any one company can own — an idea originally proposed by Ofcom, the telecommunications watchdog.

Britain’s five mobile phone network operators will also agree to improve their networks more quickly in exchange for an indefinite extension of the 3G licences that they bought for a combined £22.5 billion in 2000. The existing 3G networks cover only about 80 per cent of the population, which has created a digital divide between urban and rural regions.

Vodafone and O2 both own a chunk of “prime” 900-megahertz spectrum, which is better suited to mobile broadband as it has a longer range than bands at higher frequencies. The two companies will have to cede some of their existing spectrum back to Ofcom to be auctioned if they want to participate in future sales.

The report will also recommend that competition authorities consider the impact of the proposed merger between Orange and T-Mobile, as the two companies will dominate the 1,800Mhz range that is particularly good for covering urban areas. Whether the enlarged group will be allowed to bid for spectrum in lower frequency ranges could depend on regulatory approval of the deal.

It may be that the two companies are told they must give up some spectrum to ensure a competitive market. However, such a move would infuriate Orange and T-Mobile, which have argued that the creation of the country’s most powerful network will boost competition, not lessen it.

The government report, which will be accompanied by a consultation document, will allow Ofcom to proceed with spectrum auctions in the 800Mhz range, which is ideal for mobile broadband, and the 2.6-gigahertz range, which is suitable for faster broadband speeds. Companies outside the mobile sector, including BT and Intel, are thought to be keen on the higher frequency band.

Ofcom originally announced its intention to sell the spectrum bands in 2006 and had hoped to start auctioning the asset this year. Ed Richards, its chief executive, hailed the sell-off and claimed it would boost the UK economy to the tune of £10 billion. “Radio spectrum is an essential but finite resource. Its use accounts for nearly one pound in every 30 in the UK economy and it delivers a plethora of services to UK citizens and consumers,” he said.

Yet the euphoria was short-lived as the mobile companies threatened the regulator with legal action. Under its original plan, Ofcom had suggested forcing O2 and Vodafone to give up some of their prime spectrum, gifted to them by the Thatcher administration.

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