The UK government proposes a delay before 3G spectrum can be traded, despite expert advice that the process should be brought in as soon as possible

The government is proposing that trading of 3G spectrum should not be allowed until at least the end of 2005, despite the financial difficulties facing some 3G licence-holders.

In a consultation document called Implementing Spectrum Trading, published on Monday, the government laid out its plans for the trading of the radiocommunications spectrum, as recommended by an independent report earlier this year.

Implementing Spectrum Trading proposes a progressive rollout of spectrum trading, under which sectors of the spectrum used for certain technologies -- such as broadband fixed wireless and GSM mobile networks -- would be opened up to trading in a "first wave", probably starting in 2004. But trading of the 3G spectrum will probably have to wait up to two years longer.

Claiming that some 3G licence-holders have lobbied against 3G spectrum trading being introduced while network rollout is taking place, Implementing Spectrum Trading states that: "The government is currently minded not to introduce trading earlier than three years after the first licensee's substantial launch of service within the UK, subject to further development in the rollout and market for 3G services."

Hutchison 3G, a newcomer to the UK mobile market, is expected to be the first 3G operator to launch a service. If its high-speed product -- called 3 -- does makes its debut later this year as planned, then the government's proposal means it will be the end of 2005 before any 3G spectrum trading is allowed.

A Hutchison 3G spokesman told ZDNet UK that Hutchison would be taking part in the consultation process, which will run until 7 October. Sources within the industry have suggested that the five 3G licence-holders -- Vodafone, mmO2, T-mobile, Orange and Hutchison 3G -- have not yet reached a consensus on the issue of spectrum trading. But if the 3G operators are unhappy about the government's proposals, it is possible they will be changed.

"As this is a consultation process, we welcome all views on the issues contained in the report," a DTI spokesman told ZDNet UK.

After spending £22.5bn on their UK 3G licences, the five licence-holders are under pressure to succeed. Given the ongoing turmoil in the stock market, and the difficulty that telecoms companies are having securing investment, it is possible that one or more of the licence-holders may want to sell some of its 3G spectrum allocation to raise funds.

The Communications Bill, currently going through parliament, will make spectrum trading legal, and Implementing Spectrum Trading has been published now to coincide with the Bill's passage.

Spectrum trading was recommended in March 2002 by Professor Martin Cave in his Independent Review of Spectrum Management. As ZDNet UK reported, Cave believes that the government can achieve more efficient and innovative use of the radio spectrum if a market-led approach is introduced.

Although the government has not officially responded to Cave's report, Implementing Spectrum Trading is in broad agreement with his conclusions.

According to Implementing Spectrum Trading, spectrum trading will increase the efficiency of spectrum management, increase competition, boost innovation in the use of the spectrum and create a faster and more flexible system for access to the spectrum.

The government is proposing that the sectors that will make up the "first wave" of the spectrum opened up to trading will be the public wireless (mobile phone) networks, broadband fixed wireless access (such as the ill-fated 28GHz licences), private business systems and terrestrial fixed links.

Sectors such as broadcasting, aeronautical and maritime will come later in a "second wave".

Professor Cave's report did not include a recommendation that spectrum trading should be introduced in stages. Instead, it proposed that spectrum trading be introduced "as soon as possible".

The DTI insists however that it has not yet formally responded to Cave's report -- something which should take place this summer -- and denies that the government is pursuing a different recommendation.

"Professor Cave is an independent expert who made a number of recommendations about spectrum management, which include spectrum trading. This consultation document is looking at how spectrum trading should be implemented," a DTI spokesman explained.