Google: New Operator on the Bloc

The mobile phone companies Vodafone and O2 will be forced to hand over large chunks of prime spectrum to their rivals as part of a plan unveiled by the telecoms regulator Ofcom to stimulate usage of wireless frequencies for mobile broadband services.

With new spectrum being available and no restriction on the technology to use Google is considering a move into the UK wireless market. Google is already planning to bid more than $4.6bn (£2.3bn) on spectrum in the US when it comes up for sale early next year and is rumoured to be working on its own mobile phone, nicknamed the Gphone, and a mobile payments service called GPay.

All four "legacy" operators have been lobbying for the regulator to remove restrictions on what services they can run over their old networks. They were not expecting Ofcom to propose a full-scale re-auction of part of the existing spectrum.

Orange, T-Mobile and 3 will be allowed to bid for the old Vodafone and O2 spectrum, but it is unclear whether they need the extra capacity. Vodafone has a network-sharing deal with Orange that should cover both companies' needs when the new spectrum is released in 2010, and T-Mobile and 3 are exploring a similar arrangement.

It was unclear last night whether the removal of a third of its 2G network capacity would harm O2, but the move is certainly a blow as that is the spectrum over which the iPhone will operate. The mobile phone company, owned by Spain's Telefonica, clinched the high-profile iPhone deal this week, seeing off competition from Orange, T-Mobile and Vodafone.