Mobile network operators will be allowed to own a maximum of 90MHz in frequencies above and below the 1GHz band, making it impossible for any one the four operators to "freeze out" their competitors, the government said.
The new rule will govern the upcoming "combined auction" of frequencies in the 800MHz and 2.6GHz bands that will increase mobile network operators' capacity to provide mobile broadband access in urban and rural areas.
However, Wimax operators are likely to be able to bid early for 50MHz of spectrum in the 2.6GHz band. This auction could start in the second half of 2010, while the combined auction is likely to start in the first half of 2011, officials said.
The proposed directive to Ofcom to start the auction process still has to be passed by Parliament.
Ofcom will set a floor price to the auction following consultation on whether to set this at a per MHz price for the spectrum or on the total spectrum on offer. Officials said they were unaware of a target figure the government expected.
Sources close to the process say the Department of Business, Innovation and Skills, which is instructing Ofcom, had proposed a reserve price, but it was rejected by Treasury. Officials from both departments declined to comment on this.
In the auction for 3G spectrum that ended on 27 April 2000, the government realised a windfall of £22.5bn for five licences. Critics say this weakened network operators' balance sheets, starved 3G auctions in other countries and delayed the roll-out of high-speed mobile technology.