Reports today suggest BT is ready to re-enter the UK mobile market after selling off its O2 wireless unit five years ago.

A report in the Independent newspaper said the telecoms giant is expected to bid in a forthcoming spectrum auction, details of which were announced yesterday by telecoms regulator Ofcom.

It announced proposals of the largest ever sale of spectrum in the UK, launching a consultation period that is likely to attract speculation as to which advanced wireless technologies will prove the most popular draw to the sale for operators.

But the UK government is unlikely to generate anything near the £23 billion earned from the first 3G auction in 2000, particularly if the European Commission (EC) has anything to do with it.

The EC said Monday that it has asked Ofcom to review the methodology to calculate wholesale tariffs being charged by various 3G operators in the country. It said it believed O2, Orange, T-Mobile, Vodafone and Hutchison 3G were charging exorbitant rates for terminating calls between customers on various networks.

Ofcom had earlier this year recommended the implementation of cost-orientated tariffs, aimed at reducing mobile termination rates to target prices over a period of three years, starting April 2007.

The European Union Information Society and Media Commissioner, Viviane Reding said she believed that the Ofcom’s recommendation to calculate 3G spectrum costs could restrict the movement towards establishing lower interconnection charges between various mobile providers.

Reding also said that she believed that "such costs should not be calculated on the basis of prices paid during the spectrum auctions, which are in today's context, inflated." The Ofcom’s proposals would hinder fair competition in the UK mobile market and lead to increased prices, the EC stated.

Regardless of price, the spectrum will be sold off in two tranches, and could be used for a variety of services, such as mobile television, advanced mobile services like 3G and mobile broadband access via technologies like WiMax.

The bands 2500-2690 MHz, 2010-2025 MHz will be packaged into a number of lots and auctioned together. Participants will be able to bid for multiple lots. The auction will be conducted online using a secure server and there will be a number of rounds to the auction. The bands 2290-2300 MHz will be packaged as a single lot and auctioned though a sealed bid process.

The proposals are part of a wider Ofcom programme to release around 400 MHz of prime spectrum to the market over the next few years and the consultation period ends next April.

Ed Richards, Ofcom chief executive said: "Releasing more spectrum to the market will create new opportunities for innovation in wireless technologies, promoting competition and driving convergence."

Ofcom today also published its draft annual plan 2007-8 for consultation, which addresses some of the EC concerns, seeking to accelerate the development of a market-based approach to spectrum.

It also includes four other areas of policy focus through to 2010, including promoting competition and innovation in converging markets; enabling new services as platforms and services converge; improving industry compliance and empowering consumers; and moving towards more consistent legal and economic frameworks.

Ofcom also said Ofcom today also published its Simplification Plan, which sets out in detail its planned deregulatory activities. It said it would continue to examine the scope for removing regulation and reducing administrative burdens on its stakeholders in the coming three years.