Europe mulls spectrum trading

European cell phone service providers may soon have an easier time selling or trading spectrum, a fact that promises to roil the continent's mature cell phone market and open it up to foreign prospecting.

Some spectrum trading already takes place in Europe, but the process is tedious and the practice is rare. Carriers have been pushing for more liberal policies. But just how liberal to make the new rules is the subject of debate. The European Commission is expected to release recommendations on the matter in the near future.

Regulators in several European countries are considering two forms of spectrum trading. The most controversial includes "liberalization," which would let a carrier buy spectrum from a competitor, then change the intended use of the spectrum. For instance, it would let a TV broadcasting company sell spectrum to a cell phone company. The more common variety of spectrum trading doesn't allow such changes.

In the United States, the selling and trading of spectrum is already allowed. Regulators sometimes allow changes in spectrum use, though these changes must be approved on a case-by-case basis.

Regardless of whether European regulators will permit changes in the use of spectrum, the easing of rules regarding spectrum trading will constitute a major shift. Current regulations make it "nearly impossible" for carriers to sell one another airwaves, said Ross Pow, a cell phone analyst with Analysys Research.

The expected changes will force carriers to create innovative services to compete, Pow said. But he believes that if spectrum rules are made more liberal, a carrier's bottom line will ultimately suffer.

"It may leave network operators facing some big uncertainties around their current business models," Pow wrote in an opinion his company submitted this week to the European Commission.

However, alternative wireless technologies such as WiMax may increase in popularity if spectrum becomes more readily available, he said.

"We may see the rapid birth of new niche players on the back of increasingly bullish investors," he said.