UK regulator Ofcom has lit the touch-paper on a market for low-power GSM services in the UK - with the first spectrum auction since it was set up in 2003.

The winners of the auction, promised last summer will gain the right to run low-power services on spectrum originally set aside to form a gap or "guard band" between cordless DECT and GSM mobile phones. Today's hardware doesn't need a guard band, so the spectrum can be used by low-power localised services - which can be picked up by any existing GSM phone (read more on how the system will operate).

Most operators are playing their cards close to their chests, but the main opportunity is to put GSM hotspots in offices, that can route calls from ordinary mobiles onto the switched phone network, saving money.

BT and NTL are known to be interested, along with start-up Coffee Telecom has also floated plans for a network of hotspots in public places such as shopping malls, where consumers can make cheap calls.

There will be a single round of sealed bids with a provisional closing date of 21 March, with the awards announced in mid-April. "The end-game is not the money," said Ofcom spokesman Simon Bates. "The important thing is that this finite national resource is used in the best way possible."

Because there are already millions of devices that can connect on these bands, it is unlikely that anyone will want to do anything with the spectrum but GSM - but for the first time, that will not be specified in the licences. These will be "technology neutral licences", an important step in Ofcom's plans to liberalise the UK's spectrum (see Ofcom to throw UK spectrum wide open).

The regulator has even taken a hands-off approach to the administering of the licences, which will all cover the whole of the UK. Licence holders will register cell-locations on a website, and any disputes will be settled by a code of conduct developed by the industry - not by Ofcom. "It's a code that is part technical and part legal, and we are in the process of getting legal words wround it," said Sandra Gilligan, of Mobile 200, the group co-ordinating the code of conduct. "But we're nearly there."