Ofcom plans to allocate spectrum for use by RFID (radio frequency ID) technology - and exempt it from licensing restrictions.

The move is part of an ambitious programme of deregulation announced by Ofcom earlier this year. In June Ofcom said it would make sweeping changes into the way the spectrum has been managed for 100 years, practically regulating itself out of existence.

It ultimately plans to open up about 70 percent of spectrum to the free market, keeping strict controls over only portions with international usage concerns. The military also controls a significant proportion of spectrum (see our feature on Ofcom's liberalisation and spectrum-trading plans).

On Tuesday, Ofcom published draft regulations covering RFID, essentially recommending that there be no regulations - RFID equipment in the 865-868 MHz band are to be exempt from wireless telegraphy licensing. The paper, available here [pdf], is up for consultation until 12 September.

Ofcom is responsible for overseeing civil use of the radio spectrum, and requires users to obtain licences unless there's a specific exemption. (Ofcom doesn't handle military spectrum.) RFID devices, which can be used to automatically identify products and shipping containers, and typically have a range of only a few feet, are unlikely to cause interference, Ofcom said.

"Globalisation of the market and increased interest from businesses in the potential of RFID technology has led to a growing need for more international RFID solutions which utilise spectrum in a harmonised manner," Ofcom said in the paper. "Implementation of the Recommendation will go some way towards addressing these requirements and enable the benefits of this new technology to be realised."

RFID fits Ofcom's profile of the type of spectrum usage that needs little oversight, and it also has been singled out by the European Conference of Communications and Postal Administrations (CEPT), which has recommended that RFID be allocated the 865-868MHz spectrum licence-free.

Ofcom downplayed the privacy controversy around RFID, saying scenarios such as people being tracked by RFID embedded in their clothing were unlikely. In many cases the use of RFID tags won't be covered under the Data Protection Act of 1998, for example when monitoring distribution pallets, according to the Office of the Information Commissioner, and in situations where personal data is involved it is "perfectly possible" to comply with data protection law, the office said in a statement.

"Where the use of such tags involves the collection, generation or disclosure of personal information then the Act will apply," the Information Commissioner's office said in a statement. "In particular, this means that individuals should be aware when information about them is being collected and what it will be used for."

The free-market approach to licensing isn't without its critics, who argue that in some cases closer regulation is needed to ensure it's developed in the most beneficial way.

For example, in October European Union member states will vote whether to change the approach to spectrum that has been earmarked for 3G usage. The bands in question, 2.5-2.69MHz, have been set aside for 3G expansion traffic, but states with a free-market approach - led by the UK - want a technology-neutral approach to this spectrum.

That means it could be used by other technologies, such as WiMax and other wireless broadband systems. The other camp, led by France and Finland, want the spectrum to remain set aside for 3G.

There is no technical reason why the spectrum couldn't be used for competing technologies; at stake, rather, is whether the spectrum should be used to stimulate the growth of the 3G industry, which has cost operators billions in licenses and has yet to take off.