The MOD holds a number of valuable radio bands

The proposed new rules will free up prime spectrum currently held by public sector agencies and organisations.

Any freed spectrum could be used to develop new mobile and wireless services, according to the regulator.

It is estimated that the spectrum held by the public sector is worth between �3bn and �20bn ($6bn and $40bn).

"Public bodies and the MoD in particular hold some of the most valuable and sought-after radio spectrum," said Ed Richards, chief executive of Ofcom.

He said the proposals would "create new opportunities for the development of wireless services for the whole country".

At present, public bodies use around half of the radio spectrum below 15GHz - the most sought after frequencies for mobile and broadband applications.

The Ministry of Defence holds 75% of that spectrum.

Key bands include 406.1-430 Mhz, 2.7-3.4Ghz and 3.4-3.6Ghz according to an Ofcom spokesperson, who said the bands had the "right properties" for future wireless applications.

The MoD said it was committed to "releasing a significant proportion" of its holdings.

"MoD will release the plans for its spectrum holdings in May 2008," a spokesperson said.

"It essential that the MoD retains access to the spectrum it needs for equipment test and development, training and exercising, force preparation and peacetime operational requirements within UK."

At present, the mechanisms for trading and sharing have not been put in place.

The proposals are part of a broader initiative by the regulator and the government to secure the best use of the radio spectrum through market forces.

In December, Ofcom said that it would auction the spectrum freed up by the digital TV switchover.