The regulator said it plans to auction most of the digital dividend in 2009, offering licences that allow users to decide the technology and service, and that can be traded after being awarded.
Ofcom said this will lead to increased competition in wireless services, allowing for greater choice and lower prices for consumers. The move is expected to benefit the UK economy by as much as £5bn-£10bn over 20 years.
Ofcom's decision shuts the door on the campaign by analogue broadcasters to be allocated spectrum rather than being forced to compete with other industries such as mobile operators.
The only group that will not face an auction to retain its portion of the spectrum is the special events and theatre sector, which typically use it for wireless microphones.
The spectrum to be auctioned is suitable for a wide range of uses including ultra-fast wireless broadband services, mobile television and additional digital terrestrial television channels.
It can also be used for local television, wireless microphones and low-power applications developed from wi-fi.
Ed Richards, chief executive of Ofcom, said: "The digital dividend will be one of the most significant and valuable spectrum releases in the UK for 20 years.
"Our approach is designed to maximise these considerable benefits for UK citizens and consumers as a whole.
"We can expect the benefits of the digital dividend to include more choice, fresh competition and technological innovation."
Ofcom will announce further details about the process in spring 2008.
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