This paper develops an information theoretical approach using channel capacity as a criterion for band subset selection (BSS). It formulates a BSS problem as a channel capacity problem by constructing a band channel with the original full band set as a channel input space, a selected band subset as a channel output space and the channel transition specified by band discrimination between original bands and selected bands. Then BSS is selected by Blahut's algorithm that iteratively finds a best possible input space that yields the maximal channel capacity. As a result, there is no need of band prioritization and interband decorrelation generally required by traditional band selection (BS). Two iterative algorithms are developed for finding an optimal BSS, sequential channel capacity BSS (SQ-CCBSS) and successive CCBSS (SC-CCBSS), both of which avoid an exhaustive search for all possible band subset combinations. Experimental results demonstrate that using CCBSS-selected band subsets produce quite different and interesting results from multiple bands selected by traditional single BS (SBS) based methods.