Sharing the digital burden

By media correspondent Nick Higham

What happens if ITV Digital goes bust, or its backers Carlton and Granada decide to pull the plug?

With the Stock Market so jittery and volatile it is a sensitive question: even to ask it risks precipitating a crisis of confidence among shareholders in Granada and Carlton (but especially Carlton), and so forcing a collapse.

Publicly both companies remain committed to the project, and to the £200m apiece they say they still need to invest to reach break even in 2003/4.

If the commercial sector cannot make a go of digital terrestrial, the argument runs, why not opt for a Railtrack-style solution

The problem is that the projections of the investment still needed were made back in the spring.

Since then advertising revenue has fallen off a cliff - partly in the wake of the 11 September attacks.

Analysts in the City are asking whether the two companies still have the will or the resources to go on supporting their digital terrestrial platform.

Recession

One option would be to bring in a partner to share some of the burden.

But who?

It is hard to think of any company willing to get involved in present circumstances: major international media groups, cable companies, telecoms companies all have problems caused by the growing recession.

Sky would be an obvious candidate, not least because ITV Digital's collapse would deprive it of more than a million subscribers.

But BSkyB says unambiguously that it has no intention of buying into ITV Digital.

What's more Carlton's chairman Michael Green believes competition regulators would veto a Sky stake, as they have done before - although the regulators' opposition might evaporate if the alternative were to see ITV Digital disappear entirely.

The BBC is not keen on having to meet the costs of babysitting the digital terrestrial network - and the government certainly won't want to give it any more money

One option even involves the BBC taking over.

This is because the survival of digital terrestrial television as a platform is vital if the government is to have any chance of achieving its target of 95% digital penetration and analogue switch-off by 2006 or 2010.

Problems

If the commercial sector cannot make a go of digital terrestrial, the argument runs, why not opt for a Railtrack-style solution: allow the commercial venture to go bust, and hand a national asset (the frequencies and transmitter network) over to some kind of non-profit public trust?

Such a trust has to be invented from scratch in the railways' case, but exists already in broadcasting in the form of the BBC.

There are plenty of problems with this, however.

The BBC is not keen on having to meet the costs of babysitting the digital terrestrial network - and the government certainly won't want to give it any more money.

No-one thinks the BBC should run ITV Digital's pay channels, including ITV Sport.

But the ITV Digital transmitters and frequencies are useless without the 1.2m receivers given away free to people who subscribe to the pay channels.

The set-top boxes thus belong to ITV, but would ITV be willing to hand them over to the Beeb?

The truth is that the government has few options - and may just end up standing helplessly by as market forces run their course.

A version of this column appears in the BBC magazine Ariel.