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Sunday, 30 September, 2001, 09:34 GMT 10:34 UK
Digital TV firms mull tie-up
The main shareholders in interactive television firm ITV Digital would like a deal with Rupert Murdoch's BSkyB in order to help offset the huge costs of running the UK business, the Sunday Times has reported.

Carlton and Granada, the two large broadcasters that control ITV Digital, now see more benefit in co-operating, rather than competing, with BSkyB, Britain's leading multi-channel TV company.

ITV Digital has lost more than 400m, the newspaper reported, thanks to slumping advertising revenues, and customers' reluctance to pay for the premium interactive services that digital TV offers.

But any deal between BSkyB and ITV Digital would be complicated by the government, and even by the European Commission.

BSkyB has in the past been blocked from involvement in terrestrial TV ventures.

Difficult relations

According to the Sunday Times, talk of co-operation is at an early stage, but could result in BSkyB taking a stake in ITV Digital.

Relations between the firms have not always been cordial.

BSkyB's digital TV control centre
BSkyB pioneered multi-channel TV in Britain
They are currently in dispute over how BSkyB will offer ITV channels to its subscribers.

And ITV Digital has previously complained that BSkyB was abusing its dominant position in the pay-per-view TV market.

BSkyB was an original shareholder in British Digital Broadcasting, the company that eventually became ITV Digital, but was forced to divest by a European ruling.

That meant that Carlton and Granada, which have long experience in the free terrestrial broadcasting, had to go ahead without BSkyB's technical know-how and experience of selling packages to subscribers.

Government plea

But even if a deal does not go ahead, the two firms seem likely to step up their campaign for government help for the struggling digital sector.

Earlier this year, ITV Digital criticised the government for promising technological advances in broadcasting, while failing to support the private-sector firms in the business.

Now, ITV Digital is pushing for government permission to increase its national coverage - currently just 50% - and wants the state to encourage people to buy digital-enabled TVs and set-top boxes.

Under current government plans, all TV broadcasting, whether free or paid, is set to switch over from analogue to digital in 2006-10.

Digital TV allows broadcasters to push more channels within a smaller frequency, and is capable of operating as a platform for a wide range interactive services - everything from ordering pizzas to booking holidays.

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