She told her audience to expect the imminent reality of the digital era in broadcasting.

This would reinvigorate the relationship between viewer and producer, she said.

But Ms Murdoch ruled out talk of convergence between the Internet and television.

"For years now, the word convergence has gone side-by-side with digital, a convenient way of explaining how TVs and PCs will get married and live happily ever after.

"A divorce between the TV and PC"

"Well, I'm sorry to be the bearer of bad news, but there's been a divorce. No, not the first time I've had to talk about this subject in the last few months.

"But it's increasingly clear that people's use of the TV and the PC are hugely different experiences.

"The Internet is succeeding because it is adding real value to people's lives. Real value in transactions. Already e-commerce is gearing up to give retailers a run for their money. It's incredibly effective for communication and the sharing of knowledge.

"However, as the founder of America Online put it last month at an investors' conference, they can't see what they can add to the experience of entertainment.

"The PC will clearly be a growing competitor for people's attention ... but it's not going to become us"

"Like America Online, I really find it hard to believe people will switch from their Web page to Eastenders without losing their desk. Even now, each industry will learn and borrow from one another. TV will continue to be the dominant medium for lean-back leisure rather than lean-forward interaction.

"Yet both pieces of technology will happily sit together in the home of future, fulfilling different needs for their owners, which makes the PC and the Internet a very serious competitor. We're all competing with other media now more than ever."

'The public, not controllers, will decide'

In her 40 minute speech, which she made without use of notes, Ms Murdoch advised broadcasters to accept a future of niche markets, where no single outlet can hope to gain a majority audience.

Her speech was less than dramatic than the one made by her father nine years ago at the same venue, when he lambasted the dominant broadcasters in the UK and told them to accept change.

Instead, she said she had chosen to break with tradition at the Television Festival and "celebrate our industry and not condemn it".

She promised: "In tomorrow's TV world, where multi-channel TV homes are every home, blandness will be anathema.

"Content will have to be innovative, ambitious and competitive. There is no alternative."

She admitted not all content in a multi-channel world would be of a high standard.

"Much of it might even be appalling. But the public will decide, not a handful of powerful controllers.

"It's your viewers who will destroy you if you fail to meet their increased demands."

'Digital will make us all better'

"If you want to understand digital from a consumer point of view, it's like the arrival of magazine shelves at WH Smith"

A month away from the launch of Sky's digital service, that change is now here and Ms Murdoch focused on how digital TV would fit in to viewers' lives.

Dressed in blue jeans and a black jacket, blonde Ms Murdoch strode up and down the stage as she confidently predicted the future, using heavy emphasis to make her points.

Murdoch told her audience to exploit the potential of niche markets

She said: "Digital is a technology which enables us to compete in a world that demands extensive choice and added value. Digital allows you to manage choice but not by limiting that choice as others have.

"Of course, we still need simplicity in a world of boundless choice. But the answer cannot be to dumb down and provide less. The answer is to use the technology to provide context as well as content.

"I suppose the computer industry could have accept the power of PCs was never going to be appreciated by the average consumer, accepted the average person would never be able to handle more than the electric typewriter and the calculator.

"However, Apple decided if they simplified that indecipherable and alienating DOS language, this average person just might be able to maximise this awesome and life-enhancing tool. What they did was to put the personal into computing and they invented the PC. You could say that electronic programme guides are to digital TV what Apple was to computing.

"Digital will enable us to give added value to people's TV viewing by providing them with their own personal television navigation system, transforming the TV experience just as Apple or Windows made the PC viable.

"So digital allows for more content and the digital EPG [electronic programme guide] will give context. But most importantly, digital will also do to television what unfettered choice has done to other markets: it will make us all better."