What next for ITV Digital?

By media correspondent Nick Higham

As early as the end of this week ITV Digital may have gone down the tubes - or at least into administration.

The company's board met on Monday afternoon to discuss progress on "restructuring" the business with the aid of accountants Deloitte and Touche.

The biggest element in the restructuring remains renegotiation of the deal with the Football League.

ITV Digital has a memorable monkey in its advertising campaign

ITV Digital is supposed to fork out almost £90m in each of the next two seasons for football matches few people watch or are prepared to pay for.

Talks with the League are continuing - though ITV Digital has not, as reported, written to all 72 league club chairmen urging them to accept its offer of just £25m a season.

The clubs are over a barrel.

If they were hoping to pay next season's wages out of their share of the TV money, they will be in serious difficulties.

But if they reject ITV's terms they risk getting nothing - unless a deal can swiftly be done with an alternative broadcaster (the BBC? Sky?) which may offer even less than ITV Digital.

Talks are still on between ITV Digital and the Football League

Of course, both sides may be indulging in brinkmanship and bluff.

And if the company goes into administration the football deal may still be salvaged.

ITV Digital's shareholders, Carlton and Granada, will continue to bankroll the company as the administrator tries to reach agreement where the existing management has failed.

But if a deal can't be reached, and ITV Digital goes into receivership (ie, goes bust) no-one seems entirely clear what happens next.

Safety net

The Independent Television Commission says it would have to readvertise ITV Digital's licence.

But would anyone else want it? And what would happen to the ITV Digital channels while the licence went out to tender?

One answer may lie with Freeco, an initiative started by the BBC with the tacit approval of the government, and involving ITV, Channel 4 and Channel 5.

Freeco is meant to promote the idea of free-to-view (as opposed to subscription) digital TV. It also represents a possible safety net for digital terrestrial television if ITV Digital goes pear-shaped.

The idea is that the broadcasters will club together to promote a bouquet of free channels (including all the BBC's services, ITV1 and 2 and a number of others) and the equipment to receive them - thus persuading viewers who don't want to a pay a subscription to go digital.

'Unreasonable'

If ITV Digital went bust its 1.2 million subscribers might be able to use their existing set-top receivers to watch the Freeco channels.

But talks with ITV broke down in February.

BBC sources say ITV insisted unreasonably that Freeco-approved receivers should all be upgradable to pay-TV: the BBC believes that would involve it endorsing some receivers at the expense of others, and doesn't think it should do that.

ITV sources say it's the BBC that's being unreasonable.

They add that it hasn't realised Freeco needs to operate a customer management system for digital terrestrial TV so it can advise users on reception, aerial upgrades and the like, for which encryption (or "conditional access") is a prerequisite.

A spokeswoman for ITV Digital said on Monday there was no question of the company's subscribers waking up one morning to find their screens blank. She's probably right. But in such a tangled situation there are no guarantees.

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