The BBC won provisional approval yesterday to create a free satellite television service that could rival pay-television platforms from BSkyB and Virgin Media.

The corporation’s regulator, the BBC Trust, said that the BBC should launch the service by 2008 with the expected support of fellow free-to-air broadcasters ITV and Channel 4.

Chitra Bharucha, the acting chairman of the BBC Trust, said: “For those seven million homes yet to make the switch [to digital television], it needs to be clear that the benefits of digital television do not need to equal ‘pay television’.”

The BBC is concerned that 27 per cent of homes – about 6.75 million households – cannot receive Freeview. It argued that viewers may feel forced into taking pay-TV for channels already paid for through the licence fee.

Unlike FreeView, a free satellite service can carry hundreds of channels, and there are no capacity constraints on high definition (HD) content. Freeview is expected to be able to carry only five HD channels, handing a competitive advantage to cable and satellite.

BSkyB, 39.1 per cent owned by News Corporation, parent company of The Times, also provides its own free satellite service, called Freesat from Sky, for a one-off connection fee of £150. A BBC-backed service is likely to be priced at a similar level. The satellite broadcaster declined to comment yesterday, but was keen to ensure that any licence fee-payers’ money was not used to subsidise an attack on its core revenues.

The BBC conducted only a limited analysis into the impact on pay-TV companies, but it did produce one forecast that showed that the new service could be used in 2.5 million homes if there was “a strong HD channel lineup”. Without such a service, the BBC’s own freesat proposition could be at risk of failure, with only 500,000 households buying the kit.

Earlier this year, Ofcom, the communications regulator, offered little comfort for broadcasters hoping to launch HD channels on Freeview when it said that it would refuse to reserve any spectrum for the purpose. With the frequencies now available to the highest bidder, the BBC will not be able to outbid commercial concerns to win the spectrum.

The BBC Trust will hold a short 28-day consultation before reaching a final decision, although no material change is anticipated.

Sat Wars

BBC

Freesat

Digital satellite

High Definition

One-off upfront payment for range of receiver options £150

Channels to include BBC, ITV and C4

UK coverage: 96-99%

Take-up: Est 2.5m by 2012

FREEVIEW

Digital terrestrial

High Definition unlikely prior to 2012

One-off payment for range of reciever options (£30-£200)

40 plus channels including all BBC, C4 C4C4 4 and FIVE

UK coverage: 75%

Current take-up: 7m

VIRGIN MEDIA

Analogue/ digital cable

High Definition but only on-demand at present

Various subscription packages (£15.50 to £29.50 per month)

Various channel and telephone packages

UK coverage: 50%

Current take-up: 3.3m (2.9m digital)

BSKYB

Sky Pay packages*

Digital satellite

High Definition

Various subscriptions packages (£15-£42.50 per month)

Channels include: various packages on top of Freesat from Sky

UK coverage: 99%

Current take-up: 7.8m

* Sky also offers a Freesat service

Source: BBC Trust

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