Although BSkyB has denied it is directly involved in talks. It is understood that Haringey council, trustee of the palace, wants to include the satellite network in any final deal with one of three different consortia with which it is negotiating. Any deal would be worth several million pounds and is said to involve BSkyB building a television studio.
The move would provide BSkyB with a prestigious broadcasting site and generate enormous publicity for any future development at the palace, which would benefit Haringey.
The council is anxious to proceed with a money- spinning private development to make the 123-year-old Ally Pally commercially viable, helping to clear its pounds 55m debt, the largest deficit facing any local authority in the country.
Haringey has shortlisted three developers and the Independent understands that a BSkyB initiative would complement whichever scheme is selected on 10 May.
However, any development needs parliamentary approval and, to reach that stage, liability for the debt - at present spiralling at pounds 16,000 a day - must be settled. The council, seeking to avoid the full debt, is under pressure from Sir Nicholas Lyall, the Attorney General, to show it has managed the palace affairs prudently.
Haringey has run the building and 220-acre park at Muswell Hill through a charitable trust since taking it over from the Greater London Council in 1980. The BSkyB option was discussed at a meeting of the development steering committee last Monday, according to a source close to the council leader Toby Harris, who refused to confirm or deny the satellite network was involved: "The council has approached a large number of organisations about the possibility of their involvement in the future development of the palace. Details are confidential," he said.
BSkyB said Chris Mackenzie, its general manager who would oversee such a scheme, had not talked to Haringey.
However, the source claimed the council has held meetings with BSkyB representatives. "They have been talking about a TV studio and broadcasting museum. The attraction for Sky is Ally Pally's a great site for outside broadcasts. There is prestige attached to it - one in the eye for the BBC."
The three developers shortlisted last month are due to submit detailed proposals by the end of April. The Independent has seen preliminary proposals.
A bid from Mercury Group, believed to be worth more than pounds 25m, includes an autopark, a huge site where customers can buy and test-drive cars, a futuristic lake and an underground shopping centre. Morrison Developments and Champions Leisure propose a multi-activity leisure centre.
Michael Moss, managing director of Alexandra Development, said he wanted to give the palace back to the people by working with the local community. "Our proposal includes an exhibition hall, cinema, hotel and museum of broadcasting," he said.
This is not the first time Haringey has tried to extricate itself from the palace. Schemes have included indoor real-snow ski slopes but every plan has been blocked because of the debt liability.