Channel 5 is alive but the losers are kicking

City & Business

CHRISTMAS 1992 brought nothing but sacks of coal for ill-fated Thames TV. Just as it was winding down, handing control of London's weekday airwaves to Carlton, the Independent Television Commission (ITC) dashed what seemed its last broadcasting hope. A politically inspired franchise loss, many thought, following the storm over its Death on the Rock documentary about the killing of three IRA terrorists in Gibraltar, had led to the loss of its Channel 3 licence. Then the ITC booted its twitching body into the grave, denying Thames Channel 5, Britain's fifth terrestrial channel. The irony: in 1992, Thames was the only bidder, offering just pounds 1,000 a year, but its bid did not stack up financially.

On Friday, the corpse came back to life. Christmas came early for Thames - now Pearson TV - as the ITC's second bite at C5 degenerated into further farce. The irony this time: Pearson-led Channel 5 Broadcasting's (C5B) pounds 22m a year bid was way below UKTV's pounds 36m and fronted, to boot, by Greg Dyke, former boss of Thames' weekend rival, LWT.

The ITC insists, after five months' deliberation and a week's tense prevarication, that its 10-member board was unanimous in ruling out UKTV, led by Canada's CanWest and Lovejoy producer SelecTV. Yet cries of "establishment fix" by both UKTV and Virgin, which Pearson matched to the last penny (more of that later), have a familiar and plausible ring.

Both were able to maintain a service. Financing was not a problem, the ITC said. Instead, both failed that highly subjective holy of holies, "the quality test". Despite UKTV's having twice as many independent producers as C5B, the ITC pulled it up over its "limited range of suppliers". Despite Virgin's radio success, and backing from Hollywood's Paramount studio, the ITC said record-breaking Richard Branson showed "little sign of innovation".

News and sport, or lack of, seem to have played a key role. Yet the ITC hardly kicked up a fuss when ITV ditched Dickie Davies and World of Sport. And there is a serious argument whether Virgin's proposed short news bulletins on C5 show more innovative thinking than more of the same: the long, repetitive broadcasts already shown on the BBC, ITV and C4.

None of this in any way suggests C5B will not provide a worthy service, starting in 1997 and reaching 70 per cent of the UK population over its 10-year franchise. Its mix of entertainment, sport, religion, news from ITN and the inevitable soaps mirrors conventional - and popular - ITV.

But hardly innovative, cynics say, so cut out the bull. After 1992, in perhaps its last big decision, the ITC can hardly afford another fiasco, the argument goes. So exclude UKTV over financial fears and - as we report below - SelecTV's uncertain future. Richard Branson is also hardly on ITC chairman Sir George Russell's, or Heritage Secretary Virginia Bottomley's, Christmas card lists. This may be just sour grapes, but TV insiders point out that Sir George also chairs Camelot, butt of Virgin's we-told-you- so attacks on the Lottery's excessive profits. After Virgin lost on quality, safe bet Pearson et al had a clear run against BSkyB's token pounds 2m bid, the last horse in the race.

Rupert Murdoch, though, is the only loser not crying into flat champagne. While C5 will spend millions retuning Britain's video-recorders, BSkyB is busy preparing the ground for the real, digital TV revolution yet to come. On Monday, the BBC - working with BT - also presents its pitch to analysts for more of the Government's planned 18 digital channels.

Serious hurdles remain for digital - not least who will pay for the 40 million set-top boxes at perhaps pounds 300 a throw - but the prospect does muddy the waters over C5's real worth.

In the meantime, UKTV and Virgin may be spitting blood. But a judicial review is unlikely to go ahead because "quality" is so subjective a ground.

A "smoking loose end" remains, however. Back in May, both C5B and Virgin amazingly bid exactly pounds 22,002,000 each. C5B has now said there will be no newcomers to its consortium but, despite previous assurances, the suspicion of collusion still lingers. An ITC spokes- man put it quite clearly on Friday: "Should any collusion be subsequently proved, we reserve the right to withdraw the licence. We have put on record what the consequences will be."

Greed at the Grid

ANOTHER, more protracted, farce lurched towards its conclusion this week. On Wednesday, the National Grid - or "National Greed" - finally unveiled details of its pounds 3.5bn on-off flotation, due next month. Though well-hashed, a flick through the press clippings reveals a boardroom tale of how not to lead by example, which is well worth re-telling.

In 1990, just before the electricity industry was privatised, National Grid directors were granted options over shares as "compensation" for perks given to other power bosses. The Grid - namely, the wires and pylons that have a monopoly over electricity transmission in the UK - was to remain private, owned by the 12 regional electricity companies (RECs) that were floated off.

Last year, four Grid directors already stood to make a total of pounds 2m on those options, twice as much as they had paid. Many of the "phantom shares" had, indeed, already been cashed in to a special company trust netting pounds 650,000. Further revelations followed thick and fast: large pay rises; share transfers to wives to save tax; pounds 850,000 of special dividends, not through merit, but purely down to the mechanics of how the Grid is to be floated.

Two directors finally bowed to pressure last week, saying they would donate all or part of their dividend windfalls to charity. Most would say well they might. Grid bosses have always complained they should be judged by the same yardstick as other REC directors. And so they have. Millions made in options because the industry was sold cheaply - the Grid was valued at just pounds 1.2bn in 1990 - are not so much incentives as handouts.

Winning innovations

FINALLY, on an upbeat and not unrelated note, congratulations to former Innovations editor Nuala Moran after winning BT's 1995 "Technology Journalist of the Year" award for a piece titled "Digital Smell of Success" which appeared in this section last year.

Patrick Hosking returns from leave next week.