Blair calls in City to advise on future of ITV Digital

Downing Street has called in leading City experts to advise it on the future of ITV Digital, the possible failure of which threatens the Government's plans to cut off the analog signal in the next few years.

It is understood that leading analysts from the Square Mile have been invited to talks with the Prime Minister's advisers. They have been quizzed on the state of the advertising market, what solution could be found for ITV Digital, and general cross-media ownership rules.

The Government plans to switch off the analog signal between 2006 and 2010 and then sell on this spectrum.

The Downing Street talks add to speculation that the Government is preparing itself for the failure of ITV Digital, the Carlton-Granada joint venture which provides digital television without the need for a satellite dish. But a political source cautioned that the Government was not in the business of bailing out companies.

However, it could help ease the situation for ITV Digital by changing regulations and providing incentives for other companies, especially the BBC and British Telecom, to come to the aid of ITV Digital. The involvement of BSkyB, its rival digital platform, would offer the most obvious solution but this is seen as politically untenable.

"The Government wants to encourage digital conversion. Whether that is through pay TV or free-to-air services is immaterial," the source said.

Many in the City have cast doubt on the ITV Digital business plan and are convinced that Carlton and Granada want to cut their losses. Neil Blackley, of Merrill Lynch, said: "There is a market for dish-phobics but it is not big enough to make ITV Digital viable as a stand-alone platform."

Separately, the Government announced yesterday that it will publish next month a consultation paper asking for views on how to regulate media ownership. The move was seen as the first step toward freeing media ownership laws and analysts said the news would delight the media tycoon, Rupert Murdoch. One observer suggested that it might allow his Sky satellite service to take over Channel 5.

The Secretary of State for Culture, Tessa Jowell, said the paper will cover the principles behind the need for reform and propose options for change. Current regulations place severe restrictions on the market share players are permitted and cross-media ownership. She said: "There will be new and exciting opportunities for competition, and we are determined that British companies should be able to take advantage. It may require a different approach to regulation in new markets."