Franchises for the delivery of television and telephone services to up to three million new homes are expected to be awarded by the Government over the next 18 months, according to the Cable Television Association.
It expects a rush of applications for the franchises from North American and other overseas companies, which already dominate the British cable TV industry.
The start of bidding for a new round of cable TV franchises coincides with a growing dispute between the cable companies and British Telecom over BT's demands for permission to broadcast television down its telephone lines.
The cable TV industry will this week urge the Trade and Industry Select Committee to recommend that the restriction on BT stays in place. The limitation lasts until 2001 but may be reviewed in 1998.
Unlike existing cable TV operators, those winning new franchises will be allowed to use a mixture of technologies including radio and cable. On top of an agreed payment for the new franchise, they will also have to pay a percentage of revenues from their television services.
The levy is on a sliding scale running from zero in the first five years of the licence to 2 per cent for the second five years, rising to 6 per cent for the third and final five years of the 15-year licences.
The first franchise, for west Kent, has already been advertised and has so far attracted bids of pounds 1.6m and pounds 1.14m respectively from Eurobell and Encom.
Both companies already hold UK cable TV franchises and are largely owned by overseas groups. One of the most lucrative franchise areas due for advertisement is Northern Ireland, with bidders expected to include Cable and Wireless.
Richard Woollam, director- general of the CTA, said that some cable companies would try to gain the new franchises to fill gaps in their existing coverage, enabling them to link contiguous franchises and so provide regional television and telephone services.
Nynex of the US is already building a regional fibre optic network linking its franchises in North-west England. Several London cable operators are joining forces to provide seamless television and telephone services in and around the capital.
Existing cable franchises will ultimately cover 70 per cent of the population and the new franchises should bring that to 85 per cent, the CTA says.
The cable TV industry is already seen as the greatest threat to BT in local telephony. Investment in the networks is expected to reach pounds 1.2bn in this year alone.
Analysts say the ability of cable companies to offer telephone services as well as TV has transformed the economics of the industry.