Worries over Murdoch dog Channel 5 auction

BRITAIN'S television industry is expected to erupt into activity after the bids for a new terrestrial channel are opened on Tuesday. Producers aligned with the consortia that hand in low bids will be scrambling to sell their programmes to the likely winner, considered by most pundits to be the group led by Rupert Murdoch's BSkyB.

Fear that Channel 5 might fall into the hands of the Australian-born US media mogul has already stirred up opposition politicians and media critics. Many want the auction delayed while new media cross-ownership rules are introduced. But far from restricting Mr Murdoch, these are likely to free him and his rivals to invest even more. The last time the Government changed the rules, it was to allow ITV regional franchises to purchase each other.

"The reason for all the hoo-ha about media cross-ownership is News International," said Professor Nicholas Garnham, of Westminster University's Centre for Communication and Information Studies. "It's a code word for Rupert Murdoch."

Under the existing rules, News International, through its stake in BSkyB, is able to take a bigger role in the consortium bidding for Channel 5 than rival newspaper groups involved in much smaller ITV franchises.

"The problem the Government faces is that they want something broadly acceptable to the media industry that won't totally outrage the civil liberties groups that oppose media concentration," said Professor Garnham. "I think their instincts will be to loosen the rules, but that doesn't solve the problem of Mr Murdoch. That's why it has been delayed. They don't know what to do."

Channel 5 has already been delayed once before. In 1992, the Independent Television Commission ruled that a group led by Thames Television that put in the only bid - for £1,000 a year - did not have enough financial commitment.

Mr Murdoch is not guaranteed success. Observers argue that he has a history of throwing money at projects, and that he has more to gain from snapping up the new channel than the leaders of the two rival consortia, one led by Richard Branson's Virgin Group, the other by Pearson, the publisher of the Financial Times. But carrying his partners with him will be harder. Evidence emerged last week that the consortium, and Granada TV in particular, had not yet agreed on how much it would bid. Analysts' estimates range widely, from £10m a year to £25m.

His big advantage is that the channel would nicely complement his existing satellite broadcasting empire. He would, for example, be able to avoid political criticism when bidding to cover large sporting events such as Wimbledon by promising to air it live to satellite subscribers and an hour or two later to terrestrial viewers. The larger audience would also give him more clout when buying Hollywood films. And he would be able to keep new players out of the market.

But the licence is not without risks. Channel 5 will serve only 70 per cent of the UK market, and one of the missing chunks will be the lucrative South-east, making it less attractive to advertisers. It is not expected to attract enough new advertisers to increase significantly the total amount paid to ITV, Channel 4 and the new broadcaster.

New technology will also increase viewer choice dramatically before the end of the licence period in 10 years. It was a realistic analysis of those risks that persuaded the US network NBC and Mirror Group, part owner of the Independent on Sunday, to pull out of the race last week.