Freeview: Former BBC boss Greg Dyke charts its rise and rise

Freeview, the free digital television service which turns five on Thursday, has 13 million users

On Thursday evening, a small group of people will be meeting up to mark the fifth anniversary of the launch of one of the most remarkable, if unlikely, success stories in recent British broadcasting history – they are the people who created Freeview.

Although working at the BBC at the time, most involved were not typical BBC "types" – many had worked in other organisations before joining the BBC and most have since left to forward their careers in other places. But what this disparate bunch of 30 or so people achieved in less than nine months back in 2003 changed the face of television in Britain. It meant that today the majority of the population have digital television, most have access to 30-odd free channels and the Government's plan for the digital switchover became a reality.

Now, the chances of a group of people at the BBC, of all places, creating the fastest-ever take-up of a new electronic device in Britain is unlikely. But that is what happened and the reality of the Freeview story is that, without the engineering talent, the management energy and, most of all, the marketing power of the BBC, digital terrestrial television (DTT) would have withered away. Instead, it has become a massive success story.

The story of Freeview had its origins in the early 1990s when the idea of DTT emerged as an exciting new way of delivering digital programming through traditional aerials and, as a result, a way of enabling Britain to switch off the analogue signal some time in the future.

As the Government developed its plans for DTT over the decade, it was decided that the existing broadcasters – the BBC, ITV, Channel 4 and Five – would be given additional "gifted" DTT spectrum as a right, but that the rest of the DTT spectrum would be allocated by the old Independent Television Commission.

The two largest ITV companies, Carlton and Granada, joined up with the satellite pay broadcaster BSkyB to bid for most of the new licences on offer and their consortium – ONdigital as it was called – won the bid on the basis that they were going to set up a new pay-television system.

But things began to go wrong even before the service was launched. The European Commission ruled that it was anti-competitive for BSkyB to be involved as a shareholder as it already dominated the satellite pay-television business in Britain. So instead of having the most powerful pay-television player in Britain as a partner, ONdigital had it as an enemy. It wasn't a fair fight and it was murdered by BSkyB, which simply had too much money and muscle for the fledgling ONdigital to compete. Oddly, the company changed its name from ONdigital to ITV Digital when it was in dire economic trouble, which must go down in history as one of the worst branding decisions of all time.

ONdigital's original business plan predicted that the maximum to be spent before the business started making money was £350m. After it had lost £1.2bn, Granada and Carlton finally pulled the plug and ITV Digital went bust in early 2002. It was then that the BBC team came up with the idea for Freeview.

The first task was to win the DTT broadcasting licences that ITV Digital had handed back to the Independent Television Commission when the company went bust. Freeview's pitch was pretty simple. ITV Digital had failed for a series of reasons. Firstly, the technology was not robust but the BBC engineers knew not only how to fix that but also how to increase the coverage of DTT so it could be received by 70 per cent of homes.

Secondly, it failed because it went head-to-head with BSkyB in the pay-television market. Freeview was not going to offer a pay service, so that would not be a problem.

Thirdly, ITV Digital had got involved in buying expensive rights. Freeview would not be doing that as it was only a distribution system, the rights risk belonged to the channel providers. Finally, ITV Digital's cost structure was too high. Freeview's was to be much lower.

That's not to say there weren't problems. The BBC could not use all the available capacity which ITV Digital had given up – it was already being criticised for having started six digital channels and it did not want and could not afford to start more – but, after the failure of ITV Digital, other broadcasters were not exactly rushing to embrace the idea of Freeview.

Both Charles Allen at ITV and Mark Thompson, the then chief executive at Channel 4, turned down the opportunity to join the group. They thought more free-to-air channels would challenge the revenue base of their existing channels. These decisions were to cost their organisations dearly later on, when both decided to embrace Freeview. They are now paying £10m a year to buy spectrum they could have had for free if they had joined the initial bid.

At the BBC, we got a break when BSkyB said it wanted to provide three channels. As director-general, I was keen on BSkyB joining us because it meant it would be inside the proverbial tent rather than criticising us from outside (although I have never really worked out quite why BSkyB wanted in because I always thought Freeview was likely to undermine its own basic-tier pay business).

Once we had won the licences, we moved very fast, which is unusual for a publicly-owned organisation. ITV Digital had gone bust in early 2002, Freeview was awarded the licences in July the same year and was launched on 30 October 2002 – five years ago this week. So, why has Freeview been so successful? Basically, it was a simple idea (a lot of people wanted more television but just did not want to pay for it) but a lot of good ideas fail, so why didn't this?

Five years on, I would argue that the key to Freeview's success was the marketing power of the BBC. It was the BBC's marketing department which came up with the selling idea "more telly but no contract" but the real key to Freeview's success was that we could promote it right across the BBC's services. We could effectively advertise, for free, to millions of viewers and listeners the fact that there was a new, cheap way of receiving all the BBC's services, including the new digital television and radio channels.

So, add a good idea to an advertising budget which would have cost many millions if we had had to pay for it, and the chances of success were pretty good from the start. However, even the BBC team was shocked by the speed and scale of the take-up. Our plan said that by now there would be four to five million Freeview homes. But the number is double that and, in all, a total of 13 million Freeview boxes or integrated television sets have been sold. A broadcasting revolution had happened.

Greg Dyke was director-general of the BBC from 2000-2004