Greg Dyke on broadcasting

ITV can't lose as BSkyB's satellite monopoly crumbles

This is a crucial week for the future of how we receive television in this country. On Saturday, ITV's contract with BSkyB ends and the future of satellite television could well depend on what ITV decides to do.

Will it follow the lead set by the BBC 18 months ago and take its service unencrypted, which would mean you would no longer need a Sky card to receive ITV on satellite television, or will it negotiate a new deal with the Murdoch-run operation? Either way, ITV will be a financial winner.

All this might sound a bit dramatic but the stakes are pretty high, especially for BSkyB, as the future of their monopoly position on satellite television in the UK is up for grabs. If ITV decides to go unencrypted, Channels 4 and Five are almost certain to follow when their current deals with BSkyB end. If that happens, British viewers will be able to do what you can already do on continental Europe: go into the supermarket, buy a satellite kit for something like £60 - the price in a Brussels hypermarket last weekend - and overnight you are free from BSkyB. You will install your own dish, plug in your own box and you will be able to receive up to 90 free channels, including all the main terrestrial channels, without having any relationship at all with Sky.

This will mean BSkyB's domination of the satellite TV market in Britain will, in effect, be over because they will have no idea who these new consumers are, who won't have Sky cards and who cannot easily be upgraded to Sky's pay services. There will also be a new electronic programme guide which Sky will no longer be able to dominate.

This is a far cry from the last time ITV was negotiating their contract four years ago. Because ITV was late to go on to Sky Digital, they were forced to pay £17 million a year to BSkyB. ITV had little option but to pay, but they immediately appealed to the then regulator Oftel, claiming BSkyB was abusing its monopoly position and charging too much. In a puzzling decision, Oftel supported BSkyB and said £17m a year was a fair price. BSkyB was jubilant but their victory was short lived. The Oftel ruling set off alarm bells everywhere else, particularly at the BBC. If BSkyB could charge ITV £17m, they could charge the BBC the same when their contract ended, three times what the BBC was then paying.

I was the director general at the time and we decided that BSkyB's monopoly had to be broken, so we switched our services on to a new satellite and broke away from BSkyB. You would no longer need a BSkyB card to receive the BBC's services. BSkyB responded in the way you'd expect of a Murdoch operation. They played tough. They threatened us by saying they would take BBC1 and BBC2 off the two best slots on their electronic programme guide - 101 and 102. We said, 'You can't do that', and appealed to the Independent Television Commission (ITC).

Then something strange happened: BSkyB began to back off and make friendly noises. We later discovered that the ITC had found something in their investigation which BSkyB didn't want made public, so they were keen to settle with the BBC. Sadly, I still don't know what the ITC found but it made a big difference. We kept slots 101 and 102, BBC3 and BBC4 were given 115 and 116 on the same guide - slots which we'd been trying to get for ages - and BSkyB were very helpful to the BBC over the new FA football deal.

What will ITV do? They have launched ITV3 unencrypted, so maybe they will be brave enough to take on BSkyB. Whatever they do, it will be good financial news for ITV. Instead of having to pay BSkyB £17m a year, they will either pay nothing if they go totally unencrypted or at the most £2m if they do what the BBC did and go unencrypted while buying a service from Sky to ensure that Sky homes receive the right regional service.

So, in just four years BSkyB will have gone from being all powerful to needing ITV to stay on their system. How the mighty have fallen.

The best spinners in town

You have to admire the PR people at BSkyB. They managed to spin the fact that BSkyB added 62,000 new subscribers in the three months to the end of September as a success story. How? Because they let it be known around the City in advance that the figure was likely to be below 50,000. That way, when the results came out, the City was pleasantly surprised.

Of course, the really interesting comparison is with the number of subscribers BSkyB added in the same quarter last year. The figure then was 170,000, so this year's figure was just over a third of last year's, and yet this was seen as good news. By comparison, 659,000 Freeview boxes were sold in the same three-month period this year. So the numbers going digital via Freeview outsold BSkyB by more than 10 to one.

Mind you, BSkyB is a cash machine, so we shouldn't start feeling sorry for Murdoch and Son just yet.