on the ITC's new responsibilities

"They're tits, but they are very professional tits." That's the (off-the-record and off-colour) view of one of the ITV companies about the industry watchdog, the Independent Television Commission. A bit harsh, true, but a bit of (back-handed?) compliment as well, given that professionalism will be sorely needed in the next two or so years, as the ITC takes up three issues of central importance to the future of commercial broadcasting in the UK.

The first challenge is to determine exactly how to apply new powers accorded to the ITC in the new Broadcasting Act, under which the watchdog can consider the "public interest" of cross-media mergers. It has already announced it intends to look at the first such combination: Scottish Television's purchase of Caledonian Publishing. Last week, ITC commissioners met to discuss the "process" by which the public interest test will be considered, the ITC confirmed.

Intriguingly, the next merger to be reviewed could well be one that most of us had assumed had already passed all the hurdles: the marriage of Lord Hollick's MAI and Lord Stevens' United News & Media. That controversial deal went ahead in advance of the introduction of more liberal ownership rules in the media sector. To get around the letter of the law, the two companies used so-called "deadlock" arrangements - which, ostensibly, mean that no one "controls" the merged company. Once the new Broadcasting Act comes into force on 1 November, the deadlock provisions will have to be dropped, and the United News & Media combine, which groups newspapers such as the Daily Express and two ITV licences, Anglia and Meridian, will become a "normal" company.

At that point, the deal will be open to scrutiny by the ITC under the public interest test. I'm not suggesting the merger will be unravelled, but it will be annoying to Lords Hollick and Stevens that they have to go through yet another regulatory hoop.

The second big issue on the ITC's plate is the much-mooted, still hazy, plan to rebalance the lop-sided payments made by ITV companies to the Treasury, in the form of tax and their cash bids. Most ITV companies agree that the current licences, which were awarded under a closed auction system, should be altered. It makes no sense that Yorkshire-Tyne Tees has to pay pounds 62m a year to Treasury while Central pays just pounds 2,000.

The ITC has the power to renegotiate the licences six years into the 10-year term. That will mean determining the fair payment level before 1 January, 1999.

But the renegotiation will put at risk some of the pounds 400m received by the Treasury every year from ITV companies. Only the high bidders - YTT, HTV, Carlton, for example - are likely to apply for a renegotiated cash bid. The low payers - Scottish and Central, particularly - will be happy to maintain their risible contributions until the end of the licence period in 2002.

The ITC, as an "independent" statutory body, does not have to make any concession to political exigency. But it is likely to be sensitive to the Treasury's needs as it formulates its approach to licence renegotiation. It will be a tightrope indeed.

The third challenge is probably the most intractable. The ITC, haplessly, is in charge of preparing the way for the introduction of digital terrestrial television. The ITV companies are not at all interested at this stage, and nor is Channel 4. The BBC says it is, but its actions - it has already indicated it will be available on digital satellite, which launches before DTT - speak louder than words. Can the ITC engineer some steadfast commitments from the main commercial broadcasters to ensure DTT's future? Hard slog.

Serious consideration of the big issues will be slowed by the departure of Sir George Russell, the ITC chairman, and the time it takes to find a suitable replacement. One possible candidate, David Elstein, is now out of the running, having jumped ship from Rupert Murdoch's BSkyB to Channel 5, the new TV service scheduled for launch early in 1997. Indeed, most TV executives don't expect progress on the "fair payments" debate until well into next year.

And speaking of Channel 5, just what will happen if the retuning campaign now under way does not reach its onerous target of supplying 90 per cent of those households capable of receiving the signal? Will the ITC step in and punish the licence holders? No way. Indeed, the ITC seems positively serene about the prospect of a late launch. Having already been much criticised for the way in which it awarded the licence in the first place, the regulator cannot afford to weather another controversy. The answer will be a certain laxity about the target launch date, which is probably going to be later than 1 January, given early indications of retuning delays. Another option, which the ITC may well accept, is a "roll-out" of the service, whereby households in those parts of the country unaffected by the retuning problem - parts of the North, for example - get the service on time, while the rest of the nation has to wait. But Channel 5's David Elstein doesn't much like that option, because it could mean some people having to miss the first few episodes of the channel's new soap if they happen to live in the wrong region. Or just as bad, it could mean repeating the early episodes for those who join late, at the risk of annoying those who have already seen the programmes. Advertisers won't like a roll-out either. Elstein professes to be quite comfortable with the 1 January launch date, but says he wouldn't be too bothered by a slippage of a week or two. You heard it here first.