He told the National Heritage Select Committee, which is considering the future of the BBC, that it would be very sad if national sporting events such as Wimbledon, which Sky is hoping to win for 1995, were only shown on subscription.
During the debate leading up to the Broadcasting Act, Mr Grade said Sky was given special status by cross-media ownership rules and a lower level of programme regulation because it was expected to provide viewers with more choice. But now BSkyB was outbidding terrestrial television and then selling the events at vast amounts to subscribers: its package of channels costs pounds 19.99 a month, three times the BBC licence fee.
The Department of National Heritage is believed to be concerned that the public could lose major sporting events. The Broadcasting Act only rules that they cannot be sold on a pay-per-view service.
Mr Grade asked why BSkyB did not invest in new events to widen choice for viewers, or commission more British-made films. The company was taking close to pounds 500m a year from subscribers, but was putting nothing back into British films, he said. The one exception was Sky News, which was a tremendous service.
Mr Grade said that despite the growth of cable and satellite television and global media companies, he had 'absolute blind faith' in the power of British-made original programmes to attract and hold viewers, pointing to the continuing success of big American networks.
While several MPs questioned the future of the licence fee, and the ability of poor people and pensioners to pay a statutory levy, Mr Grade said that he 'believed fundamentally' in the licence fee. 'The BBC is one of the great institutions of this country' and should not be put at risk, he said.
Mr Grade (who was unusually applauded by MPs on the committee) was followed by Sir Peter Gibbings, the chairman of Anglia Television, and Nigel Walmsley, the chief executive of Carlton Television. They warned of the dangers of allowing the BBC to take advertising as a means of reducing the licence fee, saying it would close them down.
The committee was also concerned about the rapid changes in broadcasting; the general view was that the present system of raising the licence fee could not continue much beyond this century. 'We may be on the final page of the final chapter of the book,' Gerald Kaufman, the chairman, said.
Sir Peter called for the moratorium on hostile takeovers of ITV companies to be extended beyond the New Year, to allow for a proper consideration of all the changes.
Mr Walmsley said, however, that ITV had to develop, it could not be preserved in aspic and mergers between ITV companies should take place. Asked whether London franchises should continue to be split between Carlton on weekdays and LWT at weekends, Mr Walmsley said: 'No. It is a very artificial distinction put in place years ago.'
The select committee will take evidence next week from Marmaduke Hussey, chairman of the BBC, and John Birt, the director-general. Its report will influence a White Paper on the corporation due in the New Year. The BBC is still waiting to hear from the Government whether the licence fee will be raised in line with inflation.
Channel 4 is to start broadcasting through the night on Friday/Saturday and Saturday/Sunday from the end of November. The service, between 2-3am and 6am, will be aimed at young people.