Uncertain future for fifth channel: The new land-based TV service was doomed by recession. Michael Leapman reports

YESTERDAY'S decision not to grant a licence for a fifth land- based television channel does not put paid to the idea for good, but it will not be revived until the economy looks brighter.

When the Government, in the 1990 Broadcasting Act, charged the Independent Television Commission with doing all it could to get a fifth channel launched, the length and depth of the recession - and its effect on advertising revenues - was not foreseen.

It was never going to be easy. The only part of the broadcasting spectrum available for a new channel is the one to which most video cassette recorders are tuned. A new broadcaster would have to pay an estimated pounds 75m for retuning millions of VCRs - even in homes that did not invest in the new aerial needed to receive Channel 5.

Moreover, only 74 per cent of the country would have been able to receive signals. One of the regions excluded would have been the wealthy South and South-east, where advertising revenue is high.

Such were the difficulties that when the ITC invited applications for the franchise last April there was only one eventual bidder: Channel Five Holdings, a consortium headed by Thames Television, which had just lost its London weekday franchise. Knowing it would probably have the field to itself, the consortium bid a minimum pounds 1,000.

Its plan was for a string of 'city stations' based on Moses Znaimer's City TV in Toronto. It would have begun in London next summer, then Manchester, until it reached its maximum 74 per cent coverage. Programmes would have been cheap: mainly news and community affairs, films and music videos.

Even with such a low bid and low costs the economic climate made it hard for Thames to raise money to support its pounds 150m bid.

The ITC twice extended the deadline for the submission of firm financial proposals, but one of its grounds for rejecting the bid yesterday was its belief that the pledges of money were still not firm enough. The multinational media conglomerate Time Warner, which would have been the joint chief shareholder, was not able to give guarantees for the whole of its projected 35 per cent stake.

This is the second blow the ITC has delivered to Thames in 15 months. Last year it awarded its Channel 3 franchise to Carlton, which takes over on 1 January.

Thames, a publicly-quoted company whose majority shareholder is Thorn EMI, will stay in business as an independent producer, with programmes such as The Bill and Minder, but its staff will fall from 1,600 to 140. Yesterday its share price sank.

The advertising industry was keen to see the new channel as it would have provided a competing advertising medium and led to cuts in the cost of air time. The existing commercial broadcasters, for the same reason, were delighted with yesterday's decision.