BSkyB revives pitch for BBC pay service

BSkyB, Rupert Murdoch's satellite broadcaster, is continuing to press for an equity stake in the new BBC-Flextech pay-TV channels, in return for carrying the services on its satellite system, the Independent has learned.

Negotiations to secure satellite carriage for up to eight pay-TV channels are set to resume in the new year, with BSkyB's chief executive, Sam Chisholm, determined to take up to 30 per cent in the venture. To date, both the BBC and Flextech, the US-controlled pay-TV packager, have resisted BSkyB's offer of an equity investment, preferring to reach a carriage-only agreement with the UK's leading pay broadcaster.

The new channels are to cost pounds 140m over four years to develop, with Flextech carrying the financial burden. The BBC would supply programming.

The drawn-out negotiations have had the effect of delaying parallel talks between BSkyB and the new Channel 5, which is also eager to reach a carriage agreement for satellite distribution. Channel 5 is keen to supplement its near-national coverage of about 80 per cent, which will be reached using a terrestrial signal, with side carriage agreements on both satellite and cable systems.

"Until BSkyB has decided what it is going to do about [BBC-Flextech], they are not able to assign transponder space to us," said David Elstein, chief executive of Channel 5 Broadcasting. Channel 5, owned by Pearson, United News & Media and Luxembourg-based CLT, is also looking into securing a transponder on its own, using Pearson's close ties with Astra, the satellite company. Pearson has 6.5 per cent of Astra.

Mr Elstein said the company had not yet decided whether to offer the new channel to all satellite subscribers in the UK (through the so-called "soft encryption" option) or only to those who have smart cards.

BSkyB has 4 million subscribers in the UK, who use a smart card to watch 40 pay-TV channels. Another 300,000 households have satellite dishes and decoders, but have not paid subscription fees for smart-card services and so do not receive any Sky programming.

The Flextech-BBC deal, announced late this year, is part of the BBC's plans to take the public service broadcaster into the digital age. In addition to the new channels, the BBC plans to make its core services, BBC1 and BBC2, available on all available digital platforms, supplemented by a 24-hour news channel, an educational channel and other viewer services.