MAI revives hopes for Channel 5: Pearson joins Hollick to bid for licence Consortium claims it can avoid retuning all VCRs

LORD Hollick's MAI group has formed a consortium with Pearson, publisher of the Financial Times, and the US entertainment group Time Warner, to bid for the licence to run Channel 5 if it is re-advertised.

Later this month the board of the industry regulator, the Independent Television Commission, will consider the fate of the frequencies originally designated to carry C5.

It has spent some months digesting 76 submissions in response to a consultation paper it issued last year on the future of the embryonic channel.

The C5 franchise was first advertised in mid-1992. The only bidder was a consortium led by Thames TV, which offered a nominal pounds 1,000. Thames's programme library was subsequently bought by Pearson after the London broadcaster later lost its franchise.

Although Thames passed the 'quality threshold' for programming, the ITC believed the application was not financially viable and rejected it.

Its fears stemmed from the fact that use of the frequencies allocated for C5 would have led to interference with up to 7 million video recorders. Re-tuning all UK video recorders so as to avoid the problem would have cost up to pounds 75m.

Boffins at the ITC and at the MAI consortium now believe they have found a way to rejig the frequencies and avoid the majority of the interference, vastly lowering the up-front cost.

'A number of suggestions have been put forward, including some by the ITC itself, which would mean more efficient use of the frequencies, which would significantly reduce the amount of re-tuning,' said Lord Hollick, MAI's managing director. 'I hope the ITC will now opt to re-advertise C5 on a basis which reduces the scale and complexity of the re-tuning,' he added.

Frank Barlow, Pearson's managing director, said: 'The problem has become much less costly. It's of a completely different order of magnitude now.'

As the owner of ITV stations - Meridian and soon Anglia - MAI cannot hold more than 20 per cent of any company that might gain the franchise for C5.

Its interest in C5 is partly driven by the fact that the channel would cover only two thirds of the UK, and its own regional ITV stations would be relatively unaffected by the competition.

The ITC consultation document set out three options for the use of C5 frequencies. These were the re-advertising of a single licence on much the same basis as last year; creating a series of local television stations or using the frequencies to allow the phasing in of digital television, which offers either better quality or more channels.

Although digital television has attracted considerable attention, other frequencies are available for it and the ITC is thought unlikely to want to be seen to be stifling choice by keeping further frequencies in reserve for it. Digital television is unlikely to be widely available until the end of the century.

The second option - local stations - is also problematical in that it would need fresh legislation at a time when media ownership is under review.

The MAI bid likely to be put forward, if the ITC does decide to re- advertise, would envisage a national channel. As with the previous Thames bid, at certain points in the day the channel would 'opt out' to city stations in places like London, Manchester, Birmingham and Glasgow. As well as offering a more local service than the regionally based ITV companies, this would enable the channel to sell airtime and sponsorship to small advertisers who would not otherwise be able to afford regional ITV rates.

The consortium is interested in attracting other members, although Moses Znaimer, the Canadian behind the original Thames bid, is understood not to be involved.

The Office of Fair Trading is to seek undertakings concerning advertising airtime sales from MAI in relation to its bid for Anglia television. The undertakings are likely to be similar to those given by Granada in relation to LWT, and Carlton in relation to Central.

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