ITV threat to join BBC in satellite service if Sky refuses to cut fees

ITV has threatened to team up with the BBC to launch a free- to-air satellite service if BSkyB does not cut its charges for the commercial broadcaster.

ITV has threatened to team up with the BBC to launch a free- to-air satellite service if BSkyB does not cut its charges for the commercial broadcaster.

Talks will resume this week between ITV and BSkyB to try to settle the dispute, which is being investigated by regulator Ofcom. But it looks increasingly likely that the row will hasten the launch of the "Freesat" satellite service later this year, which will allow viewers to watch satellite television without paying a subscription fee.

In an effort to reach a settlement, ITV executives have told BSkyB it will not join the BBC's planned Freesat service if its broadcasting charges for the Sky platform are cut. BSkyB executives refused the offer outright.

Under its existing contract, ITV pays BSkyB £17m a year for a regionalisation service which allows ITV to vary its programming schedule for different parts of the country.

As part of the contract, BSkyB, which controls satellite decoding services, also decodes the scrambled signal which ITV broadcasts. This means only Sky viewers can watch ITV via satellite, preventing satellite viewers in Europe watching illegally. This is important when ITV broadcasts some programmes, such as sport, usually on condition that only viewers in the UK can watch them.

ITV could decide to transmit an unscrambled signal and broadcast "in the clear" anyway, which would allow it to be broadcast on the Freesat service. It can only broadcast one signal, which has to be either scrambled or "in the clear".

ITV is unhappy that the BBC is paying a much lower figure, reported to be around £4m a year, for the regionalisation service for its channels on Sky. Earlier this month, the broadcaster lodged an official complaint, saying the pricing was not transparent. BSkyB has denied this. Ofcom will complete its investigation by April.