BBC the bookies' favourite for digital terrestrial

The BBC-BSkyB alliance is favourite to be awarded the digital terrestrial licences today by the regulator, in a major blow to the rival ITV-Channel 4 consortium.

Betting in media and City circles was firmly on the BBC's proposal for 24 free-to-air channels as the Independent Television Commission met yesterday to decide on the award of the licences vacated by the defunct ITV Digital. The decision is due to be announced at 7.30 this morning. There is also evidence of opinion in government turning against ITV after the broadcaster presided over the ITV Digital débâcle.

One cabinet minister said: "I'd take a very dim view if the ITC allows a company to renege on its financial commitment one day, only to be handed valuable digital assets the next."

Although both the Government and the regulator had earlier indicated that they favoured pay TV on the digital terrestrial platform, which is being offered by ITV-Channel 4, the failure of ITV Digital appears to have discredited the ITV management too far.

Carlton and Granada, the two main ITV companies blew £1bn on ITV Digital and abruptly closed the business earlier this year, owing hundreds of millions of pounds to creditors, including the Football League.

The ITC, and its chief executive Patricia Hodgson, are jockeying for position within Ofcom, the new super-regulator that is being formed, and will not want to make a decision that is out of step with government opinion, according to regulatory experts. The closure of ITV Digital threatened the Government's entire digital strategy, damaging ITV's relationship with Downing Street and the Department of Culture, Media and Sport.

Conor O'Shea, an analyst at BNP Paribas, said: "It would be very difficult on political grounds to give ITV a second chance after all the negative publicity over ITV Digital. But that leaves ITV without a digital strategy. Medium term, I think that's a real concern. The BBC and Sky will control what goes on this platform."

Although the BBC proposition threw up considerable regulatory concerns and it failed to provide any pay-TV element to its bid, it is considered the safest choice for the ITC. The BBC and Sky are the dominant market players.

To placate these concerns, the ITC may attach conditions to a BBC win, over access to the platform for other broadcasters and asking for a commitment to consider adding pay services at a later stage.

Nick Bell, an analyst at Banc of America, said: "A decision [for the BBC] would be indicative of a loss of support in Government circle for Carlton and Granada, with potential negative implications for the timing of a merger between the two."