British broadcaster Channel 4 could merge with rival Five or form a partnership with the BBC under proposals from the UK media regulator published today.
In a report aimed at supporting the embattled broadcasting sector, tieups between Channel 4 and Five are seen as one way of creating a stronger alternative to the BBC in producing public service content such as news and children's programming.
Alternatively Channel 4 could link up with the BBC's commercial arm, which publishes TV listings magazine Radio Timesand sells BBC formats such as Strictly Come Dancing, as a way of cutting costs, regulator Ofcom said.
ITV could also be freed from the majority of its public service remit to focus on more commercial programming.
Independent consortiums could provide regional news.
However, Ofcom rejected any suggestion that Channel 4, known for edgy programming such as Big Brotherand for its strong news coverage, should take money directly from the licence fee - a tax on every television-watching household which funds the BBC's programming.
Instead it could use any surplus from the money given to the BBC to help the country's switchover from analogue to digital.
BBC Worldwide is the commercial arm of the BBC and Five is owned by RTL, whose chief executive Gerhard Zeiler welcomed the statement.
"RTL Group welcomes Ofcom's recognition of the important role a combination of Five and Channel 4 could play in the future of public service broadcasting," he said.
"We believe that it is an exciting option that would provide a long term, sustainable solution for the British broadcasting industry."
But Channel 4 has argued a merger of the two would not resolve structural issues within the industry, such as the fact that advertisers are less willing to advertise around public service content.
Channel 4 chief executive Andy Duncan said a partnership with the commercial arm of the BBC would "best meet Ofcom's criteria of strategic logic, scale of synergies and sustainability, as well as serving licence fee payers' interests.
"It would create an exciting new organisation, combining and optimising strong brands, content and distribution, appropriately governed within a competitive system," he said.
The BBC said it recognised it had a role to play in helping others provide public service broadcasting but said it preferred partnerships to a merger.
Ofcom said it had issued its report to address structural changes in the commercial broadcasting sector, such as the digital switchover and pressures on television advertising.
These factors could create a shortfall of up to £235 million ($250 million) per year by 2012 and mean programmes such as regional news, current affairs, British children's programming and some types of drama and documentaries would only be available on the BBC, it said.
"The central challenge is how a strong and historically successful public service broadcasting system can navigate from analogue to digital," Ofcom chief executive Ed Richards said in a statement.
Analysts at UBS said a merger between Channel 4 and Five, or the BBC, could create a stronger competitor for ITV, depending on its remit.
"While headlines of additional funding and savings could help sentiment (for ITV), the reality is that these benefits have been known about for many years and should be in forecasts," they said.
Ofcom said the government would need to take decisions on many of these matters within the next year as the public service broadcasting model was not sustainable.
Reuters