BBC and BSkyB fall out over history channel

The launch of Freeview, the new digital terrestrial TV service, yesterday was marred by a rift between the venture's backers, BBC and BSkyB, over one of the channels it shows.

Sky is unhappy about UK History, a new channel produced for Freeview by BBC Worldwide, the commercial arm of the BBC. That station directly competes with the History Channel, a pay-TV service half owned by Sky.

The History Channel is challenging the legality of UK History, which it claims was "secretly" given the go-ahead by the Department for Culture with no consultation in 2000. The History Channel has discovered that the BBC was given approval to launch an unlimited number of commercial channels, a development that rivals said would allow the corporation to challenge all commercial rivals.

Geoff Metzger, the managing director of the History Channel, said: "Where has the market failed here that means the BBC is needed? The historical documentaries sector is served very well." Chris Smith, the Secretary of State when that approval was given in 2000, said in a letter to The History Channel that the BBC's new station appeared to contravene the rules and called for a government investigation.

Mr Smith, who is still an MP, said the commercial and public service activities of the BBC had to be kept separate, while UK History, which shows advertisements, seemed to cross the line. Freeview provides more than 20 free-to-air channels to anyone with a decoder box.

"The BBC should not be able to cross-subsidise or support those [commercial] operations from the licence fee.... I wonder why they are not deeming the new digital terrestrial service as part of their public service output? It is being largely funded by the licence fee," Mr Smith said in the letter.

The History Channel, which is available in 7 million homes through cable and satellite, said it is considering taking the matter to a judicial review but first it needed to see the government approval papers, which were not being released by the department.

The fall-out between the BBC and Sky is the second big disagreement between the broadcasters.They are also at loggerheads over the "conditional access" fees that the BBC must pay to have its channels available on the Sky satellite platform.

The BBC confirmed that there were no restrictions on the number of commercial channels that it could launch, though it added that there were guidelines it must adhere to.

Mr Metzger said UK History had a monopoly on all BBC history programmes. He said he was concerned at the prices that UK History paid the BBC for these programmes, which were not transparent. National Geographic, another pay-TV station, also said it was concerned at the BBC's commercial activities.

UK History was launched by UK TV, a joint venture between BBC Worldwide and Telewest. UK TV is planning another Freeview commercial channel next year, Freestyle, which will show lifestyle programmes. A spokeswoman for BBC Worldwide denied UK History was cross-subsidised by the licence fee. "We pay market rates for any programmes that we acquire [from the BBC archive]," she added.