Greg Dyke on Broadcasting

Why a sunny spell for Freeview means black clouds for Sky

The last seven days have been pretty important in the short but eventful life of Digital Terrestrial Television (DTT) in Britain. First, Channel 4 announced that it was taking its youth channel, E4, out of the Sky pay package and making it available for free on Freeview. And then came the news that ITV was paying £134m for SDN, which would give it a great deal more capacity on Freeview.

The last seven days have been pretty important in the short but eventful life of Digital Terrestrial Television (DTT) in Britain. First, Channel 4 announced that it was taking its youth channel, E4, out of the Sky pay package and making it available for free on Freeview. And then came the news that ITV was paying £134m for SDN, which would give it a great deal more capacity on Freeview.

Both decisions are likely to boost the future of Freeview; both are bad news for Sky; and both demonstrate how important digital free-to-air television has become in just a few years.

I predicted the Channel 4 decision to turn E4 into a free- to-air channel some months ago in this column, but before claiming a great scoop, I should admit that I did so after having lunch with Channel 4's chief executive, Andy Duncan, who made it very clear to me that it was only a matter of time before this happened. The calculation that Channel 4 had to make was not a complicated one. It had to decide whether the additional advertising revenue it gained by being free-to-air in an additional four-and-a-half million Freeview homes was worth more than the subscription income it was receiving from Sky and the cable companies. This week, they decided that it was.

Of course, personalities matter in these decisions and, as one of the half-dozen people at the BBC responsible for the success of Freeview, Andy Duncan, the BBC's former director of marketing, was always likely to favour the move. But there's also a feeling around that a coherent anti-Sky grouping is emerging among the traditional terrestrial broadcasters.

The reason that Channel 4's decision is bad news for Sky is that it gives young people in particular another reason for turning to Freeview rather than to Sky for multi-channel television. Given that Sky was actually one of the founders of Freeview, which probably wouldn't have started without its support, it makes the decision by Sky's former chief executive Tony Ball to support Freeview increasingly questionable.

The sale of SDN to ITV for the enormous price of £134m is also a story of winners and losers. The winners are the owners of SDN (UBM, S4C and Crown Castle), who could be counted in that special group of people who could be described as the luckiest blokes since Ringo. Three years ago, their investment in SDN was dead and buried. ITV Digital had gone bust and digital terrestrial television looked equally dead. It was revived largely by the BBC, and the end result has been a £134m payout for the three shareholders. Lucky boys.

By any judgement, the loser in the whole saga of DTT is ITV. Having lost £1.2bn of its shareholders' money in ITV Digital, Granada and Carlton - now joined as ITV plc - were both offered the chance to be part of the Freeview consortium when it was put together. By joining at the beginning they could have acquired enough DTT spectrum for at least six extra channels, and could have had it for free. They decided against.

Last week, ITV recognised its latest mistake by paying £134m for SDN, which owns one of the six DTT multiplexes. By buying SDN, ITV has effectively bought back some of the spectrum it gave back when ITV Digital went bust, and refused to bid for when Freeview was formed. The problem is that the spectrum that ITV has now acquired is largely let out to other channels such as UKTV Gold, ABC1 and Discovery, so it will have to wait some years before it can use it. It will be interesting to see what ITV does with this new DTT spectrum, assuming that it can get full control of it. With ratings and revenue for ITV 1 in the doldrums, ITV made much of its new free- to-air multi-channel strategy when it announced its 2004 results recently. But some see the acquisition of SDN as ITV's move back into pay television without boosting the revenues of Sky, something that it is not keen to do.

Here is the (bad) news

While ITV is celebrating its 50th anniversary this year, it should look very closely at some audience figures published last week which showed that not only is it no longer Britain's most popular channel - BBC1 took over that mantle a couple of years back - but that it has now lost its stranglehold on regional news viewing.

The figures showed that for the month of March, BBC1's early evening regional news beat ITV in every single region in England for the first time ever. In some areas the BBC's lead was enormous - two-to-one in the South-west - while in others such as the North-east and Kent it was very narrow, but overall the BBC got 60 per cent of the regional news audience, and ITV 40 per cent.

What is interesting is that the BBC's victory in regional news is not as a result of its audiences growing - they have stayed pretty stable. What's happened is that audiences for ITV regional news services have plummeted in recent years.

Now while this might not seem the most exciting news in the world, it is a landmark moment in British television given that ITV was set up as the regional television system in Britain, and that the BBC has been struggling to catch up for 50 years. Figures like these would have been unthinkable even 10 years ago when ITV was still all-powerful, but the collapse of ITV as a federal system has clearly had its impact.