Public service TV stations must pay Sky charges

The Government has hinted that it may provide some tax benefits to compensate public service broadcasters after rejecting their demand that the BBC, ITV and Channel 4 be carried free on BSkyB.

The Communications Bill, published yesterday, also introduced a special provision for ministers to intervene in newspaper mergers and acquisitions on public interest grounds. Newspapers (and the defence industry in other legislation) were made an exception to the new mergers scrutiny regime, which takes economic regulation of deals out of the hands of ministers. Industry sources have said the provision is aimed at stopping individuals or companies that the Government deems "undesirable", for political or social reasons, from buying newspapers.

The Government not only maintained the existing regime for carriage on Sky, it imposed an additional obligation on the public service broadcasters to put their content on the satellite platform.

However, a clause in the Bill suggested that the public service broadcasters may be able to recoup the money they pay to Sky from a reduction in the licence fees paid to Government every year, as a tax for using the airwaves.

ITV pays £17m a year for carriage on Sky, while the BBC, which currently pays less, has its contract up for renegotiation next year. The public service broadcasters fear an ever rising cost for Sky carriage.

In the draft Bill, the Government had suggested that it would impose a "must carry" obligation on Sky for the public service broadcasters, which wanted the satellite operation to be forced to take their channels for a nominal fee. The BBC said: "We are very disappointed that even the modest provisions contained in the draft Bill for a "must offer, must carry" regime on digital satellite, which is the dominant digital platform, have been removed.

"We believe that the Bill needs to implement a "must carry" regime covering all digital platforms, from the moment of its implementation."

Sky and the public service broadcasters, led by Greg Dyke, director-general of the BBC, lobbied government hard on the issue. The public service broadcasters fear that, when the analogue signal is switched off, they will be reliant on Sky to reach a large part of the population and the satellite broadcaster can then hold them to ransom.

Channel 4 said: "The 'must carry' and 'must offer' provisions do not yet ensure that public service channels will be carried on satellite at a fair rate in the run-up to digital switchover."

The charges for carriage on Sky are regulated by Oftel, the telecoms regulator, which is charged with making sure the fee is "fair, reasonable and non-discriminatory". The public service broadcasters said this provides inadequate protection.