New channel is pounds 15m over budget ... and it isn't even launched yet

Cost of retuning operation is set to soar as TV company outlines plan for engineers to visit 10 million homes.

The estimated cost of retuning millions of video recorders and televisions to allow reception of the new Channel 5 television signal has risen by at least 25 per cent, sources at Channel 5 Broadcasting conceded yesterday.

The news emerged as Channel 5 unveiled details of its plans to visit nearly 10 million homes in the United Kingdom starting this week, to retune equipment in advance of the launch of the country's fifth and final mainstream television service, due to be on screen early in 1997.

The original retuning budget of pounds 55m, to be borne by the channel's backers, Pearson and United News & Media, could soar to at least pounds 70m, as Channel 5 confirmed yesterday that it would send 7,000 engineers into the field to visit homes, backed up by 380 staff at a state-of-the-art call centre.

The higher budget was deemed necessary following a pilot retuning project just completed in Surrey, which suggested that original plans had been inadequate. It will be met by the channel's owners, and the programming budget of pounds 110m a year will not be affected.

The retuning exercise, necessary to avoid interference from VCR playback signals in nine transmission areas, will be backed by an extensive media campaign featuring 3,000 posters and in-store promotions in Blockbuster Video outlets and at Thorn and Granada rental shops. Granada and Thorn have agreed to retune the equipment that they rent to private homes in the UK.

The Channel 5 signal uses the channel 37 frequency in key areas of the country, which is used by many VCR manufacturers for the playback signal.

Talks are continuing with cable operators, which could lead to special subcontracting deals permitting companies to retune equipment in their own franchises. Retuning is the "crucial first step" in launching Channel 5, Ian Ritchie, the channel's chief executive, said yesterday, promising further details on programming by September.

The service is expected to be dominated by light entertainment, serials and soaps, and will carry 60 per cent original programming, its backers said yesterday at a high-tech unveiling of the retuning plans.

"The retuning exercise will be difficult and it will be very public," Mr Ritchie said. "That is the problem with being a pioneer," he said, paraphrasing the film producer Sam Goldwyn. "You end up with hundreds of arrows in your back."

The retuning programme has already created controversy, following a report in the Independent that the ITV companies, which have most to lose from the introduction of a third commercial mainstream channel, have launched a destabilisation campaign aimed at undermining confidence in the ability of the new service to launch on time and on budget.

According to an independent analysis by Goldman Sachs, the Channel 3 companies could lose as much as pounds 30m in revenues in the first year of Channel 5, depending on how successful the new service is.

Channel 5 executives yesterday dismissed the criticisms of their rivals, and insisted that the service would be launched on time.

Starting next week, retuners will begin a door-to-door campaign, backed up by the promotional campaign and an extensive and comprehensive security programme. All retuners will wear branded uniforms and carry special identification cards. The visits will take no longer than 25 minutes each, and will allow viewers to tune into the new service once it goes "live" next year.

Channel 5 has reached an agreement with the Association of Chiefs of Police to vet all retuning staff, to ensure that none has a criminal record.

Safety issues have been a key consideration, Mr Ritchie said yesterday. "We must manage the security risk, and must ensure that correct information is provided to all householders. That is absolutely crucial."

The door-to-door nature of the retuning exercise has already led some police authorities to warn of the dangers of fraud and crime. Greg Dyke, chief executive of Pearson Television, one of the channel's main backers, famously called the retuning exercise a "burglar's charter" in 1991, when the franchise for the fifth channel was first (and unsuccessfully) tendered.

The licence for the service was awarded last year, following a controversial auction that saw Richard Branson and Rupert Murdoch lose out to the winning consortium.