End of ITV Digital's impossible dream

Collapse throws fresh doubt over planned analogue switch-off

The BSkyB chief executive, Tony Ball, memorably castigated his counterparts at ITV Digital earlier this year for their inability to run a bath, let alone a television company. Last night, with water pouring from the cracks in the enamel, it was the administrator who finally pulled the plug.

As the lights went out at Marco Polo House, the jinxed Battersea headquarters of the doomed TV operator, the broadcasting industry was counting the cost of a digital dream that few, apart from the misguided executives who ran the service and myopic officials in Whitehall, ever believed could succeed.

Digital terrestrial television (DTT) - the means by which digital television was beamed into viewers' homes through existing aerials - was meant to be the cheap-and-cheerful option for those who wanted neither a dish nor hundreds of channels. But as a proposition it was flawed: those who embraced the brave new world went the whole hog, signing up to the hundreds of channels and top-notch interactivity of Sky Digital. The rest were content with the four or five channels they had already.

With its aggressive marketing strategy and attractive set of services, Sky is likely to be the biggest winner from the ITV fiasco. Its top offering of 226 television channels, 58 radio networks and associated interactive services has long been superior to its competitors and it will spare no effort in hoovering up as many of the 700,000 remaining ITV Digital subscribers as quickly as possible.

Some will migrate to the struggling cable networks NTL and Telewest, who have been beset by their own financial problems resulting from an impossibly fractured structure and outdated technology imposed when the Conservatives first started cabling up Britain in the 1980s.

Others will stick with their ITV Digital boxes for the time being: it is likely that the administrator will continue to broadcast the free services such as the five terrestrial channels plus the BBC's digital channels and ITV2 until the future of digital terrestrial television is sorted out.

A few will simply give up on multi-channel television altogether. All will be frustrated, and none more than those who pre-paid their subscriptions and will join ITV Digital's long list of creditors.

As for digital terrestrial television as a platform, there are doubts whether it can survive at all. Britain is unique in that it has three competing platforms - satellite, cable and digital terrestrial. Spain has recently abandoned its digital terrestrial network and many believe Britain should do the same. Despite officially sticking to the aspiration to turn off the analogue television signal between 2006 and 2010, ministers will be forced into a radical reappraisal of their plan for a digital Britain. The timescale has long been ridiculed, and few credible analysts now believe that the Treasury's hoped-for cash windfall from selling off the analogue signal for other technological uses will come much before 2020, if ever.

Comments made on Monday by the former Channel 5 chief executive, David Elstein, look remarkably prescient. He estimated it could take 27 years and cost £3.3bn to complete the task of simply checking that every household in the country had the right technology so that the analogue signal could be switched off. Even when the task was complete, there was no evidence that anyone would want to buy the signal, following the financial disasters that befell mobile phone operators after they overbid for the last set of spectrum to become available.

"The government [should] now put DTT on the back burner and quietly abandon, not just its wholly incredible target dates for analogue switch-off but analogue switch-off itself as an objective. There are no obvious spectrum shortages or willing buyers."

But, ostrich-like, the regulatory regime grinds on and applications have been invited by the independent television commission for the licences handed back last night by ITV Digital. Whoever wins the licences - assuming anyone wants them - will have to start from scratch. The most likely outcome will be a free-to-air coalition, advocated by the BBC, that will include the existing free channels plus several others, if broadcasters such as Sky, Channel 4 and UKTV can be persuaded to make material available from Sky One, E4 and UK Gold.

Bruised veterans of the last big multi-channel battle joined by Sky - the grudge match with British Satellite Broadcasting, purveyors of the squarial and former occupants of the same Thamesside offices now being vacated by ITV Digital - saw it all coming.

Then, as now, it was shortsighted policy makers who must share part of the blame. In the mid-1990s, competition authorities ejected BSkyB from the original consortium that won the right to broadcast a digital service direct to viewers' aerials. Rupert Murdoch's company already enjoyed a virtual monopoly in satellite television after seeing off BSB, while the minnows of the cable network were not much of a threat. Mr Murdoch, it was argued, would enjoy too great an interest in digital television.

Proving that patience yields its rewards, the old pro's tentacles now stretch further than ever.