ITV licence fee to be slashed

BROADCASTING group ITV was today offered deep cuts in its licence fee to help it cope with the challenge of the digital age. Industry regulator Ofcom is proposing to slash the cost of ITV's dozen licences, including GMTV, to less than £80m this year - down from the £215m it paid in 2004.

Ofcom also paved the way for further reductions in licence fee payments beyond this year if advertising revenues come under pressure as more households turn to digital. The move affects ITV plc and companies which have franchises that use the Channel 3 network such as Scottish TV owner SMG and Ulster TV.

Including the Five channel, the licence fee will be about £90 million this year against £180 million under the terms of the previous licence deal. ITV welcomed the changes, which it said would boost their programme budget and come after months of lobbying for a shake-up of a licence fee system that dated back to the time when it managed the sole commercial television station in the UK.

Central to its complaints was the rise in digital television, which tempted audiences away from its analogue ITV1 channel and put advertising revenues under pressure. ITV said it was unfairly disadvantaged compared with rivals such as Five, which paid less than £20m for its licence last year, and Channel 4, the BBC and BSkyB, which were not required to pay anything at all.

Media reports this week said ITV could abandon its licences for public service broadcasting if Ofcom failed to cut the fee significantly. Chief executive Charles Allen said the successful review of licence fee terms was critical to ensuring ITV had the firepower to meet the challenge of digital television.

In addition to ITV1, the group owns 75% of the GMTV breakfast channel and has a quartet of digital stations in ITV2, ITV3, ITV4 the ITV News Channel. It has pledged to invest about £1bn in programming this year. However, Mr Allen said: 'The modernisation of ITV regulation is not complete, with a number of important issues still to be addressed.'

These included the renewal of the BBC Charter renewal, a review of the advertising market by Ofcom and the development of a new funding model for commercial public sector broadcasting, he said.

Broadcasters have until July 25 to tell Ofcom that they wish to accept the new terms for the licence fees, which are collected by the regulator on behalf of the Treasury.The new terms have already been accepted by Ulster TV, which broadcasts on the ITV network in Northern Ireland. SMG, which owns the Scottish TV and Grampian TV franchises, said its licence fee payments would fall by up to £5 million this year to between £1m and £1.5m.

Andrew Flanagan, chief executive of SMG, said: 'We're pleased that Ofcom has recognised that in the increasingly competitive world of multi-channel television our licence fee costs had to come down.'