Handing PSP to C4 'would damage Five'

Channel Five must be feeling rather vulnerable at this point of time. A byproduct of the last Conservative Government squeezing every last drop out of the analogue TV spectrum, Channel Five has always had less than perfect analogue signal coverage since it exploited most of the last remaining useable gaps in the transmitter frequency allocations that were originally intended for nationwide coverage of four channels.

So although Channel Five holds a privileged position as a member of the analogue broadcasting 'elite', its audience figures were often compromised by this relative lack of analogue coverage and only the rise of digital broadcasting has enabled Channel Five to reach a larger audience. But with the advent of more channels comes the prospect of increased competition for advertising, and Channel Five's analogue status coupled with its unique position of being more powerful than Sky One yet weaker than Channel 4 makes it a very strong candidate for a takeover.

In a sense, even though Channel 4 has always had a public service remit for which it needs the PSP money in order to continue to fulfil such a remit in the face of dwindling ad revenues, Channel Five's concerns relating to what Channel 4 would do with any surplus revenue generated are partly justified, at least in the short term whilst Channel 4 is still cash-rich and its recent history has been biased towards a much more aggressive commercial agenda. The inevitable failure of the Channel 4-Five merger plan must have been especially disappointing for Five.

However Channel 4 is thinking more about its long term future along with a possible change in its general remit that should move it away from the commercial world of Channel Five. Plus Channel 4 is already significantly more powerful than Five; for one thing it outbid both Five and the BBC for terrestrial rights to The Simpsons, and of course ITV is still a very powerful commercial broadcaster (despite attempts to prove otherwise). And Disney's ABC1 should never be underestimated.

Then there is the might of BSkyB. Channel Five may be performing better than Sky One on paper but that's only one channel versus another, and BSkyB has a whole range of channels plus a subscription income to fall back on. All this makes Channel Five's claim that a extra income for Channel 4 would significantly damage its operations look even more dubious under closer examination, but it is perhaps a sign of its desperation that Five is worrying about such matters in the first place.

So Five is already comprehensively outgunned by its major rivals, but there is some hope for the channel in a digital world. There may well be markets that are ignored by both ITV and BSkyB as they fight for commercial supremacy which may not suit either a potentially revived public agenda of Channel 4 or the conservative values of ABC1's parent company Disney. Avoiding a takeover isn't going to be easy for Channel Five - especially from BSkyB if Freeview becomes even more popular - but it may still be possible, especially if RTL provides further support.

The reality is that Channel 4 really needs extra money from another source in order to preserve some form of public service remit in the middle of the deregulated ITV/BSkyB/Disney crossfire. Of course it is still possible that Five will be taken over by another UK or foreign company (like Viacom) or consortium (like the one rumoured to be interested in ITV), but such a change may further intensify the requirement to 'futureproof' Channel 4.

But it's equally possible that Channel Five is also considering having a significant part of its output funded by Ofcom's PSP in order to help protect its long term future, though Channel 4's UK ownership and corporation status together with its historical track record should make it a much stronger choice for the bulk of public funding despite some people's desire for there to be 'greater competition in the public sector marketplace'. And there is unlikely to be the funds available for both Channel 4 and Five to be supported equally and effectively via a PSP mechanism alone.

All this means that a transition from Channel 4's current status as a public service broadcaster with a commercial agenda - caused by handling its own advertising - to one of an income model based on part commercial/part PSP funding or some other form of public revenue becomes even more important than ever. In terms of general public interest, this is far too important an issue to let one commercial competitor dictate the rules of play, especially as that competitor's concerns may be strongly overshadowed by other factors.