Ofcom 'rejects' C4 stake in BBC Worldwide

Ofcom will reject proposals for Channel 4 to take a stake in BBC Worldwide in order to help plug its post-2012 funding gap, according to leaked documents seen by The Guardian.

The channel has told Ofcom that it expects to face an annual deficit of between £100m-£150m due to rising costs and falling advertising revenues; and that such a gap would result in it being unable to provide a public service broadcasting alternative to the BBC.

Various solutions, including plugging the financial hole with money "top sliced" from the television licence fee, have been proposed, and it is understood that Ofcom favours breaking the direct link between the BBC and the licence fee after 2012.

An alternative proposal, which according to the leaked document has been abandoned, would have seen dividends from the BBC's commercial arm shared between the BBC's public service function and Channel 4.

It is reported that Ofcom's document said that such an idea presented numerous "practical obstacles" and "significant legal problems".

The regulator denied that any decisions on the future of public service broadcasting in the UK have been reached, describing the document seen by the press as an "iniital draft of some very early analysis". It plans to publish its second consultation on the subject in September.