ITV could hand back Channel 3 licences

ITV is looking at whether to hand back its eleven Channel 3 licences to Ofcom, freeing itself from public service obligations, according to a report.

The broadcaster could potentially turn off its analogue terrestrial stations and make major changes to its programming, which are currently dependent on approval from the regulator.

For example, ITV is currently awaiting approval for changes to regional news that would save up to £40m, and it has been refused permission to reduce children's programming on several occasions. The changes could cut costs and would allow ITV1 to air more popular shows that generate greater revenue at the expense of dropping its public service output. However, handing back the licences at this point could cost the broadcaster up to £100m.

Giving up the licences would also mean the channel losing its Ofcom-protected gifted third slot on electronic programme guides.

MediaGuardian reported that ITV was looking at the potential costs and benefits of the idea. Investors are said to be putting pressure on executive chairman Michael Grade as ITV's share price continues to fall.

The value of the licences for delivering viewers and advertising proceeds is falling rapidly and will all-but disappear as the analogue terrestrial signal is switched off region-by-region between now and 2013.

Nonetheless, ITV would be risking a large chunk of viewers if it ceased off analogue broadcasting early. At the end of last year, 34% of television sets remained reliant on analogue. Among over 65s, 28% had still not converted their main set.

The regulatory process by which ITV could hand back the licences is also unclear, and the suggestion highlights the urgency of the ongoing review of public service broadcasting by Ofcom and the government.