Submission is in response to Digital report

LONDON — Pay TV giant BSkyB has proposed that it should work with pubcaster Channel 4 to run a portfolio of new pay channels.

The Murdoch-backed satcaster makes the suggestion in an eight-page submission to Stephen Carter, the government minister who is attempting to come up with a blueprint for the future of U.K. broadcasting.

In its submission in response to his Digital Britain report, released last month, BSkyB is highly critical of C4, state owned but funded by advertising, which claims it faces a funding gap of up to £150 million ($207 million).

The paybox proposes a package of self-help measures for C4, including creating a portfolio of channels to be distributed by BSkyB.

BSkyB argues that other operators would be keen to invest in a suite of C4 pay webs and that, “potentially, a deal could be agreed very quickly,” enabling C4 to generate new coin and secure a profitable future while remaining a public service web.

The satcaster pours cold water on C4’s claims of financial hardship and points out that it is sitting on reserves of $623 million.

“Given the strength of its balance sheet and liquidity position, Channel 4 is better placed than many other U.K. companies to ride out the recession,” said BSkyB.

It claims the web has wasted $372 million on “unprofitable non-core commercial activities,” including an abortive investment in digital radio, and wants the government to prevent it making further poor investments.

Carter and media regulator Ofcom have proposed setting up a public service content org involving C4 and possibly private operators like Five, the cash-strapped U.K. web owned by RTL.

But BSkyB, drawing attention to its own contribution to public service TV via channels like Sky News and Sky Arts, said that the government should encourage C4 to diversify and create new revenue streams, rather than coming up with “even more Byzantine structural solutions.”

C4 announced today that CEO Andy Duncan and director of television Kevin Lygo have volunteered to have their pay cut by up to 35% to help the web weather the recession.

When it emerged last year that Duncan was paid $1.6 million in 2007 there was widespread criticism.

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