Communications minister assesses options

Blighty TV industryites are proposing changes that could prompt one of the biggest shakeups in British broadcasting history.

There is mounting speculation that U.S. media groups are interested in collaborating in a new pubcaster that would merge the government’s cash-strapped pubcaster Channel 4 and the BBC’s commercial arm, BBC Worldwide.

However, it has emerged that struggling commercial giant ITV has drawn up competing plans for a three-way merger with C4 and pan-European broadcaster RTL’s struggling terrestrial web Five.

The C4/BBCW matchup is one of the proposals in the interim Digital Britain report, unveiled by government communications minister Stephen Carter last month. It aims to shape the future of the TV industry in the digital age.

ITV’s plan is expected to be among other comments in its response to the report.

On Wednesday, speaking in London, Carter said the government had been approached by private sector parties “that look on paper to have come up with ideas that could work” but he would not reveal names.

Disney, NBC Universal and Discovery all run channels in Blighty. As traditional business models increasingly come under pressure, it makes sense for them to weigh future opportunities in the U.K.

C4, which claims it faces a funding gap of up to £150 million ($216 million) a year by 2012 unless it gets a bailout, prefers the linkup with BBC Worldwide.

It is unclear whether ITV’s merger idea is a serious proposition or a negotiating tactic as it lobbies to end government restrictions on advertising sales and product placement.

ITV, which is expected to announce a new wave of cuts next week as the worsening U.K. ad market takes its toll, is seeking radical solutions to the problem of providing well-funded, sustainable competition to the BBC.

A tie-up between ITV, C4 and Five — the three main advertising-funded webs — is unlikely to be approved by policymakers because of competition issues.

It is certain to be opposed by News Corp.’s BSkyB, Blighty’s dominant paybox, whose subscription model is so far standing up well despite the poor state of the economy.

Five is expected to announce radical cost-cutting measures next week with perhaps as much as a third of its staffers being pinkslipped.

Bobbie Whiteman in Hollywood contributed to this report.

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