View from City Road: Viability of C5 is not ITC's problem

Despite its justifiable pique at the Government's half-way house verdict on Channel 5, it is a reasonable bet that, come October, the Independent Television Commission will be offering a licence to run the new television station.

It will be second time around for C5. Last time the ITC rejected the only bidder, a consortium led by Thames Television, on the grounds that its business plan was uneconomic because of the much disputed pounds 70m estimate of costs associated with the need to retune video recorders.

This time the focus is as likely to be on the viability of its advertising projections. The decision to offer frequencies covering 50-60 per cent of the country makes C5 look a lot less attractive. A wider geographical coverage would have enabled C5 to seek local advertising - the MAI / Pearson / Time Warner consortium, for instance, was planning regular 'opt outs' to city-based local stations for both programming and advertising.

The idea was to go for the cheap and cheerful local advertising market, which currently cannot afford television - the ITV regions are too big, and hence too expensive, to be much use to an individual car distributor or a retailer. Local programming and advertising might have complemented, rather than competed with, the existing ITV structure. The local approach may not now be possible - at least until sufficient frequencies are obtained to give 60 per cent coverage.

Without such alternative sources of advertising, C5 might not be able to compete with ITV, something that is clearly troubling the ITC. While the ITC is right to press the Government to make C5's prospects better, it should be wary of a re-run of 1992. With hindsight, it looks as though the ITC was wrong to second-guess commercial companies about the viability of the re- tuning process. While this continues to be a disputed subject, it looks as though it will not prove nearly as expensive as the ITC originally thought.

It would be a shame if this time the ITC made the same mistake about whether C5's advertising base would be viable. Regulators should stick to criteria of programming quality rather than worry too much about the commercial viability of business plans. As many start-ups, from Eurotunnel to BSkyB and Direct Line have proved, initial projects rarely live up - or down - to expectations. If sensible companies are prepared to hazard their hard cash with such ventures, no quango should stop them.