Prebble blamed a number of factors for the demise of OnDigital/ITV Digital and laid many of them at the government's door. He pointed out that Rupert Murdoch's set-top give-away would have been regarded as anti-competitive in some countries. Being forced to follow suit doubled OnDigital's funding requirement.

The company also had to contend with signal and reception problems, which Prebble estimates cost them 750,000 subscribers and meant they could reach only 40% of homes instead of a projected 70%. Piracy was another problem. Their encryption codes were cracked and put on the internet, costing the company a further £100m.

The final nail in the coffin came when ITV Digital paid £315m for rights to screen Football League games over three years. Lacking the glamour of the Premier League football garnered by Sky, the games weren't enough to pull in the audiences. As ITV Digital's losses mounted, it attempted to renegotiate this contract but the Football League wouldn't play ball. Earlier this year, Carlton and Granada finally pulled the plug on ITV Digital.

ITV Digital's demise was a further victory for BSkyB whose digital satellite platform easily dominates the market for digital pay-TV.

Until the DTTV debacle is resolved, BSkyB's only competitors are the struggling cable platform companies NTL and Telewest - not that they offer much in the way of competition.

The cable companies have been beset by their own financial problems resulting from an impossibly fractured infrastructure and outdated technology imposed when the Conservatives first started cabling up Britain in the 1980s. NTL has filed for Chapter 11 bankruptcy in the US as part of a survival plan while Telewest recently announced first quarter net losses of £166m and 1,500 job cuts.

Both NTL and Telewest are putting a brave face on their troubles - maintaining that they will soon begin to reap the benefits of their extensive investment in the cable infrastructure. But some analysts believe that a merger between the two companies may yet be the only way out of their difficulties.

Meanwhile, BSkyB remains triumphant. By the end of 2001, ITC figures recorded that 36.7% of UK household had some form of digital television. Of these, Sky supplied a mighty 23.3% compared with 8.1% for cable and 5.2% for DTTV (ITV Digital).

BSkyB's third quarter results, published in March this year, reflected this dominant position. The company had added another 171,000 subscribers to its digital satellite services - bringing the total to nearly 5.9m - and its operating profits were up 33% to £129m.

Even the victorious BSkyB faces its challenges though. The number of people signing up for digital television in Britain is slowing down, partly because Britain already has the highest uptake of digital TV in Europe. It seems that many of those who remain firmly analogue are simply not interested in digital TV. The confidence-shaking fall of ITV Digital has not helped.

According to surveys by media research company Ipsos-RSL, six out of 10 people who do not have digital television say that 'nothing' would change their mind about getting it. In the week after ITV Digital went down, their Digital Audience Research Tracking (DART) study suggested that only 3% of analogue homes planned to switch to digital in the coming year, with 45% of refuseniks saying they were satisfied with existing analogue services.

'The uptake of subscriptions is definitely beginning to falter,' says Martin Bell, spokesman for the Digital Television Group which represents industry interests, including manufacturers and broadcasters. 'The question now is how we persuade those people who aren't yet signed up to make the switch to digital.'

One answer, supported by the BBC's director-general Greg Dyke, is that DTTV should become a 'free to view' platform. In May this year, he told the Advertising Association: 'Our research shows there are more than 5m consumers out there interested in acquiring more television, but not pay television. More than 30% of the population don't want and won't get pay-TV. Given the government's aim to switch off the analogue signal by the end of the decade, this is a serious problem.'

Viewers who wanted this increased offering of free channels could either buy an integrated digital TV set - and the price difference between those and analogue sets is falling all the time - or one of the cheap top-set converters coming on to the market this year. For under £100, they could then enjoy a far wider range of free programmes than the five currently available on terrestrial TV.

There are problems with this scenario, however - not least in getting the broadcasters to decide on what should be provided free. For example, the commercial companies are increasingly wary that the BBC is going beyond its public service remit to encourage the growth of digital television and using its unique funding to encroach on their territory.

The government has acknowledged these concerns. Back in March, the BBC asked for permission to launch its youth channel, BBC3. Tessa Jowell demanded evidence about the likely impact on commercial channels. The ITC estimated that BBC3 would cost rivals £25m a year in lost revenue. BBC research puts the figure at £4m. A decision has yet to be made but the signs are not good. 'Now is not the time to impose a new, publicly-funded service on a fragile and competitive market without being certain of the likely result,' said Jowell.

As we went to press, the ITC was inviting applications for the DTTV licences relinquished by ITV Digital. It has confirmed that it has received applications from all the main terrestrial broadcasters. One option is that they will, as Greg Dyke has suggested, form a coalition offering free to air channels - including the existing free channels plus several more, if the relevant broadcasters can be persuaded to make material available from Sky One, E4 and UK Gold.

The terrestrial broadcasters are likely to support such a move, since it would cut their dependence on BSkyB or the cable companies to distribute their programmes when the analogue broadcasting signal is eventually turned off.

It will no doubt appeal to the government too. Without a DTTV service that is either predominantly or entirely free to view, it's difficult to see how it will ever achieve its target of analogue switch-off and secure its longawaited digital television windfall.

[1993] ITC mounts first public demonstration of digital terrestrial TV

[1996] Broadcasting Act sets out the framework for digital TV in Britain

[1997] British Digital Broadcasting, a consortium consisting of BSkyB, Carlton and Granada, wins three digital multiplex licences; six months later, the regulator asks BSkyB to leave because of anti-competition concerns

[1998] BSkyB launches its digital satellite service (in October), shortly followed by the DDTV service launch from OnDigital, the renamed BDB (November)

[1999] Telewest and NTL launch digital cable TV services; BSkyB reaches 1m subscribers; secretary of state announces 2010 as probable cut-off date for analogue TV

[2000] BSkyB reaches 5m subscribers

[2001] OnDigital reaches 1m subscribers, and rebrands as ITV Digital; Sky turns off its analogue service

[2002] Pace launch a £100 set-top box giving access to a basic package of free digital channels; ITV Digital goes into administration, unable to fulfil its contract with the Football League, and is put up for sale; NTL files for Chapter 11 bankruptcy; Telewest announces pre-tax losses of £167m; Sky reaches 5.9m subscribers

Digital TV has many advantages over the 'analogue' transmission system in use for the past 70-odd years.

TV programmes are 'coded' into a digital stream of ones and noughts, like a computer. This digital information gives better quality pictures and sound than analogue signals and also allows viewers to interact with their TVs - choosing the camera angle for football matches and so on.

Digital signals can be transmitted by cable, satellite, existing TV aerial or high-speed telephone line (see below). They are then converted back into pictures and sound - either by a separate decoder or one built into the TV (an integrated digital set).

The digital stream takes up less capacity in the airwaves, so that the space needed in the past for just one analogue channel can now carry five, six or seven different programmes.

To date, there are four main 'platforms' on which viewers in the UK can receive digital TV signals in their home:

Digital satellite TV is supplied by Sky through a satellite mini-dish and 'digi-box'.

Digital cable TV is currently supplied by two companies, NTL and Telewest, through a set-top box.

Digital terrestrial TV (DTTV) is supplied through the existing aerial and a set-top box. It was provided by ITV Digital (and OnDigital before them).

Digital ADSL TV can be received via a high speed digital internet connection through a standard telephone line (limited to trial areas at present).