The Trust has refused permission for local video, arguing that it would not improve services for the public enough to justify either the investment of licence fee funds, or the negative impact on commercial media.
Trust chairman Sir Michael Lyons said: "It is clear from the evidence that, although licence fee payers want better regional and local services from the BBC, this proposal is unlikely to achieve what they want. We also recognise the negative impact that the local video proposition could have on commercial media services, which are valued by the public and are already under pressure.
He added that the BBC's priority should be improving the quality of its existing services, adding that the corporation should focus on providing better quality regional TV news programmes.
"We would expect BBC management to consider carefully the conclusions of this public value test, before returning to us with new proposals," he concluded.
Andrew Harrison, chief executive of RadioCentre, the industry body for commercial radio, said: "The BBC will continue to have an important role in local media markets, but this decision will ensure that that role remains a complementary one, and will give commercial media operators the breathing space to respond flexibly to the changing needs of consumers and advertisers."
Newspaper Society director David Newell said: "We are pleased that the BBC Trust and Ofcom have responded to the industry's concerns and rejected the BBC local video plans for the time being. This is a proposal, which the BBC should never have made and would have severely reduced consumers' media choice and the rich tapestry of local news and information provision in the UK.
Newell added: "We will be seeking an urgent meeting with the secretary of state to discuss the future roles of the BBC, BBC Trust and Ofcom and the current challenges facing regional and local media. We must be on our guard to ensure that the BBC is not allowed to expand its local services by alternative means."
In May, the BBC management submitted proposals to the Trust to introduce an additional local video service, covering news, sport and weather, on enhanced BBC Local websites in 60 areas across the UK, with an additional five Welsh language services. The proposed service was to have employed around 400 staff, with a budget of £68m, covering a four-year period from launch.
The Trust decided that the proposals were a significant change and should be subject to a public value test, including a public value assessment by the Trust and a market impact assessment by Ofcom. Today (21 November), Ofcom's market impact assessment concluded that such a service would have a significant negative impact on commercial providers. Its test found that if the service were launched, annual revenues from existing commercial providers would fall by up to 4%.
The Trust's decision not to approve local video is now open to public consultation until 5 January. The Trust will publish its final decision by 25 February.
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