The channel, using programming from Five's Milkshake children's strand, will broadcast hit shows such as 'Hi-5', 'Monkey Makes' and 'Bear in the Big Blue House', which are currently on the Milkshake strand between 6am and 9am.
Nick Wilson, Five's controller of children's programming, is heading the operation. He is planning to commission low-cost factual programming and co-productions, as well as cartoon favourites.
Wilson first outlined his vision for Five's children strand at the Voice of Listener & Viewer conference in November last year.
"We are looking at rolling out Milkshake. We have to develop other outlets. We would like to have a presence on the children's section of the electronic programme guide," he said.
So far, Five is the only terrestrial broadcaster not to have a digital presence. The BBC has BBC Three and BBC Four, as well as its two children's channels CBBC and CBeebies, which Five's launch will go up against.
ITV has ITV2 and ITV3, while Channel 4 has E4, E4+1, FilmFour and is launching More4 later in the year.
The children's market is one of the most crowded in the digital spectrum with competition not only from the BBC, but from: Nickelodeon with Nick Jnr and Nickelodeon; Jetix; and Time Warner with Cartoon Network and Toonami.
Wilson could not be contacted at the time of publication but a Five spokeswoman confirmed plans for new channel were going ahead.
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