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The Freesat service, which will compete with a similar service from Sky, will provide subscription-free digital television via satellite mainly to viewers in parts of the UK currently unable to access the free digital terrestrial television (DTT) service Freeview.

ITV has also announced that it is set to start broadcasting its channels ‘in the clear’ on digital satellite TV rather than using Sky’s encryption service - meaning all its channels, including regional variations, will be available all over the country.

ITV chief executive Charles Allen said: “As the UK's largest and most popular commercial broadcaster we want our channels to be available to as many people as possible, regardless of technological and geographical constraints.

“As we move from an analogue to a digital environment, Freesat - and Freeview - will enable every family in the UK to enjoy a wide range of quality channels for free.”

BBC director-general Mark Thompson said: "We welcome ITV’s intention to take all its channels into the clear on satellite, and also welcome them as partners in the project to develop a consumer friendly, subscription-free satellite proposition.

"This is great news for viewers. It paves the way to provide subscription-free digital television across the whole country.

The service, which aims to be operational by the first half of 2006, will initially carry all ITV and BBC free-to-view digital services including digital television, digital radio, electronic programme guide, and interactive services, plus dozens of other free-to-air channels.

A Sky spokesman pointed out that the pay TV giant already offers a limited number of channels on a free digital satellite service.

“Freesat services already form part of Sky's strategy for continued pay-TV growth,” he said. “As analogue switch-off approaches, we welcome increased promotion of satellite reception by ITV and the BBC.”

A Channel 4 spokesman said the broadcaster was interested in the development but not in a position to get involved.

“We broadly welcome any development that offers more UK homes the chance to receive the full range of digital services and creates more competition between platforms. We will watch how Freesat develops with interest,” he said.

“However, we have carriage agreements for all our channels with Sky Digital and we have a number of years to run on these deals. We’re happy with our current distribution deals with Sky and have no present plans to review these arrangements.”

By Caitlin Fitzsimmons