Ofcom said that the ITV should provide "high-quality" regional news because it considered it "the most significant and valued aspect of ITV1's regional output."
ITV will be allowed to axe 90 minutes of non-news regional output, down from three hours, out of peak hours as part of its new public service broadcasting obligations, enabling it to make more money from advertising.
The news means ITV may axe religious shows, children's programming and certain documentaries under the new terms.
Ofcom has also increased ITV's quota for out of London production to 50%, representing £40m of programming spent in the regions a year.
The PSB review also revealed that Channel 4 does not have an "immediate case for direct public funding" and should develop cost-saving initiatives, expand its commercial ventures and alliances to meet its proposed £100m shortfall in funding.
Ofcom will monitor Channel 4's performance and finances with a further review outlined for 2006/2007.
In an increasing digital age, Ofcom has proposed a new Public Service Publisher, based on core characteristics of digital television because the analogue model of PSB will not survive until 2012, when analogue switch-off comes into force.
The PSP will use new-media platforms such as broadband, mobile and digital TV to deliver high-quality content.
Elsewhere, the BBC should remain "the cornerstone of PSB -- strong, independent and properly funded by the licence fee".
Five should remain market-led and should focus on original UK production.
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