In addition to all BBC and ITV programme content, Freesat will offer digital radio services, an electronic programme guide and interactive services, in addition to dozens of other free-to-air channels yet to be announced.
Insiders say it could offer more channels than the 30 currently on Freeview.
The service, which users can take up after paying a one-off fee like Freeview, could also benefit by targeting areas where digital terrestrial signals are limited -- making it a seriously financially viable operation.
The service would operate in addition to Freeview and could seriously dent Sky's ambition of winning 10m customers by 2008. The project is scheduled to be up and running in the first half of 2006.
BSkyB launched its free-to-air satellite service, also called FreeSat and which offers viewers 140 channels for a one-off payment of £150, in October with little fanfare. The service was launched to rival Freeview.
Charles Allen, chief executive of ITV, said: "We want our channels to be available to as many people as possible, regardless of technological and geographical constraints."
Mark Thompson, director-general of the BBC, said: "This is great news for viewers. It paves the way to provide subscription-free digital television across the whole country."
Separately, ITV said it will unencrypt its channels on digital satellite television over the next few months.
In the long run, ITV will be in a better position to negotiate its carriage deal with satellite broadcaster BSkyB. ITV currently pays Sky £17m a year to encrypt its signals, but is looking for a better deal similar to the BBC's £4m a year.
ITV released its first-half results today with pre-tax profit up to £154m against £45m for the same period last year. Revenue before joint ventures for the period was up 9% at £1.04bn.
Total advertising revenue for its family of channels was up 3.4% but flagship channel ITV1 was down 3.5% due to a tough summer, losing viewers to BBC One and Channel 4.
Allen said: "These results show very clearly that ITV has rapidly come of age as a balanced and diverse broadcaster. ITV is now a genuine family of channels united under a strong brand."
ITV also said it was to plug its pension deficit, with a £325m lump-sum pension payment. This could pave the way for a potential takeover -- one of the main reasons a consortium led by US media giant Time Warner pulled out of ITV takeover talks was the pension deficit.
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