Further details of the "blue sky thinking" that has been discussed with Lord Carter by ITV have emerged today along with initial reaction from politicians, who could make or break the so-called British TV "mega-merger".
Analysts have estimated that an ITV/Channel 4/Five tie-up would save the three broadcasters £200m per year, but the proposed merger would face massive competition issues.
Uniting the trio would create a group the size of the BBC with a 60%-70% share of the TV advertising market and a 40% share of all viewing.
There are also questions over how serious ITV is about the merger given that it has not discussed its idea with C4, which is understood not to be supportive, and Five, which has declined to comment.
It has emerged that the broadcaster has also floated another option, which would involve changing Channel 4's remit, making it completely publicly funded and without ads, diverting commercial revenue to ITV.
Politicians' reactions have varied from amusement at ITV's chutzpah to concern at the idea's implications for the TV industry.
A senior Whitehall source told The Times "When you receive an idea like this, it would be rude to just to guffaw with laughter", indicating that ITV would be allowed to develop the case for the merger.
Conservative MP John Whittingdale, chairman of the culture, media and sport committee, said: "This raises very serious questions about competition within the television industry in the UK.
"Contemplating joining them together like this would be an absolute last resort."
An ITV spokesman yesterday said the company was engaging in "blue sky thinking" on the request of Lord Carter, who is examining blueprints for the future of Britain's digital media and public service broadcasting sectors.
The spokesman said: "Every broadcaster, along with the government and Ofcom, is ... seeking radical solutions to the platform of how to provide sustainable guaranteed public service competition to the BBC.
"ITV is fully engaged in that debate which must include exploring all options for the future including a number of radical ideas."
Some observers feel that ITV has put forward the mega-merger idea as a bargaining chip and a way to bring its own troubles to the front of politicians' minds.
The spotlight will be on its finances next week when is its annual results are expected to reveal that first quarter ad revenues have fallen 20% and operating profits for 2008 were £200m.
ITV's proposal comes as media analyst Screen Digest updates its view of the advertising markets in the top five European markets and reveals a sorry picture of falling advertising revenues with the UK hit particularly hard.
Screen Digest said prices have hit an all-time low and TV advertising is set to decline by 7.7% and that analogue terrestrial TV will be hit hardest.
It is forecasting ITV1 and Channel 4 to be down 10% in 2009.
Vincent Létang, head of advertising and author of the report, said: "The UK TV advertising market is going to remain sluggish for a number of years and it will take the 2012 London Olympics to provide a strong boost and only then will we see the growth rates we experienced at the beginning of this decade [+6 per cent in 2012].
"Even by the end of 2012, the market will merely be back to its 2003 size [£3.2bn]."
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