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Sky One, Sky Two, Sky Three and Sky Sports News have been missing from the Virgin Media platform since February 28, affecting the cable TV provider's 3.3m subscribers.

Virgin Media promised on March 5 that it would take court action 30 days from the breakdown in negotiations with Sky if there was no settlement.

Sky and Virgin Media have each retailed the other's channels to their customers. Virgin Media TV channels, such as Living and Bravo, which previously operated under NTL's Flextech division, have been broadcast by Sky to its customers and Sky's basic channels have been broadcast by Virgin Media to its customers.

The proceedings are now also set to address what the Virgin Media calls "onerous rates" imposed by Sky for carriage of Virgin Media TV channels on Sky's own platform.

Any court action will be based on Section 18 of the UK Competition Act 1998 and Article 82 of the EC Treaty, each of which prohibit a company from abusing its dominant position.

Virgin Media claims that nearly 70% of the country's pay-TV subscribers are signed up to Sky and that the satellite broadcaster has engaged in a strategy to stifle competition by using its dominance against Virgin Media.

It also claims that in January, Sky forced it to accept a reduction of approximately 85% in the fees that Sky pays for Virgin Media channels such as Living, Bravo and Trouble, despite audience gains.

According to Virgin Media, in February Sky attempted to double the fees the cable operator pays for retailing Sky's basic channels on the Virgin Media network, despite a reduction in the channels' popularity of about 20% over the last three years. Virgin Media refused the new terms, after which Sky refused to continue to supply its channels to Virgin Media.

Sky has run a marketing campaign aimed at convincing Virgin Media customers to switch to Sky, in order to be able to watch popular Sky One properties such as 'Lost' and '24'.

Steve Burch, Virgin Media chief executive, said: "This dispute is one very specific example of how UK consumers are being denied the benefits of a diverse, dynamic and competitive pay TV market. Litigation is obviously a serious step and a last resort but we are determined to have these issues resolved as quickly and fairly as possible."

Mike Darcey, chief operating officer at BSkyB, reacted to the news, saying: "This action is without foundation and is an obstacle to bringing back Sky's basic channels for Virgin Media customers.

"The best and quickest way to give customers what they want is to resume negotiations and we've invited Virgin Media to return to the table. For a cost of just 3p per customer per day, Virgin Media could offer a bigger and better choice of Sky channels than ever before.

"Virgin Media is saving money as a result of this dispute but it hasn't reduced prices. Millions of customers have lost access to the shows they enjoy and it is clear that many resent paying full prices for fewer channels. Virgin Media is also insisting on re-opening a previous deal for its channels on the Sky platform, even though this has absolutely no relevance for cable viewers.

"Increasingly, customers will ask whether Virgin Media is putting its own financial interests before giving them the service they want."