Sky shelves Picnic terrestrial TV service

Sky's plan to offer paid-for television channels via a Freeview-like digital terrestrial broadcast system has been put on hold.

The decision comes after the regulator Ofcom delayed a decision about whether or not Sky's service would prove to be too much competition for other providers.

The Picnic service was due to be launched later on this year. It would have offered several premium channels without the need for a satellite dish, replacing the three free-to-air channels BSkyB currently broadcasts on Freeview: Sky News, Sky Three and Sky Sports News.

Ofcom first learned of the proposal 18 months ago, but there were objections from rivals including Setanta and Top-up TV.

Ofcom said it would need to decide whether Picnic would have a negative effect on competition in the market, but then decided to combine its inquiry with an investigation of the pay-TV market that may not conclude until next year.

A representative for Sky said that there was "no end in sight" for Ofcom's investigation.

"The Picnic team have done everything they can to prepare for launch and there's nothing left to be achieved until Ofcom makes its mind up," he said.

Ofcom said that its objective was to carry out the investigation "as efficiently as possible".

It said in a statement: "The Picnic proposal raises complex issues, and is likely to have a significant effect on the future development of the PayTV market as a whole.

"As all parties are aware, Ofcom will very shortly issue a further consultation document. Any decision to suspend the project is entirely a business matter for BSkyB."