The tortuous process to award the licence to operate the Republic's new digital television service got under way yesterday. Prospective bidders have been asked to declare their interest by June 8th, at which stage the Government will make clear how the 15-year licence will be awarded.

The Department of Arts, Heritage, Gaeltacht and the Island's has not yet disclosed if the process will be a straightforward auction or a beauty parade. Informed sources suggested last night that a hybrid process that involves a payment would be the most likely option.

The winner will operate more than 30 digital channels that will be broadcast over RTE's transmission network, which is in the process of being part privatised. RTE will have the right to five channels and another five will be shared by TV3 and TG4. The operator of the service will be responsible for the programming on the remaining 20 channels and will be expected to offer Internet and other interactive services. One of the obstacles to a straight forward auction of the licence is that the value of the licence is hard to estimate as the competitive environment is almost impossible to predict. The digital television service will be in direct competition with cable network - once they are upgraded to digital - and satellite services.

The operator of the system will have to pay an annual fee to the Office of the Director of Telecommunications Regulation of 3 per cent of revenue. The process is due to be complete by October this year, the Department said yesterday.