The sole bidder for a licence to operate a national digital television service is lobbying the telecoms regulator to amend a draft licence that it believes is preventing it from raising the funds required to support its application.

It'sTV, a consortium headed by former RTÉ executive, Mr Peter Branagan, is the sole bidder for a licence to operate the proposed digital television service. But it has been told by the Government that it will not be awarded the licence unless it secures a principal financial backer for its plan.

It is understood It'sTV has told the regulator, Ms Etain Doyle, that it will not be able to raise venture capital funding without amending a clause within the licence to enable it to supply internet services, as well as more than 30 television channels. The draft licence currently restricts the amount of radio spectrum a licence holder can use to supply internet and data services to customers at "up to 20 per cent of each digital multiplex at any given time". But It'sTV believes this would undermine the quality and reach of its internet services and is lobbying to have this amended to up to 20 per cent of "all six digital multiplexs".

A digital multiplex is a combination of digital television channels and other material. There are six multiplexes planned for the Irish services, one of which will be assigned to RTÉ, with TnaG and TV3 sharing another. The operating company for the service would rent the remaining four multiplex's to other parties.

The amendment sought by It'sTV would enable it to use one of these multiplex's solely to supply high speed internet services, enhancing the quality and reach of the service. Industry sources said It'sTV's move to amend the draft licence reflected the consortia's change in emphasis from seeking to be mainly a pay television provider to placing internet services at the core of its plan. This reflects the downturn in the pay television market which has seen an equivalent service in the UK, ITV Digital, go into administration, and cable group NTL amass huge debts of $17 billion, sources said.

It is understood that NTL and its bondholders have moved closer to a debt-for-equity swap deal to help get the British cable group back on its feet. It'sTV has met officials from the regulator's office twice to discuss the licence but as yet no decision has been reached on the issue.

A decision in favour of It'sTV could create a competitor for Eircom, but it may also distort the original intention of the Government, which was to create a TV service. This licensing issue is the latest in a slew of problems to dog the Government's plan to set up a digital television service, which has already been delayed for two years and cost about €2.5 million.

Originally four firms expressed an interest in the competition to award a licence but just one of these, It'sTV, submitted a bid by the deadline of August 3rd 2001.

On the recommendation of consultants acting for the Department of Arts, Heritage, Gaeltacht and the Islands a deadline of January 31st 2002 was set for evaluation.

But following It'sTV's failure to secure a principal financial backer by this date, the department granted an extension to enable the consortia to conclude talks with a "credible potential lead investor".

It is understood It'sTV has been in contact with a US venture capital firm but has not, as yet, secured the required financial guarantees that would enable it to be awarded the licence. The venture capital firm is believed to be seeking guarantees that the licence would allow It'sTV to position itself as an internet provider, as well as a provider of pay television services.

But the huge costs of launching and operating a digital terrestrial service, estimated by analysts at between €15 to €80 million, is also thought to be a major hurdle to It'sTV's quest to obtain funding. A spokesman for the Department for Art's, Heritage, Gaeltacht and the Islands, said it hoped the award of the licence would be concluded by mid-2002. The department also revealed it has paid a consortium of advisers, led by AIB Corporate Finance, €2.43 million in fees and expenses, to organise the selection contest.