Sky Digital currently has 4.7 million UK subscribers

ITV has said it should be ready to launch the service by the end of 2001 after setting up the technological infrastructure with Luxembourg-based SES.

An ITV spokesperson said talks between ITV and BSkyB will start soon.

"We haven't had the capacity to start until today but we've got a year to get it finalised. These things aren't going to happen overnight."

Sky's rival ONdigital, which has one million subscribers, has been carrying ITV and sister channel ITV2 for some time - something seen as a major selling point.

But if the deal between ITV and Sky goes through, Sky will have taken another step up in a market where it is already the leader, with almost five million subscribers.

Tough negotiations

ITV has found that many of Sky's viewers simply can't be bothered to switch between the digital and terrestrial services so they want to make it easier for viewers to see their programmes.

But they will face tough negotiations with Sky, who are reportedly asking �20m ($29m) per year to carry the ITV network.

Viewers will still be able to view local programmes as 16 regional services will be broadcast digitally.

They include the 14 ITV regions, together with separate services for HTV Wales and HTV West, and English and Scottish versions of Border Television's output.