The British TV broadcasting model of a strong public sector involvement in both the non-profit and profit-making sides of the business, overseen by tough regulation of competition to ensure a level playing field, is heading towards collapse with reports that the state-owned commercial channel, Channel 4, is talking to the privately-owned Five channel about merging.

The move, disclosed late last week in several London papers, including the Financial Times , would mean the end of the Channel 4 experiment and its absorption into the German-controlled Five. (The Bertelsmann Group of Germany controls Five through its RTL subsidiary. RTL also controls Fremantle Media, the big independent TV production group).

The suggested merger is being driven by the gaping hole in Channel 4’s finances, caused by the economic slump and cost problems. There had been proposals to merge C4 with the BBC, or spin off the BBC Worldwide production arm and merge parts of it with C4 to give it regular cashflow and repair the multi-million pound black hole. But that was opposed by the BBC management and Trust, C4 and some in the UK Government.

The search for a new big friend for C4 follows the rejection of new funding calls by the UK Government. The advent of the recession and falling viewing levels caused by the rise of the internet, and especially satellite transmission by the News Corp controlled Sky, has hurt C4 in particular.

The British Communications Minister, Patrick Carter, and the media regulator, Ofcom, are due to announce plans to reform public service television to help it cope with falling revenues. Channel 4 is publicly owned but commercially funded and it has announced plans to cut jobs and spending in the face of the global economic downturn.

The channel is home to programs like Big Brother and a very successful nightly one-hour news broadcast. It has seen its advertising revenues fall in recent years, along with other TV stations. In fact, the network’s problems are similar to those being experienced by small London newspapers such as the Independent and its Sunday sister paper. The two papers are controlled by the struggling INM group — 28% owned by Tony O’Reilly — whose finances are under pressure from bankers worried about rising debt and falling cash levels.

In public, Channel 4 has opposed any merger with its smaller rival, but in private there seems to be some movement with other media companies confirming the talks reported by the FT. Mr Johnson told The Guardian on the weekend that the talks were held, but he thought the merger wasn’t such a good idea because of the different objectives of Four and Five.

A merger of C4 ­and Five, owned by RTL, was raised last week in an FT article by Mark Thompson, the director-general of the BBC.

Channel 4 asked the UK Government for money when it revealed last year that it would be losing over $A300 million (£150 million) a year.

Meanwhile, ITV and the BBC are said to be close to announcing plans to produce regional news program in the UK, which will be broadcast on ITV1, the UK’s largest commercial channel.

A senior BBC official told the FT the details had yet to be worked out, but the scheme would involve the use of BBC studios and pooled footage to be used by both broadcasters. ITV spends around £80 million a year on regional news and wants to cut this by half as part of a renewed cost cutting attempt. ITV has already revealed plans to lay off over 1000 employees. The BBC is cutting over 4000 jobs by 2010.