Ofcom has flagged up concerns that BSkyB's plans for a pay-TV service on digital terrestrial television might "unacceptably diminish the appeal" of Freeview.
The regulator today announced a consultation about Sky's proposals for a four-channel pay service that would sit alongside Freeview channels and require a new kind of set-top box for viewers.
Sky needs Ofcom's approval for the launch of a subscription service.
Sky's plans are seen principally as a measure to limit the appeal of Setanta's paid-for sports offering, which will bring live Premiership football back to digital terrestrial TV (DTT) from August.
Sky's planned service will offer live football and other sports, as well as movies, entertainment and news. It would replace the company's current free-to-air offering of Sky News, Sky Sports News and Sky Three.
Ofcom said it would examine the impact of Sky's plan to use MPEG4 compression technology via new set-top boxes to squeeze out space for extra programming.
While such a change could provide potential benefits, Ofcom will also assess the "potential detriment associated with a reduction in the number of channels received by existing set-top boxes or digital televisions".
It also flagged up the risk that existing set-top boxes or digital televisions might be "incompatible with multiplexes broadcast using a combination of MPEG2 and MPEG4 coding".
Ofcom is also concerned that Sky's plans could affect consumer confidence in the digital switchover process under which the UK's analogue TV service is being phased out between 2008 and 2012.
The regulator said it would examine whether any change in the channel line-up on digital terrestrial TV might "unacceptably diminish the appeal of the channels to a variety of tastes and interests, and whether a reduction in the current range of free-to-air channels would be compensated for by the proposed introduction of the new pay television channels".
Its final concern is to ensure fair and effective competition for digital TV licences for the benefit of consumers.
Ofcom said it had yet to receive a request for approval from Sky, but would start a consultation, likely to last 10 weeks, once it had done so.
Some parts of the TV industry fear that Sky's proposal would damage the appeal of Freeview, the consortium Sky helped to found in 2002 and in which it remains a partner and board member.
Despite the Freeview name and the provision of 40 free-to-air channels on digital terrestrial television, there is already space for pay-TV on the platform.
The Top Up TV service offers 19 channels on top of the basic Freeview package for £9.99 a month.
And Setanta's sports offering, priced at £10.99 a month, launches on the DTT platform next month.
Sky previously offered a number of pay-TV channels on DTT via the now defunct ITV Digital service between 1998 and 2002.
Cable group Virgin Media criticised Sky's plans. "Sky's plan to withdraw free channels from the DTT platform and replace them with pay channels shows how determined the Murdochs are to undermine Freeview," a spokesman said.
He added: "Policy-makers and consumers alike ought to be extremely concerned about the UK's dominant pay-TV provider extending its influence to the Freeview/DTT platform. The result will be less choice on Freeview."
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