The Government has given a boost to ITV’s campaign to extract up to £80m a year from Virgin Media for its main channel by saying the row should be resolved commercially.
The Daily Telegraph revealed at the weekend that the broadcaster and the cable operator are in a stand-off over retransmission fees.
ITV is attempting to charge for its main public service channel for the first time following a change in the law.
It has threatened to cut off nearly four million Virgin Media households early next year if a deal is not struck.
Virgin Media has refused to pay, saying the channel is meant to be free.
In a letter to pay-TV operators last month, Culture Secretary Karen Bradley said she believed there should be “zero net fees” for pay-TV operators to carry public service channels.
On Monday evening, however, the Department for Digital, Culture, Media and Sport said it would not at this stage seek to impose its preference for no money to change hands.
A Government spokesman said: “We would hope that both parties can reach an agreement as there are mutual benefits of ITV's public service channel being carried on the Virgin platform.
“However, we are clear that this is a matter that is best resolved through commercial negotiation."
The hands-off approach clears the ground for ITV to hold out for payment.
A deadline last month was extended to early next year, when incoming chief executive Carolyn McCall begins work at Britain’s biggest commercial broadcaster.
ITV argues it is not fairly compensated by pay-TV operators that attract customers by retransmitting its main channel and undermine its advertising business with set-top box recorders that make it easy for viewers to fast forward breaks.
It has demanded at least around £45m and up to £80m for high definition pictures, its “plus one” channel and the right to record its broadcasts.
Virgin Media points to the broadcaster’s public service licence obligation to make its main channel available in exchange for a guaranteed prominent position in menus.
The cable operator is understood to be making preparations to effectively pirate the ITV signal if the official cable link is cut off, hoping that Ofcom would intervene to find the broadcaster in breach of its licence and force it to restore the feed.
The regulator could seek to invoke "must carry" obligations that would enable Virgin Media to provide ITV for free.
In such a scenario the Culture Secretary would have discretionary powers.
The battle is being closely watched by BT and Sky.
They are not directly affected by the recent legal changes as they do not need to retransmit the ITV signal to provide it to their pay-TV subscribers.
A victory for ITV could have implications for BT and Sky in future, however, as more television is expected to be delivered over the internet, which will involve retransmission.
ITV has led the charge for retransmission fees but other public service broadcasters could stand to benefit.
Channel 4 has previously supported the campaign, for instance.
The BBC has not been involved.
It would likely be criticised for attempting to effectively charge fee payers twice.
© Telegraph Media Group Limited 2017.