ITV Digital's demise shows it simply doesn't pay to go head-to-head with Murdoch

The collapse of ITV Digital has proved yet again that nobody takes on Rupert Murdoch and wins.

Furious that competition regulators barred BSkyB from the dish-less digital television consortium in the late 1990s, he mounted a ruthless campaign to undermine his rival that ended when the ruined ITV Digital staggered, exhaling its dying breaths, up the steps of the High Court in London on Wednesday.

The decision to exclude BSkyB from the original plan to launch a digital terrestrial service - a multi-channel television sent through existing TV aerials into a set-top decoder - pit the then ONdigital and BSkyB against each other in a battle that only one could win.

The regulators wanted to prevent the pay-TV market from being dominated by Mr Murdoch, but instead he has ended up more powerful than ever.

It should have been obvious from the start: even BSkyB's name was a living symbol of its dominance. Just a few years previously, British Satellite Broadcasting, the British government-backed service that pinned its hopes on the technologically superior "squarial" dish, crashed and burned. Swallowed up by its satellite rival Sky, the new broadcaster was renamed British Sky Broadcasting.

Nevertheless, ONdigital thought it could take on Sky and win. All seemed to go well when it was launched in November 1998, with a party at Crystal Palace hosted by Ulrika Jonsson that heralded a £90 million sterling advertising campaign.

But the celebrations did not last long. From the start, ONdigital's business plan was doomed. The first chief executive, Mr Stephen Grabiner, declared he would take on BSkyB with aggressive bids for movie and football rights, while principal shareholders Carlton and Granada decided to withhold the ITV service from BSkyB subscribers in an attempt to lure them to ONdigital.

But instead of taking on the middle England market with quality drama and cultural programming, it entered a grudge match with BSkyB from which it suffered blow after blow.

Conceptually, the service was all wrong. Carlton and Granada used ONdigital as a platform to push their own, sub-standard digital channels. Sky Digital, meanwhile, launched, with the promise of hundreds of channels and superior interactivity.

Then there were problems with the technology: availability of decoders was initially poor and it became clear that the decoding technology, developed for Canal Plus in France, was easily pirated. Finally, the digital terrestrial signal proved notoriously patchy, failing to cover large parts of Britain.

Just months into the launch, Mr Grabiner resigned and took ONdigital to court in a damaging legal battle over severance.

But the new ONdigital chief executive, Mr Stuart Prebble, did not let up in the battle against Sky. When Mr Murdoch decided to risk BSkyB's entire business on a costly plan to give away dishes and set-top boxes in exchange for subscriptions, ONdigital did the same.

But while Sky was bankrolled by Mr Murdoch's millions, ONdigital was brought to its knees. At one point the "churn" rate - the number of customers who signed up then left after their subscriptions expired - came close to 30 per cent.

Sky, on the other hand, had seen the value in ploughing cash into a customer service division and subscriptions soared beyond five million.

ONdigital decided the future lay in football, agreeing to pay £315 million for nationwide league matches in June 2000. Meanwhile, Mr Prebble rebranded the service ITV Digital and set up IT Sport.

Again, the service provided by ITV Digital was simply substandard. BSkyB held the trump card with Premiership football.

The final nail in the coffin was the unexpected ferocity of the downturn in the advertising market after September 11th. Suddenly, ITV executives were forced into a humiliating attempt to renegotiate the £315 million bill for football rights.

On Wednesday , the dregs of ITV Digital went down the plughole.