LONDON: An audit by UK media regulator Ofcom warns that publicly-owned but commercially-funded television broadcaster Channel 4 could become bankrupt after 2012 when its current cash reserves are exhausted.

The study claims that the channel behind many innovative documentaries and dramas - as well as controversial reality show Big Brother - is facing tough choices as it battles with increasing digital diversity and consequent advertising revenue slides.

According to the report: "Channel 4 will increasingly be forced to decide between different types of investments that, on the one hand, support the group's long-term commercial health and, on the other, ensure the continued delivery of public service content."

The channel's ceo Andy Duncan, who has long lobbied for extra government support, commented: "This report makes clear that it's no longer a question of 'if' Channel 4 needs new forms of public support (to replace our gifted analogue spectrum which is rapidly declining in value), but 'when'."

Adds Duncan: "We believe Ofcom should now progress to identifying appropriate new forms of support that will give Channel 4 a secure financial base from which to plan our future strategy and public service contribution."

The watchdog and the government recognize the broadcaster has fulfilled its public services remit in the main, but the report notes its original programming has declined while spend on acquired programmes has increased.

Consultations on how to prevent financial meltdown at Channel 4 will continue and industry experts predict a limited safety net will be put in place.

Duncan would prefer tax breaks or more free broadcast spectrum rather than a slice of the licence income enjoyed by public service rival, the BBC.

Data sourced from The Times Online (UK); additional content by WARC staff