Media Spotlight: BBC's free-to-air initiative poses challenge to Sky.

Even if a BBC platform fails, the Sky brand could suffer as well, Alasdair Reid says.

It's hard to think of many occasions when BSkyB has been comprehensively outflanked - and, of course, Sky executives would deny vehemently they have been embarrassed in this instance.

But the BBC initiative announced last week has manoeuvred the company into a ticklish sort of corner. Although it's hardly a crisis, it represents a tidy little strategic test for Sky's new chief executive, James Murdoch.

The BBC's document, the Digital Switchover Report, published last week, seems relatively innocuous from a Sky point of view. The report addresses the issue of reaching sufficient digital penetration (that's to say, not far short of 100 per cent) in UK homes - a goal that Sky, as a passionate believer in the digital future, has always backed wholeheartedly.

Over the past few months, the news has been unremittingly good. Sky has been growing modestly but the real driver (and its growth rate has surprised even the most optimistic of analysts) has been Freeview, which is already in 3.5 million homes and is expected to pass the four million mark during the summer.

The digital market is now divided into three distinct and robust market segments: cable, satellite and digital terrestrial Freeview for those who won't pay for subscription channels. More than 50 per cent of UK homes are now multichannel.

But although Freeview is the only one of the three options likely to appeal to digital refuseniks, the platform will never be the answer to the Government's prayers as it moves toward analogue switch-off by the end of this decade.