Fears over BBC's local news service on the web

Ofcom is to carry out a 'Market Impact Assessment' on the broadcaster's plans to run the offering in 60 areas.

Once again, there are claims the corporation is using the might of its guaranteed licence fee income to distort the commercial market.

The revamped BBC website was just the first of a raft of changes for the corporation which could see the introduction of local video websites

Local newspapers, websites and radio stations are alarmed at the BBC's latest attempt to expand its activities, fearing it will damage their businesses.

The service will expand upon the corporation's existing local websites by offering video news, weather and sport in counties and conurbations across the UK.

The news will also be offered to mobile phone users and in both Welsh and English languages in Wales.

It will cost £68million over the next five years, including the creation of 300 jobs, mostly for video journalists.

Once it is up and running, it is expected to cost £23million a year.

The proposal for the broadband service has replaced previous proposals for a local television service, following a lower than expected licence fee deal.

Ofcom's report will study the likely impact of the service on 'similar and related products and services'.

It will look at how the plans might impact on innovation and investment in the commercial sector, including local and regional TV services as well.

The BBC Trust has also announced it will carry out a public value test on the local video proposal.

Ofcom's findings and the BBC Trust's research will both feed into the final decision made by the corporation's governing body.

In a bid to fend off criticism of the plans the corporation will offer free use of its video and free links to content to local newspapers.

It also says it will limit the service to ten local video stories a day, with a maximum of 20 minutes of material. In London this will be doubled.

BBC chiefs have also said it will keep clear of local paper mainstays such as jobs, holidays and property.

The latest investigation comes after the broadcaster's governing body was accused of ignoring widespread concerns its internet activities.

Last month the BBC Trust claimed there was no evidence that the broadcaster's online empire - which could cost licence fee-payers up to £150million next year - was stifling competition.

Commercial rivals were amazed at the clean bill of health given to the broadcaster's growing power on the internet.

The Trust also revealed at the time that the BBC spent £36million over budget on its website operation last year.

The amount spent was £110million, almost 50 per cent above what had been budgeted.

 At the time ITN chief executive Mark Wood said: 'Commercial vendors cannot hope to compete at this level of funding and there is also a real threat to plurality in the media landscape.'

Speaking yesterday Diane Coyle of the BBC Trust,said:  "Last year the Trust challenged BBC management to respond to licence fee payers wanting better local services.

"We wanted a proposal that would deliver public value with minimum adverse impact on local newspapers and other commercial media services."

She added:  "The Trust is inviting all interested parties to participate in our consultation on BBC management's proposals.

"We want to receive all comments – positive and negative – from the public and the industry before we consider the application in detail.