A Government plan to broadcast a pilot digital television service in Dublin may be delayed due to problems in complying with broadcasting legislation.

The Government said this month it was co-ordinating its project with RTÉ to enable consumers to sign up for a cheap digital television service in Dublin.

This service would compete directly with cable firms and the satellite broadcaster BSkyB by offering digital picture quality and more channels at low costs.

But an unexpected problem has arisen in relation to complying with the Broadcasting Act, which stipulates that a licence for digital television must be awarded by competitive tender.

The Commission for Communications Regulation (ComReg) has expressed concerns to both the Department of Communications and RTÉ on the licensing issue.

All the parties, including ComReg, confirmed to The Irish Times yesterday they were discussing the issue of licensing.

It is understood the Government is pushing for the award of a test licence to RTÉ that may comply with existing legislation.

But it remains unclear how many people could take part in the pilot project, and if it could ever be expanded without rewriting the Broadcasting Act.

Industry sources believe the licensing issue will further delay the Government's aspirations to set up a national digital television service, which is several years behind schedule.

A previous tender process to appoint a private firm to build and operate a national digital television network ended in failure in early 2003.

A single bidder for the licence failed to secure the appropriate finance and licence conditions to make its bid viable.

But the Government says it is committed to establishing a national digital television service and recently told journalists about its plan to begin a pilot in the Dublin area operated by RTÉ.

The pilot is being prepared by the Department for Communications, which last year took over the digital television project from the Department of Arts.