Hi-tech giant Pace Micro Technology is in talks with the BBC and ITV over a deal that could revolutionise the way we watch TV.

The Saltaire firm is in advanced discussions with the mainstream TV channels and the government to provide set top boxes to every home in the UK that wanted them which would end subscription rates for their digital channels.

With the UK's 23 million homes each owning between two and three television sets the deal has the potential to create massive profits for Pace and rapidly accelerate the country's transition to a digital TV nation.

Andrew Wallace, Pace marketing director, said if successful the deal would herald the start of the next stage of digital TV development.

He said: "We have been in talks for several months and they are pretty detailed.

"We have demonstrated the technology needed, the idea is in place and now we are talking to the companies and government about how to market and launch it."

The new non-pay scheme could be available to the market next year and while customers would still have to pay for the hardware, access to the ITV and BBC digital channels would be free.

The two networks are also heavily reliant on a much needed boost to their fledgling digital services, especially ITV which has taken repeated financial knocks with the significant slump in advertising revenues.

Mr Wallace was reluctant to put figures on the financial potential of the deal but did say there were hopes to roll out the technology to Pace's international corporate links.

He said: "The UK has 23 million homes and each has, on average, two or three TVs and Pace will be finding ways to be at the front of the digital market over the next ten years or so.

"What we are doing is taking another step closer to having digital boxes in every home that wants them.

"At the moment some people may be put off by the subscription costs, we aim to remove that barrier."

In July, Pace announced yearly results showing profits up 61 per cent to £44 million but bosses warned at the time growth would slow in the ensuing 12 months and said it was looking to overseas markets to sustain expansion.