THE Conservatives will intensify their attack on the power of the BBC today with a call for limits on its ability to “crowd out smaller players” in internet and local television markets.

George Osborne, the Shadow Chancellor, will suggest that the BBC should be blocked from dominating online and local media in order to safeguard independent innovators who cannot get a foothold.

Mr Osborne will build on the warning from his leader David Cameron last week that “we need to look at ways of making sure that the BBC doesn’t overextend itself”.

Speaking at the International Media and Communications Summit in Oxford today, Mr Osborne is expected to say: “The BBC receives most of its money from the compulsory licence fee — a tax in all but name. It is sheltered from the pressures of the market.

“As new forms of media develop, I believe that the BBC must be very careful about not abusing its privileged position and huge resources to crowd out smaller players.”

He will praise the quality of the BBC’s news coverage, but will add: “I am concerned that in too many of its non-core activities, particularly on the internet, it is stifling the growth of innovative new companies that simply cannot compete with BBC budgets.

“For example, the BBC’s licence-fee funded ability to hand out quality content free online makes it very difficult for others to move into the new video download market.

“Another example is the BBC’s plan to launch programming for local communities — what it calls ultra-local television. This might sound like a reasonable idea, but it could have a ruinous effect on local newspapers and local radio stations.

“This is not in the interests of the British public — who are denied new products and services, and ultimately, it is not in the interests of the BBC, who need the competition.”

He will propose new rules to set out what the BBC can properly focus on, while leaving space for creative innovators to develop. He will also give a warning against an “inflation-busting increase in the licence fee” as the Government negotiates the next seven-year settlement.

The BBC is running a trial of “ultra-local” television news services in the West Midlands, which may be extended across the country. The Newspaper Society has been critical of the scheme because of fears that it could kill off regional newspapers.

Mr Cameron last week showed his party’s tough attitude towards the BBC, saying: “We have all seen in our own constituencies small internet businesses, often involved in education or other information provision, working away to create a market, to make some money, and then the BBC comes along and squish, like a big foot on an ant, and that business goes out.”

A spokeswoman for the BBC said that the corporation provided a quality service: “The new governance arrangements, including the public value test with a market impact assessment by Ofcom, and service licences setting out clearly the expectations of BBC services, will ensure licence fee payers receive a quality public service from the BBC and an extensive choice of services.”

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