Photograph: Mick Gell/Channel 5
Channel 5 has ditched plans to launch a high-definition channel on Freeview for the second time in less than two years, after being unable to resolve "issues of commercial importance".

The broadcaster has notified media regulator Ofcom, which is handling the launch of the fifth HD channel on Freeview, that it does not wish to continue to proceed with its application to launch a service.

Channel 5 said it has "decided with regret" to drop its application after being unable to commit to launching on Ofcom's deadline of 2012.

"This decision was taken as it has not proved possible to resolve some issues of commercial importance to Channel 5 in the timescale to which Ofcom has been working," said a Channel 5 spokesman.

The Freeview multiplex is run by the BBC so it now has the right to use the vacant HD channel, or to offer it to third parties.

However, Ofcom reserves the right to offer the HD slot to a public service broadcaster in the future. Channel 5 was the only PSB to submit an application this time around.

Channel 5 said it "remains committed" to having a channel on Freeview in the future.

"We will be applying afresh for DTT [Freeview] capacity when it is next advertised by Ofcom," said the Channel 5 spokesman. "We hope this will take place in the near future."

In March last year Channel 5 pulled out of launching a Freeview HD channel after failing to give a launch date or programming schedule to Ofcom.

Freeview has four HD channels: ITV, BBC1, BBC HD and Channel 4.

Freeview HD currently offers four HD channels - BBC One HD, the BBC HD Channel (due to turn into the BBC Two HD under BBC plans), ITV1 HD and Channel 4 HD - but a fifth channel is scheduled to launch in April next year.

This latest development with Channel 5 bears similarities to the last time that the broadcaster was supposed to launch its HD network on Freeview.

After Channel 5 failed to meet Ofcom's requirements for launch of Channel 5 HD in March 2010, the capacity was handed back to the BBC, which enabled the surprise launch of BBC One HD in October that year.

The BBC now faces another dilemma over what to do with the spare capacity. It could maintain carriage of the BBC HD channel to provide an outlet for HD content from BBC Three and BBC Four, or it could launch an entirely new network, possibly one dedicated to HD sport in time for the Olympics.

Alternatively, an agreement could be reached with ITV, Channel 4 or another third-party broadcaster to bring a different HD channel to Freeview.