AFTER an opening ceremony transmitted from the Guildhall in London, and an advert for SR toothpaste, ITV's first night burst into life with a variety show featuring Hughie Green, Harry Secombe and band leader Billy Cotton.

It was September 22, 1955, and the BBC's monopoly had been broken.

Sir Winston Churchill feared it would become a "peep show", but independent television was a tightly-regulated network of regional broadcasters, each offering something slightly different to their neighbours - and commercial rivals. While they may all have been on the Channel Three button, there was fierce competition to produce high-ratings programmes and capture advertising cash. Variety was indeed the game.

That first night debutante, Associated-Rediffusion, was soon joined by ABC, ATV, Granada, and, in January 1959, Tyne Tees, serving the North-East. The subsequent years have seen many of those names fall by the wayside, along with Southern, Thames and Television South West, as franchises, famously called a "licence to print money" by one station head, changed hands. But it was deregulation in 1993 which heralded the most significant shake-up.

For the first time, ITV companies were able to move on each other, and it didn't take long for the major players to emerge. Carlton wasted no time in buying Central and Westcountry, and Granada followed suit, swallowing up LWT, Yorkshire and Tyne Tees. Those two giants divided ITV between them, with only the minnows of Scottish, Grampian, Ulster and Channel left swimming free.

Now, those two will become one, as Granada and Carlton were yesterday given approval to merge into a single £4bn company. This single powerhouse is a far cry from ITV's origins, but it is a union largely driven by commercial considerations.

ITV's viewing figures have experienced an alarming slide in recent years, victim of a well-established Channel Four and a resurgent and rebranded five, as well as cable and satellite extending their reach into more and more homes. Saturday nights have been a particular problem area, with a new game show-led line-up featuring Judgement Day, The Vault and Drop the Celebrity, attracting a measly 18.1 per cent audience share on its launch in June. Daytimes have also proved barren since the departure of Richard and Judy to Channel Four, and Saturday morning show sm:tv never recovered from the loss of Ant and Dec. Turning the News at Ten into the News at When was unpopular both with viewers and advertisers, and even ratings winners such as Pop Idol and I'm a Celebrity... Get Me Out of Here have failed to turn the tide.

Falling ratings means less money from advertisers, and in the middle of an advertising slump this was hitting the ITV companies hard. So too was the collapse of ITV Digital last year, with losses of £315m. Even with 50 per cent of television advertising revenue still in ITV's clutches, it was clear something had to give.

Perhaps the most obvious consequence of the merger will be to provide savings - estimated at around £55m by analysts - which can then be put into improving programmes. "ITV is likely to use that cash to invest in more hit dramas, plus peak time entertainment, and boost its daytime programming," says Graham Lovelace, of media consultancy Lovelacemedia. "What you could see is the beginning of a fightback against a cash-rich and confident BBC."

With so many more channels available than in ITV's early days, it's not surprising that its viewing figures have suffered, and are half those of 20 years ago, but the station's controllers don't see it as a lost cause, and the extra cash will come in handy, according to analyst David Pope, of Brewin Dolphin.

"In theory, the merger should help the viewer, through better quality programmes and probably more money available to source programmes overseas. Channel Four spends a lot of money on Friends and Will & Grace, and savings from the merger will help ITV compete in those sorts of areas," he says. "They will also have a larger portfolio of programmes, and more opportunity to sell overseas, for programmes such as Pop Idol."

He says fears that one giant ITV company will mean the end of regional programmes are likely to prove unfounded, with the demand for regional news persisting, and the regional logos will remain, although there may be greater use of the blue and yellow ITV symbol.

The merger will put ITV on a more equal footing with the BBC and BSkyB, and indeed the BBC says it welcomes the prospect of a stronger ITV, benefiting viewers and broadcasters alike. But the upheaval may not end here for the third channel.

A new round of deregulation programmed for the end of the year will allow non-EU companies to buy into ITV. A £4bn business with a substantial slice of the UK's advertising market could prove very tempting, and there is already speculation that bids will be coming in, particularly from across the Atlantic.

Viacom, the world's biggest media group and owner of American network CBS, MTV, Paramount studios and Blockbuster video, is the front runner, and company president Mel Karmazin has said a move for ITV would make commercial sense. Disney, which owns the ABC network, could also be interested, along with NBC and Hallmark, better known for greetings cards but a well-established programme maker in the US. Investors could, of course, have bought both companies separately, but a unified broadcaster could prove more alluring.

But even if it leads to a foreign take-over, the creation of one ITV company had something of an air of inevitability about it, according to Brewin Dolphin's David Pope. While the original idea in the 1950s was to split the third channel into regional companies to provide a competitive element for advertisers, the growth of alternative commercial channels has rendered that impulse obsolete.

"Now you have got channels Four and five very well established, and BSkyB and digital has a more than ten per cent share, so it is a completely different environment," he says. "This merger is a natural thing, and if you started now with a blank piece of paper, this is what you would do: a large national channel with regional centres of excellence."

It may be a far cry from the days of variety, but then it's a far cry from the days when the third channel was Britain's most popular button. Creating one independent leviathan is the best chance ITV has got to retake its place as one of the giants of British broadcasting.