The decision came the day after the holder of most of Australia's microwave licences declined an offer from media mogul Mr Kerry Packer to buy them for a reported A$13 million (about HK$68 million), on condition he abandoned his involvement with pay-television.

Mr Steve Cosser, chief executive of the private company Australia Media, said Mr Packer's empire and the other major networks, plus Optus, whose satellites were to carry pay-television, lobbied the government to halt microwave pay-television after realising its potential and that they would be left out.

Australia Media owns 24 microwave licences in Sydney and Melbourne and spent millions tendering for the 12 which were to be decided last week.

His company was in the middle of setting up a multi-point distribution system (MDS) pay-television, using microwave technology.

It would charge A$250 to A$400 for a receiver dish and decoder and a $10 a week subscription - significantly less than the start-up costs for satellite pay-television are expected to be.

It was on the verge of signing an agreement with Times-Mirror (owner of the Los Angeles Times ) and Irish businessman Mr Tony O'Reilly for equity in the venture.

The Prime Minister, Mr Paul Keating, took over responsibility for pay-television policy last June. He surprised the industry and even his advisers by announcing on a current affairs show that the unproven digital technology would be used in Australia'ssatellite pay-television.

But he has remained silent over this latest move, even in the face of criticism from former prime minister Mr Bob Hawke.

It is the communications minister, Senator Bob Collins, who is in the hot seat; he is accused of turning Australia into the laughing stock of the pay-television world.

United States interests say his directive and the court action in response means policy is unclear and raises questions about the risks of tendering for the two four-channel satellite licences. Tenders close on March 24.

US cable television broker Daniels and Associates, has said in leaked advice that the Australian Government ''is generally viewed by outside investors as unable to make hard decisions with regard to pay-TV''.

Senator Collins has admitted lobbying by Optus, which expects to make $28 million a year from satellite pay-television, and the ABC, which is guaranteed two channels.

But he has denied bowing to the commercial networks, and defended his decision as preventing a ''sub-standard technology'' which subverted the effectiveness and financial viability of the satellite service.

The microwave pay-television, based on terrestrial line-of-site with a 50 kilometre range, has been defended by the Australian Telecommunications Users Group, which said it did not suffer the weather interference that can affect satellites and could reach gaps satellites could not reach, such as Alice Springs and parts of Tasmania.

It said Australia needed a variety of delivery systems, some based on one technology and some a hybrid.

Mr Cosser, who refused to reveal the directors of his company, was already operating narrow band services, including one for the Italian community in Melbourne.

He said one for the Chinese communities was part of his plan.

Mr Cosser has denied the technology was inferior, and said it was successful in more than 20 countries and numerous American cities.

Even before the tender closing date, commentators were speculating that the moves on microwave television by big overseas interests meant satellite pay-television were all but ''dead in the sky''.

Insiders say few in the department know much about the microwave technology and do not realise that it will be seized on as a way into the mainstream pay-television.