Newspapers across the UK heaved a sigh of relief after the BBC Trust scrapped plans to launch a £68 million network of over 60 local news websites with video content, as it did not find any merit in the plans.

British media regulator Ofcom also rejected the proposal, saying it would hurt rivals in the private sector, including the web sites of newspapers.

Small newspapers have all along been opposing the plan as they feared that the move by the state-funded broadcaster could damage or squeeze out their own online operations.

Sir Michael Lyons, chairman of the BBC Trust, said the proposal did not meet its criteria for offering value to the public and that it would be better for BBC to concentrate on improving the quality of existing services.

While the rewards on investment would also be not commensurate with the planned investments, he said , it would, on the other hand, help generate negative interest in commercial media.

''It is clear from the evidence that, although licence-fee payers want better regional and local services from the BBC, this proposal is unlikely to achieve what they want. We also recognise the negative impact that the local video proposition could have on commercial media services which are valued by the public and are already under pressure," Lyons said.

''The public wants better quality regional television news programmes and more programmes of all kinds produced in and reflecting their areas. We would expect BBC management to consider carefully the conclusions of this public value test before returning to us with new proposals," he said.

A separate review by media watchdog Ofcom also said the BBC move would have a "significant negative" on commercial rivals. Also, while younger audiences would prefer local video services that offer more commercial content, the BBC does not provide these.

The BBC Trust will take a final decision on 25 February after taking into consideration all aspects of the issue, but as things stand, BBC is unlikely to go ahead with the proposal.

Hit by falling advertising revenues and the economic downturn, dozens of local papers in the UK have closed this year and many more are in the line.