* Says British government has allowed BBC to become dominant
* Says state-sponsored journalism threatens independent news
* Digital journalism needs fair price to survive
EDINBURGH, Aug 28 (Reuters) - James Murdoch, chairman and chief executive of News Corp (NWSA.O) in Europe and Asia, attacked UK broadcasting policy on Friday, saying it had created a dominant BBC [BBC.UL] which was threatening independent journalism.
Giving the MacTaggart Lecture at the Edinburgh Television Festival 20 years after his father Rupert addressed the same meeting, he said the lines between different forms of media -- television, newspapers and publishing -- had blurred but broadcasting alone remained centrally planned.
"We have analogue attitudes in a digital age," he said according to the text of his speech.
The government regulated the media industries "with relish", he said, and had created unaccountable institutions such as the BBC Trust, Channel 4 -- which has a public-service remit but is advertising-funded -- and regulator Ofcom.
"The BBC is dominant," said Murdoch, who is also non-executive chairman of pay-TV firm BSkyB (BSY.L). "Other organisations might rise and fall but the BBC's income is guaranteed and growing."
While the BBC receives 3.6 billion pounds ($5.9 billion) a year from the licence fee, its free-to-air commercial rivals ITV (ITV.L), Channel 4 and Channel 5 (owned by RTL [BERT.UL]) are struggling as advertising revenues fall.
Murdoch said the BBC was crowding out new and existing news providers. "The scale and scope of (the BBC's) current activities and future ambitions is chilling," he said.
"In this all-media marketplace, the expansion of state-sponsored journalism is a threat to the plurality and independence of news provision, which are so important for our democracy.
"Dumping free, state-sponsored news on the market makes it incredibly difficult for journalism to flourish on the Internet."
Murdoch said government intervention was curbing free speech and it would be better served by adhering to the principles of free enterprise -- namely the need to make a profit -- and trusting customers to pay for the news they valued.
"It is essential for the future of independent digital journalism that a fair price can be charged for news to people who value it," he said.
Rupert Murdoch, chairman of News Corp, has said he will start charging for the organisation's content online, including from newspapers such as The Sun and The Times in Britain. [ID:nN05266606]
"The only reliable, durable and perpetual guarantor of independence is profit," his son said in Edinburgh.
Reuters, by Paul Sandle, editing by David Holmes