The plotters would meet several times a month in different locations across White City. And from tiny acorns huge oak trees grow. Throughout 1999 a small cabal of strategists had been given a simple task by then-Director General, John Birt - to work out how the BBC could turn the plethora of new technologies emerging at the time into cool, hard cash.

BBC insiders knew of the the group, but few were privy to their ideas. The plotters organised a series of clandestine conferences, all code-named 'Hever' and which were attended by some of the brightest brains advising the corporation. Their conclusions were fed back directly to Birt.

Auntie was nervous about what would happen if Hever's results leaked into the public domain. They exposed huge rifts at the heart of the BBC. In one corner was the old guard, opposed to an increasingly commercialised BBC. In the other was the younger contingent, who viewed the corporation as a fusty relic urgently in need of an overhaul.

Numerous plans were dreamt up. A free internet service provider was one option. But by the time the corporation got round to looking at launching a service, electrical retail giant Dixons had blown competitors out of the water with Freeserve. Then there was the proposal to float off the BBC's internet division on the stock market. But by the time Auntie had squared the move with her public service conscience the value of tech stocks had crashed and the move was dropped. 'The BBC has got the right idea but it's always been following the field. It takes a long time for it to make decisions and they all have to be given policy spins,' said one Hever source.

But some Hever plans are now finding their way on to the desk of Greg Dyke, the BBC's commercially savvy new sheriff, who is charged with finding Auntie an extra £400 million to meet the costs of programming between 2002 and 2006.

'John was always trying come up with a theoretical model to explain why we could do something commercial,' a BBC source said. 'Greg is much more, "f *** it, let's see what we can get away with".'

Last week it became clear just how far Dyke thinks he can go. The BBC admitted that it was studying a plan to display advertising on a yet-to-be built international news website, BBCNews.com. The announcement sent shock waves through the media world. Commercial rivals are screaming that what will start out as a bit of banner advertising on a website aimed at overseas internet surfers will quickly spread to all of the corporation's activities.

'This is the thinnest edge of the biggest wedge you could find. It cuts across all the things the BBC stands for,' said Angela Mills, director of the British Internet Publishers Association, the trade body that lobbies on behalf of online firms and which will argue its case at a Department of Culture, Media and Sport select committee meeting later this week.

The BBC's charter bans the corporation from allowing advertising on its television and radio stations but it is not clear about its position regarding new media. 'It's a grey area, and the BBC is exploiting it,' Mills said.

The commercial media's theory is that as the internet is quickly assimilated into all forms of media - chiefly television, mobile phones and radio - the corporation will have its cake and eat it. While it rakes in billions of pounds a year from licence fees, Auntie will also earn lots more from selling advertising on its new media - all the whizzy technologies that will allow viewers to watch favourite episodes of East Enders whenever they want.

This may seem a long way off, but the technology to merge the internet and television, known as broadband, is practically here. And by 2003, 21 per cent of European households will have broadband access, according to international media analyst Screen Digest.

The commercial firms fear that the BBC won't stop at advertising on its news sites. 'What are they going to do next? Sports? Entertainment?' Mills asked.

The commercial radio stations, which have increased their share of total UK advertising spend from 2 per cent to 6 per cent in the past five years, are up in arms at the prospect of seeing their revenues pour into the BBC.

'The BBC benefits from £3 billion of public money every year,' said Paul Brown, chief executive of the Commercial Radio Companies Association. 'It's a rampaging elephant and this could put the commercial sector at a huge disadvantage. There's only a limited amount of advertising to go round.'

The print media too, already angry at the shameless way the BBC has plugged its various magazines on its television channels, fears the consequences if Auntie's plan goes unchecked. 'I'm scandalised,' said Hugo Drayton, managing director of Hollinger Telegraph New Media, a division of Conrad Black's empire. 'It's down to weak government. They haven't done anything.'

The prospect of the Government stepping in to the row soon is seen as bleak. 'Chris Smith has indicated that he's prepared to conduct a review of the BBC's internet strategy,' Mills said. 'But you've got to be realistic. With a general election coming up, the Government doesn't want to take the BBC on. Chris Smith was always saying that he'd reduce the power of the governors, but the White paper did nothing to neuter them.'

BBC insiders argue that it makes sense for the corporation to commercialise its overseas operations. 'At least half the internet server traffic to BBC sites comes from overseas,' one source said. 'It's being subsidised by people in the UK, and that's not fair.'

But this would still hit UK firms. 'Half of Telegraph.co.uk's audience comes from outside the UK. The whole point of new media is that it reaches audiences you can't reach in print,' Drayton said.

Significantly, those who attended the Hever conferences believe that the fledgling plan for BBCNews.com to take ads is a red herring. The source said: 'The plan was for news and education elements to always be free of advertising. But everything else would be commercial outside the UK and take ads. I think this is some of the old guard trying to stop the plan by raising concerns about what it could mean to news, which has always been seen as sacrosanct.'

These plans have frightened everyone in media land - even Auntie herself.