ONdigital's ambitious plans to generate substantial new earnings by offering subscribers internet access through its pay-TV services received a dramatic setback last night.

Granada, joint owner of ONdigital, is to stop selling the ONnet box in its 500 Box Clever stores. The box makes its TV set-top devices capable of accessing the internet. An internal memo sent to store managers states: 'Sales of ONnet boxes have been lower than anticipated through Box Clever and other retailers, as a result of which we will cease to stock this product.'

News that Granada is to pull the product will surprise media analysts. In January, ONdigital chief executive Stuart Prebble said he was 'very pleased' that ONnet - which launched last September - had attracted 70,000 subscribers, each of whom pay £5 a month for the service.

Until recently, the company, whose other shareholder is Carlton Communications, has seen ONnet as a platform for delivering a range of interactive services. In addition to offering users email services, ONnet also provides secure online shopping facilities - opening up potentially lucrative e-commerce revenues to ONdigital.

The company's promotional material boasts: 'Fifty six brands have now signed up to provide content to the ONnet portal. ONnet is adding new partners virtually every week.'

Analysts have expressed concerns that French firm Netgem, which makes the ONnet boxes, has seen demand level off.