Ofcom warned in September that Channel Four could face a bleak future if it wasn't given a share of the license fee to make the changes necessary before the digital switchover. But now the Government has scrapped this plan.
Channel 4 could have got £14 million from the BBC licence fee, but now the Gov says, simply, that the debate has "moved on significantly".
Culture secretary Andy Burnham said in a written statement, that the plans have been made redundant by calls for "more wide-ranging" proposals on Channel 4's future funding model.
He also stated: "Furthermore, the structural challenges that traditional commercially funded public service broadcasters face have been exacerbated by current cyclical conditions".
"The Government has, therefore, brought forward its timeline for decisions and is now committed to take a more comprehensive view on the future institutional and financial framework of public service broadcasting, including the future of Channel 4, early in 2009".
A Channel 4 spokesman said: "Channel 4 supports the decision to withdraw this proposal. As the Government makes clear in its statement, broader decisions about the future framework of public service broadcasting will be made early in 2009 as part of its Digital Britain review".
"In light of the Government's accelerated timetable, it makes sense to seek any necessary approvals from the commission for a single, all-encompassing solution to support the UK's public service broadcasting system, rather than a series of small-scale proposals."