Now MediaWorks' Kiwi FM has moved to a 40/60 international music format, it should lose its three free radio licenses - worth around $6.5 million in Auckland alone - says a radio industry expert. But the government is dithering.

Labour would create a new public broadcaster if elected on November 26.

National MP Melissa Lee had told NZ On Air she believed her company was entitled to money she is now being told to pay back.

Ms Lee, a list MP, was National's candidate in the June 13 Mt Albert by-election and during the campaign faced allegations that her television production company Asia Vision Ltd had misused taxpayer funds for political purposes.

NZ On Air cleared her of those allegations but in the process uncovered $80,000 of unspent contingency funds that should have been refunded.

Private equity-owned television and radio company Mediaworks says it is hunting for NZ On Air funding for a free-to-air Pacific Island TV channel.

This follows Labour’s announcement on Sunday that it will make a Pacific Island channel a priority if it wins re-election.

Both TVNZ and Mediaworks have had the idea on the cards for quite some time, but Mediaworks’ announcement is the first time something concrete has been announced.