It may be another antitrust case waiting to happen - BSkyB (NYSE: BSY) is now the leading contender for buying Tiscali’s UK ISP, edging Carphone Warehouse in negotiations, a source tells FT.com, with the Sunday Times estimating its offer at £450 million. An acquisition like that would marry Tiscali’s 2.4 million subscribers with Sky’s 1.79 million and, more importantly, would herald further consolidation at the top of Britain’s fast-shrinking ISP market, its 3.6 million laying just behind Carphone and Virgin on 3.8 million. Sky, for its part, sees broadband (and VOD) as the main growers, with pay-TV subs threatened by a consumer spending downturn. It already bought easynet a few years ago but is still making big losses on its infrastructure investment. But what chance Ofcom and the OFT taking an interest?

One deal Sky won’t be doing, however - it’s pulled out of the running for Spanish pay-TV operator Digital Plus, which would have cost a hefty €3 billion; CEO Jeremy Darroch (via FT.com): “There is a lot of opportunity for us in the UK and we are pretty focused on that.”

Update: In an afternoon market update in its native Italy, Tiscali confirmed the BSkyB talks.