The radical shake-up will see private firms bid for a new channel that will broadcast local news for several hours a day, alongside a national schedule. It will be funded with advertising and likely some licence-fee cash.
The move could be good news for ITV, which could be given the green light to strip back or even axe its costly regional news programming.
Hunt says he will ensure the local station – dubbed channel 6 – is given a prominent position in electronic programme guides.
He said: “For consumers, what this will mean is a new channel dedicated to the provision of local news and content – one that will sit alongside other public service broadcasters, offering a new voice for local communities, with local perspectives that are directly relevant to them.”