Sky delivered a broadside to the BBC Trust in publishing its final submission on Project Canvas, a proposal for the BBC develop a hybrid broadcast and broadband platform in partnership with commercial public service broadcasters and broadband service providers. BSkyB called Canvas “an unnecessary intervention which will distort the market” and claimed the assessment by the Trust of the market impact and public value was flawed. It said the Trust should require the BBC to develop the core specification through the Digital TV Group industry association and make its programming available through other platforms on an unbundled basis.

The BBC Trust is due to reach its final conclusions on Project Canvas, having already given it provisional approval, despite open opposition from pay-television service providers Sky and Virgin Media, and evident frustration from many consumer electronics manufacturers.

Sky said it was unfortunate that the Trust appeared to have sought to approve the proposals with the minimum conditions, “irrespective of the evidence before it”.
“With such weak obligations on the BBC and the joint venture partners,” Sky said “there would be a real risk of the Trust failing to discharge its duties as guardian of the licence fee revenue and public interest, by favouring the BBC’s short-term commercial objectives over the interests of the wider market, and the licence fee payer.”

In the absence of Project Canvas, Sky argued that “a hybrid connected device specification would be developed by the industry in any event” in such a way that would create competition, reduce prices and maximise innovation.

Sky backed the Digital TV Group as the appropriate forum for the development of technical standards and proposed that the Trust should require the BBC to develop the core specification standard in partnership with the wider industry through this group, rather than in isolation with its joint venture partners.

Sky suggested that third-party programming providers should have access to the platform at launch, without the need to enter into onerous arrangements with the joint venture partners or to license particular technologies. It said broadband service providers associated with Canvas should grant equal access to the network to all such programming providers to avoid preferential traffic management. Furthermore, Sky said that BBC programming should be available to third-party platforms on an unbundled basis, separate from the iPlayer.

Sky cautioned the Trust to take further legal advice on competition law and state aid and suggested that it is nonetheless “wholly inappropriate for the BBC to act as a lending bank to commercial broadcasters”.

Sky contended that was wrong to use licence fee revenue to underwrite the participation of competing public service broadcasters, which challenges the very notion of a ‘joint venture’. If the BBC is willing to undertake this risk to fund the venture, it is not clear “why such a potentially harmful collaboration is even necessary”.

The Sky submission is couched in the measured language of regulation and consultation but the threat of further challenge is implicit. In the event that Project Canvas goes ahead, Sky is at least seeking to ensure that it does not have an unfair advantage over other platforms.

No stranger to regulation, Sky is awaiting the outcome of a lengthy review of pay-television from Ofcom. That seems likely to require Sky to make its own premium programming available to other platforms at lower wholesale cost.

Sky previously announced proposals to offer premium programming, including Sky Sports, on terrestrial television, where it already carries Sky News and Sky Sports News. The plan, known as Picnic, was shelved but could be re-opened following the pay-television review.

If Sky were to market its own subscription package of programming, combining free-to-air terrestrial television, a number of premium channels plus video-on-demand delivered over broadband, it could compete with the joint venture partnership envisaged by Project Canvas. Sky would no doubt like to see a level playing field when it comes to access to video-on-demand programming from the main public service broadcasters. That is, after all, what BT and others have been pressing for when it comes to wholesale access to premium sport and movies from Sky.

Writing in the Guardian newspaper, Mike Darcey, the chief operating officer of BSkyB, said he struggled to understand “why we need a new, publicly subsidised platform in the shape of the BBC and BT-backed Project Canvas venture”.

The Sky executive said he was not against the growth of online video or the development of common standards, but “we do stand firmly against is the use of public money in a way that distorts fair competition or undermines the scope for other innovative services to emerge in the future”.

He argued that everyone would benefit if a single standard is developed through the DTG. The desire of the Canvas partners to impose an identical user interface on all compliant devices does not benefit consumers because differentiation drives innovation. Internet-connected television is already happening and rather than replicating what would otherwise occur naturally, the BBC could put the licence fee to better use by producing programmes and making them available without discrimination on all platforms.