Project Canvas, the proposed joint venture to establish a new platform for hybrid broadcast and broadband services in the United Kingdom, raises considerable concerns for competition. The partners in the project have submitted their case to the Office of Fair Trading which is now considering the matter. The outcome could have considerable implications for the development of television in Britain, although it is only one regulatory hurdle that the venture will have to pass.

The partners in Project Canvas include the main national broadcasters, national broadband service providers and the national transmission network operator.

That could be seen as an excellent example of a joined up approach across the converged communications market. It could also be seen as a significant constraint on open competition, not least by existing pay-television service providers, potential new entrants to the market and consumer electronics manufacturers.

The broadcast partners in the proposed project are the BBC, ITV, Channel
4 and Five. Together they provide all the public service channels, accounting for around 60% of all television viewing in the country, with corresponding promotional power.

The broadband service providers in the project are the incumbent national telecommunications provider BT and TalkTalk Telecom, the leading independent voice and broadband service operator. With over nine million broadband customers between them, BT and TalkTalk control around 58% of the retail market, while BT is the wholesale supplier to many other internet service providers. BT and TalkTalk provide their own online video services, BT Vision and TalkTalk TV, which are expected to be quietly dropped if Canvas succeeds.

The transmission services provider Arqiva controls the entire national network of television transmission towers. Arqiva has already entered the online video market with its launch of SeeSaw, which might be expected to find a presence on the Canvas platform.

Between them, these organisations have substantial power to control the delivery of broadcast television and broadband video across the country.

The closing date has now passed for further expressions of interest in joining the proposed consortium.

Digital terrestrial television is the most commonly used means of viewing in the United Kingdom, received in over 18 million homes and accounting for over 72% of television households. It is the only means of reception in over 10 million homes, representing almost 40% of all television homes in the country.

Consequently, any enhancement to the main television platform, controlled by the broadcasters that account for the majority of viewing, is relevant in terms of competition.

It might be argued that Freeview, the company established to market digital terrestrial television under that brand name in the United Kingdom, was equally controlled by a consortium of industry stakeholders.

However, Freeview was not established to specify technical standards but to promote an existing platform and license its trade mark to compliant receivers. It was formed in response to the collapse of the commercial ITV Digital operation in order to secure the future of free digital terrestrial television in the country.

While organisations like the BBC have a proud history of helping to establish technical standards, the BBC has no remit to create a new platform through a joint venture with commercial partners.

The BBC is charged under its Royal Charter and Agreement with making its public services widely available, doing all that is reasonably practicable to ensure that viewers, listeners and users are able to access services intended for them, or elements of their content, in a range of convenient and cost effective ways which could include broadcasting, streaming or on demand over terrestrial, satellite, cable or fixed or wireless broadband networks or via the internet.

That does not appear to extend to the definition of devices on which such services can be received or the development of a distinct delivery platform.

The problem with Project Canvas is that it proposes to specify not only a new technical platform that will integrate broadcast and broadband services but also to mandate the user interface by which programmes and applications are accessed and potentially the mechanisms by which usage is measured.

That may be the prerogative of vertically integrated pay-television platforms but it is incompatible with a horizontal retail market that is genuinely open and competitive.

Historically, broadcast standards have been set through a consensus driven industry approach that has allowed interoperability and economies of scale across national markets.

Consumer electronics manufacturers generally want to be able to differentiate their products in the market in terms of features and functions, rather than have the user interface imposed by a broadcaster-led consortium.

The proposals for Project Canvas have so far received remarkably little scrutiny from the communications regulator Ofcom. That is surprising given the level of regulation imposed on pay-television operators like Sky.

The Office of Fair Trading will need to assess whether to refer the proposals from the Canvas consortium to the Competition Commission, on the basis that the enterprise could supply more than 25% of relevant goods or services in the United Kingdom, resulting in a substantial lessening of competition.

That depends on the definition of relevant goods or services. The partners in Project Canvas clearly collectively already have a dominant position in the provision of broadcast programming, broadband services or terrestrial transmission respectively. The concern may be that they could establish a dominant position in the provision of programming through the combination of broadcast and broadband networks.

Consumers will still be able to access programming through broadcast and broadband networks by other means, but the issue is whether they will be equally capable of benefitting from the combination of services from competing providers.

It is irrelevant how open, or otherwise, the proposed Canvas platform will be or whether third parties will be able to create their own competing solutions. The real issue is how open the participants will be to providing their programming on equivalent terms to other competing platforms.

The evidence to date is that broadcasters like the BBC have only been prepared to make their programming available through other platforms on their own terms.

The relevant market is therefore not only receiving devices and displays but the provision of programming from the broadcasters involved in the Canvas consortium to other competing platforms.

That was precisely the conclusion on Project Kangaroo, a previous joint venture initiative between the BBC, ITV and Channel Four, which was blocked by the Competition Commission. This appeared to come as a genuine surprise to the parties involved, although to others it had the appearance of an anti-competitive cartel.

It might be noted that the assets of Project Kangaroo, in the form of SeeSaw, were acquired by Arqiva, which is now part of the Project Canvas initiative.

Some industry observers anticipate that Project Canvas might suffer the same regulatory outcome as Project Kangaroo. They include John Donovan, the managing director of 3View, which is launching its own hybrid broadcast and broadband box.

“We do not understand what Canvas’s remit will be and we do not subscribe to the belief that Canvas will provide something the commercial market can’t. We have proved that we can do it,” he said. “I think Kangaroo’s fate will probably be the same for Canvas.”

Sky, which has expressed its own reservations about Canvas, has already done deals with 3View and other companies like IP Vision and Cello, demonstrating that it can provide its programming to third-party internet protocol platforms. Most recently it has done a deal with Humax, which is significant because that set-top box company has been closely associated with Project Canvas as well as supporting the Freeview and Freesat platforms.

The Office of Fair Trading is currently reviewing submissions and expects to provide an initial decision on Project Canvas by 19 May. Based on that decision, the BBC Trust is expected to pronounce on whether the corporation can participate in the joint venture.

Irrespective of the outcome, further regulatory and legal challenges can be expected, continuing to cast a long shadow over the initiative, chilling the market that is already coming up with its own alternative solution.