Ofcom says it will not at this stage investigate YouView, formerly codenamed Project Canvas. The United Kingdom communications regulator said it would be premature to open an investigation under the Competition Act on the television platform which plans to launch in the first half of 2011. It follows formal complaints from Virgin Media and IP Vision and an eleventh hour submission from Sky. Ofcom said it will continue to monitor developments, particularly in relation to standards and programme syndication and may reconsider whether to investigate in the future.

YouView is a partnership between the BBC, ITV, Channel Four, Five, BT, TalkTalk and Arqiva which will offer a combination of digital terrestrial channels and internet-delivered television services. It involves creating technical standards which can be used by participating services to deliver media to a standard user interface.

The initiative has been widely criticised as anticompetitive by other platforms with which it would compete. Virgin Media and IP Vision submitted complaints to Ofcom that alleged potential breaches of the Competition Act 1998. Ofcom also received submissions from 11 other parties, including Sky.

Ofcom has the power to conduct an investigation if there are reasonable grounds for suspecting an agreement which may result in the prevention, restriction or distortion of competition within the United Kingdom. The Competition Act comes with powers to levy substantial fines on companies found in breach.

Among the complaints was that the partners in the joint venture are incentivised to withhold programming from competing platforms, that technical standards had not been developed openly and were not made available for use outside the joint venture, that the YouView brand is tied to a specified user interface and electronic programming guide, and that it was likely to restrict competition between television platforms.

Ofcom formed the view that in an emerging sector the impact of YouView on the market will not be known for some time. It said that YouView will bring benefits to viewers and consumers that would offset any potential harm to competition. It argued that any restriction on competition will depend on how the partners act, particularly in relation to providing access to programming and issuing technical standards.

However, Ofcom said: “If YouView did lead to its partners restricting the supply of video on demand content to rival firms, this could lead to consumer harm and may well generate competition concerns.” It said it will keep the syndication policies of the YouView partners under review.

Ofcom said that the partners had already made a number of technical standards available to the industry. While there is potential risk if transparency is restricted in the future, Ofcom does not consider it requires investigation at this stage.

The regulator also recognised the risk that YouView may result in a more limited choice of user interfaces and user experiences for viewers but did not consider this outweighed the potential benefits to consumers of a common look and feel.

“Ofcom’s view is that consumers’ interests will not be served by opening an investigation,” said Ed Richards, the chief executive of Ofcom. “It would be premature at the current stage of YouView’s development given the absence of a clear risk of consumer harm. “But if evidence does emerge in the future that YouView causes harm to the interests of viewers and consumers we may reconsider whether to investigate.”

The news that YouView would not be investigated at this stage was welcomed by its chief executive, Richard Halton. “We have been clear throughout this process that YouView will stimulate competition in the TV platform market and create opportunities for content providers and device manufacturers,” he said in a statement. “We look forward to broadening our engagement with wider industry partners over the coming weeks and months.”

The lack of action from Ofcom at this stage will no doubt disappoint Sky and Virgin Media, who are preparing to launch their own services combining broadcast and broadband.

Sky simply said in a statement to informitv that it noted Ofcom’s decision and “will consider it fully before making any further comment”.

Virgin Media told informitv: “We are perplexed and disappointed by Ofcom’s decision but will not comment further until we’ve examined their statement and the underlying reasoning in more detail.”

Eddie Abrams, the chief executive of IP Vision said he was pleased that Ofcom recognised there is a potential impediment to free market competition and even potential for consumer harm. “We maintain that if YouView were to roll out as currently intended, market competition would be thwarted and the industry’s motivation and drive to innovate, to create new services and to improve the TV user experience would be inhibited.”

He called on the BBC Trust to ensure technical specifications are published in sufficient detail for third parties to implement both for use in concert with the YouView trade mark and also to provide competing services. He also asked the Trust to confirm that BBC programming would also be syndicated widely and independently of iPlayer and called for other public service broadcasters to make their programming to platforms other than YouView on equivalent terms.

The option of an appeal or a judicial review is still open to those that might wish to take the matter further. It may also attract the scrutiny of the European Commission if initiatives such as YouView are held to restrict the free flow of programming.

Given that the communications regulator Ofcom was set up to have oversight of the converged broadcasting and telecommunications space it will be a surprise to some that it has adopted such a laissez faire approach to regulating what will perhaps be the single most significant development in this market.

However, rather than clearing YouView of any anticompetitive complaints, Ofcom is clearly warning the partners to be on their best behaviour if they are to avoid the prospect of a future investigation.