Ofcom Signals that Project Canvas May Face More Regulatory Scrutiny

--Canvas is a Joint OTT Initiative between the BBC, ITV, and BT
--Seeks to Develop Common Standard for Delivering Broadband Video on TV

Project Canvas--a joint initiative between the BBC, UK commercial broadcaster ITV, and UK incumbent telco BT, which seeks to develop a common standard and interface for the delivery of online catch-up services such as the BBC iPlayer and the ITV player, as well as other Internet-based VOD services, to broadband-connected set-top boxes (specifically, set-top boxes designed for reception of the UK's free-to-air multichannel TV services, Freeview and Freesat)--may be facing the same kind of regulatory scrutiny that led to the demise of Project Kangaroo, the joint VOD venture between the BBC, ITV and Channel 4 (note: for more on Kangaroo's demise, see the article posted on itvt.com April 20th).

Last week, UK communications regulator Ofcom, in a letter to the BBC Trust, the body which is responsible for public oversight of the corporation--and which had previously announced that it would not conduct a full "public value test" of the Project Canvas proposal, instead opting to conduct a less stringent "consultation" (note: a full public value test would require Ofcom to assess the competitive impact of the proposal on the marketplace; the BBC Trust's official reason for avoiding a full public value test was that Project Canvas is not a new BBC service but a new platform)--stated that "there may be a future role for the OFT [Office of Fair Trading] and/or Ofcom to assess [Project Canvas] under relevant merger or competition law." The letter, which was authored by Ofcom's head of strategy and market developments, Peter Phillips, also identified five areas that Ofcom believes would provide a "clear framework" for assessing the competitive impact of Project Canvas:

"standards: We understand that the technical specification for Canvas will involve not only reference to open standards, but also identifying preferred technical solutions from specific vendors," the letter stated. "The latter may have associated intellectual property rights (such as the chosen Digital Rights Management system) which could inhibit their use by third parties outside the Canvas consortium or potentially reduce competition. Encouraging effective collaboration between Canvas and third parties already developing fully open standards in these areas is likely to be beneficial for consumers;

platform: The collection of individual standards into a single specification--as is likely under Canvas--may effectively result in the creation of a new 'platform.' Resulting benefits are likely to be greatest if the Canvas specification is sufficiently flexible to enable it to be implemented by different delivery platform operators (whether free-to-air or pay) and equipment manufacturers, alongside other services to enable access by consumers to a wider range of services;

platform services: The BBC Executive's description of Canvas refers to navigational features enabling 'personalization, recommendations and localization,' which appear to envisage a sophisticated user interface spanning both regulated and unregulated content. Platform services such as these--and any electronic program guide--will need to be considered carefully to avoid the creation of a competitive bottleneck for third parties wishing to reach audiences via Canvas;

content services: The Canvas proposition envisages delivery of a high-quality experience for users. We recognize that it is necessary to have minimum standards for content providers in order to ensure such a quality user experience. However, such minimum standards should be justifiable, non-discriminatory, transparent and proportionate;

institutional arrangements: The BBC Executive proposes to partner with broadcasters, manufacturers, technology providers, software providers and Internet service providers to introduce the Canvas proposition. An inequitable approach to participation in the joint venture which favors certain participants may lead to potential harm for consumers as a result of market distortion. It is therefore important to ensure there are no unreasonable barriers inhibiting third parties participating in the joint venture and contributing towards future updates to the Canvas specification which may also help to support and foster innovation."

The letter goes on to say that "while the benefits of Canvas are potentially significant, we would encourage the BBC to continue to ensure its content is made available on a wide range of platforms, and to provide its services on a platform-neutral basis. In other words," the letter continues," it is important that commercially led propositions which seek to compete with Canvas should not be unfairly prevented from accessing BBC content."

Project Canvas has received mixed reviews from UK industry groups: in a submission to the BBC Trust's consultation on the initiative, the Intellect Technology Association, a body that represents, among others, manufacturers of digital TV equipment, complained that the initiative, by creating a UK-only standard, would make the UK a "technological island," and would also make it difficult for foreign vendors to compete in the country's set-top box and integrated digital TV market. (Note: Intellect also has concerns about what it alleges is the initiative's lack of openness. In an interview with the UK trade publication, Broadcast, Intellect's director of consumer electronics, Laurence Harrison, complained that the BBC is "still trying to exert an element of control over what should be an open standard" and "has chosen to work with certain players and not others, and...hasn't said why...It's been a closed shop around what the plans are--for example, the technical specifications," Harrison continued. "There is a lot of sunk investment in other projects that is going to be lost. How on earth can we comment meaningfully on Project Canvas' market impact if we don't know what it is?") However, in its submission, the advertising-industry organization, ISBA, praised Project Canvas as "an important commercial counterbalance" to the BBC iPlayer.