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Competition watchdog bounces BBC, ITV and C4's web TV plan

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A plan by the BBC, ITV and Channel 4 to offer their shows in one location on demand on the web received a major blow today when the Competition Commission said the plan would "restrict competition".

Releasing the preliminary findings of an investigation into Project Kangaroo, the regulator asked the broadcasters to comment on how they might "address the loss of competition and its adverse effects for viewers". The Commission took evidence from Sky and Virgin media, who said a joint venture online by the UK's major TV producers would concentrate too much market power.

Competition Commission chairman Peter Freeman said: "We are concerned that the loss of rivalry between BBC Worldwide, ITV and Channel 4, who are normally regarded as close competitors, could restrict existing and future competition for video-on-demand."

After hearing how Project Kangaroo plans to calm its concerns, the Competition Commission will release its final judgment on February 8.

The venture has already been delayed for months by regulatory hurdles. In November its chief executive of four months, former BBC technology chief Ashley Highfield, quit for a job at Microsoft.

In its "notice of possible remedies" (pdf), the Competition Commission said it could block Project Kangaroo altogether. Other solutions on the table include requiring the joint venture to offer its shows to other video on demand distributors on a regulated wholesale basis and limiting the level of exclusivity between the parent broadcasters and the Project Kangaroo site. "For example, [it could] be limited to providing links to itv.com and Channel4.com, as is proposed in the case of the BBC iPlayer," the regulator said.

Project Kangaroo plans to offer both free-to-view content, supported by advertising, and paid for options on some shows. The BBC's involvement is being handled by its commercial arm, BBC Worldwide.

Freeman said: "The evidence that we have seen tells us that domestic content is key to being able to offer strong competition to [Project Kangaroo's] proposed service.

"The parties control most of that content, putting them in a powerful position in relation to competitors and viewers. We think that it would be difficult to obtain content from third parties to match [Project Kangaroo's] offer in scale or attractiveness."

The joint venture's partners said in a statement: "We will continue to make the case for a service that will be both in vast majority free and non-exclusive, and of great benefit and value to British consumers." ®

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