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Competition regulator kyboshes Project Kangaroo

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Updated BBC Worldwide, ITV and Channel 4's web video on demand plans were sunk by competition regulators this morning, who said their proposed joint venture "Project Kangaroo" would have too much market power.

In its final report on the proposal, the Competition Commission said Project Kangaroo would have control over too much of the original television produced in the UK.

Peter Freeman, chairman of the Competition Commission said: "Without this venture, BBC Worldwide, ITV and Channel 4 would be close competitors of each other. We thought that viewers would benefit from better [video on demand] services if the parties — possibly in conjunction with other new and/or already established providers of VOD — competed with each other."

In their preliminary findings in December, regulators suggested ways to ameliorate the potential anti-competitive effects of the venture. Today's decision means none of the measures, including forcing Project Kangaroo to supply competitors with programming on a price-controlled wholesale basis, was found strong enough.

BBC Worldwide, ITV and Channel 4 had hoped to repeat the success of the BBC's streaming iPlayer on a commercial basis, by building an ad-supported site to aggregate shows online. In a statement they said: "We are disappointed by the decision to prohibit this joint venture. While this is an unwelcome finding for the shareholders, the real losers from this decision are British consumers. This is a disproportionate remedy and a missed opportunity in the further development of British broadcasting."

During the inquiry, Sky and Virgin Media gave evidence complaining that Project Kangaroo would concentrate too much power over content and stymie their own video on demand efforts.

ITV chairman Sir Michael Grade said ITV remained committed to online services despite today's blow. "In the two years since the idea for Kangaroo was born, the success of ITV.com has proved that our UK content is attractive enough to stand on its own and we remain focussed on our online growth," he said. "We will provide a further update on our online plans with our full year results on March 4."

The Competition Commission's blockade today was apparently foreseen by Ashley Highfield. The ex-BBC technology chief quit Project Kangaroo for Microsoft in November after just four months in charge. ®

Update

The BBC sent this statement:

We are disappointed by today's decision that prevents the partners taking Kangaroo forward. However, we remain absolutely committed to delivering distinctive quality BBC programmes online and will continue to drive innovation through our successful iPlayer platform.

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