Virgin calls for inquiry into internet-TV project

Virgin Media has called on Ofcom to investigate Project Canvas, a joint venture that is preparing to bring internet television into living rooms next spring, saying it will "significantly and irreparably harm competition".

Virgin yesterday submitted an official complaint to the media watchdog over the joint venture developed by the BBC, ITV, Channel 4, Talk Talk and broadcast transmission group Arqiva. It fears that Canvas could create a monopoly in the UK's internet television market.

Canvas has been described as ushering in a "new generation" of on-demand and interactive TV. Virgin's complaint, however, was that it created "obvious restrictions on competition" that were "not compensated or outweighed by any potential consumer benefits".

A Canvas spokeswoman said the venture "expects to discuss the grounds of any complaint by Virgin Media with Ofcom", adding that the proposals "will create an open standards-based internet-connected TV environment within which competition and innovation can flourish".

Project Canvas was first announced in September 2008, and was cleared by the BBC Trust earlier this year, despite submissions from Virgin and rival pay-TV provider BSkyB arguing against the venture in its proposed form. Virgin is the first company to officially complain to the regulator, although insiders expect other industry players to support its action. Sources close to Sky said it was "considering its options".

Virgin held talks with the project's stakeholders about including Canvas in its forthcoming internet-connected box developed with Tivo, but failed to reach an agreement. Insiders at the group said: "There is a bigger agenda behind Canvas for the public service broadcasters, they are clamping down on access to their content."

Ofcom said yesterday that it could "confirm that it has received a complaint from Virgin Media relating to Project Canvas. Ofcom will assess the complaint to determine whether it warrants investigation." Virgin is confident after Ofcom raised concerns over Canvas during the BBC Trust probe.

Virgin also said that Canvas would block innovation in the wider industry, as it will be "restricted to a single experience and interface – a single 'shop window'." It fears that "this will preclude free competition before the market has had the opportunity fully to develop".

Research group Enders Analysis said the project gave rise to the "worry that the Canvas specification will soon become the 'National Health glasses' of the TV world if it prevents manufacturers and services from differentiating and innovating".

Insiders contrasted the partnership with the "open standard success" of the Android mobile phone software developed by Google. It is available to all mobile manufacturers to develop different handsets and is the fastest-growing part of the smartphone market.

Virgin's submission pointed out that "each of the Canvas partners is a very significant player in the broadcasting or wider telecommunications market". The public service broadcasters involved in Canvas account for 66 per cent of television viewing in the UK as well as over 50 per cent of the broadband market. That these companies have teamed up already removes competition in the industry, it said.

The BBC Trust, the body that governs the BBC, approved the corporation's participation in Canvas in June. A green light from the trust was seen as the last hurdle for the venture that was expected to launch in April, but Virgin's move could delay it.

Canvas secured a heavyweight figurehead last month when it announced that Kip Meek, who has formerly held board-level roles at Ofcom, would be chairman of the body. Mr Meek's principal task is to find a chief executive.