UK's Competition Commission finds Project Kangaroo would restrict competition

December 3, 2008 - The UK's Competition Commission (CC) has given provisional findings on the nascent Internet TV collaboration Project Kangaroo, proposed by the broadcasters BBC, ITV and Channel 4, ruling that the service would restrict competition.

The CC has concluded that the joint venture is likely to result in a "substantial lessening of competition" in the supply of video on demand content in the UK at wholesale and retail levels, but adds that it does not expect the project to lead to substantial lessening of competition in online advertising or content acquisition.

"Video on demand is a relatively new and rapidly expanding medium and UKVOD clearly has much to offer," said Peter Freeman, Chairman of the Competition Commission. "However, we are concerned that a loss of rivalry between BBC, ITV and C4C, who are normally regarded as close competitors, could restrict existing and future competition for VOD. Whatever benefits viewers would gain from this rivalry would clearly be lost."

"Of course there are already several other well-established providers of various types of VOD services," continues Mr. Freeman. "However, the evidence that we have seen tells us that domestic content is key to being able to offer strong competition to UKVOD’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 UKVOD’s offer in scale or attractiveness.

"In this situation, UKVOD would have the ability and incentive to impose unfavourable terms when licensing domestic content to rival VOD providers. At the extreme, UKVOD might withhold content from its rivals altogether. Any reduction in access to content would be likely to impact unfavourably on viewers. We now seek comments on how to address the loss of competition and its adverse effects for viewers."

The commission has suggested a number of ways that the companies involved could resolve the lessening of competition, including putting in place access remedies to control the way content is offered to other providers and/or making modifications to the terms of the joint venture, such as adjusting the scope of the joint venture's activities or the terms of exclusivity between the venture and its parents.

The Competition Commission is now to hold further hearings with the main and interested parties before publishing its final decision on competition issues and remedies, with a final deadline of February 8th of next year for the commission's final report.

Following the considerable success of the BBC's over-the-top VOD service iPlayer, which has placed such burdens on local broadband networks that a dispute has arisen over who should fund the increase in network demands, the UK's broadband operators and pay-TV operators will be keeping a close eye on Project Kangaroo and the eventual findings of the Competition Commission.