The BBC Trust has given its provisional approval to the BBC Executive’s proposals for Project Canvas, the JV between the BBC and five partners that aims to enable DTT homes with broadband connections to access IPTV content on their TV sets

Canvas promises to enrich greatly the DTT platform; however, it is likely to encounter fierce opposition during the coming consultation from equipment manufacturers and the pay-TV platform operators, Sky and Virgin Media, especially in relation to its attempts to prescribe the user experience (UX)

We think that the BBC Trust will give its final approval, subject to the conditions specified in its provisional statement, but further delays seem likely and we do not expect Canvas devices to appear in the shops before 2011

T-Mobile and Orange’s plan to merge their UK businesses into a JV would create the UK’s largest mobile operator by some margin, and the enormous planned synergies of £545m per annum are actually quite unaggressive given the cost overlap

This achievement would be moderated by ‘integration leakage’, i.e. increased churn caused by customers leaving who were initially attracted by an aspect of one of the operators that disappears after integration, but the net result should still be positive for the JV

The remaining UK operators will benefit both from this churn and the reduction in competitive intensity associated with five players dropping to four. While all the operators may win, UK consumers might lose, with regulatory clearance thus still far from certain

The BBC Executive has fleshed out many details of Project Canvas in response to questions raised by the BBC Trust: Canvas being the proposed joint venture between the BBC, BT, ITV and Five that aims to solve the challenge of realising the seamless convergence of linear broadcast TV and internet video to the TV screen in the living room

For Project Canvas to succeed, it is likely, in spite of its merits, to have to address competition concerns in the areas of company structure, stifling innovation and editorial controls over who gets to participate

Stifling innovation – whether to do with creative restrictions, marginalisation of competing players or undue prominence given to the traditional public service broadcasting (PSB) model – appears the most problematic issue facing Project Canvas, whose success will depend on its ability to convince the rest of the industry that it is stimulating, not stifling innovation

Vodafone (and others) are reported to be interested in acquiring T-Mobile in the UK, but any such merger would be likely to face significant barriers from regulatory authorities

This achievement would be moderated by ‘integration leakage’, i.e. increased churn caused by customers leaving who were initially attracted by an aspect of one of the operators that disappears after integration, but the net result should still be positive for the JV

The remaining UK operators will benefit both from this churn and the reduction in competitive intensity associated with five players dropping to four. While all the operators may win, UK consumers might lose, with regulatory clearance thus still far from certain

Project Canvas is the BBC/ITV/BT backed proposal for next generation Freeview and Freesat services that embraces IPTV reception, new EPG, home storage and HDTV applications

Setting up Canvas as a not-for-profit consortium and making it non-exclusive to content providers should avoid the competition issues which killed Kangaroo, but many questions remain and technical and regulatory delays could push back the launch to 2011

We do not expect Canvas to make a major difference to non-linear viewing of audiovisual content – its importance lies much more in future-proofing the ‘Free TV’ viewing experience on the terrestrial and satellite platforms

The planned merger of Vodafone and H3G in Australia has raised the question of what consolidation could occur in Europe, although a direct analogy is not appropriate because Vodafone is much weaker in Australia (#3 operator) than it is in the larger European countries, and so would face much more regulatory scrutiny in Europe

The only merger opportunities in the top five markets which would have a similar or lower theoretical impact on competition (and hence would theoretically be as easily approved) in the top five European countries would be T-Mobile and H3G in the UK, Wind and H3G in Italy, and any operator with Yoigo in Spain

There are massive cost savings to be had from in-market consolidation, with network, marketing and general administration costs all fully overlapping between operators. The non-merging players would also enjoy a period of less competitive intensity, which may last indefinitely

The essential conclusion of Ofcom’s Second Public Service Broadcasting Review is that the present commercial PSB model is unsustainable in the digital age. The Ofcom solution of fixing on Channel 4 as the “alternative, commercial PSB voice”, while freeing up the Channel 3 and 5 licensees from most of their PSB obligations, still leaves a major funding gap

A particularly attractive solution is some kind of synergy-generating merger/JV/partnership, but difficult to achieve in practice. The attached note examines the main issues that we may expect to arise with the existing proposals

Kangaroo – the proposed BBC Worldwide/ITV/Channel 4 video-on-demand (VOD) service – has been terminated by the Competition Commission (CC) due to fears that it could control the wholesale and retail supply of UK TV VOD

In our view the CC decision is a lucky escape for all three shareholders since it will save them from investing potentially tens of millions in an ill-advised venture which could have become a bottomless money pit when they can least afford it

Near term ITV and Channel 4 will refocus their internet strategies around their own portals and online syndication deals, but these are unlikely to deliver significant revenue; Marquee – the BBC’s proposition to open up iPlayer to other PSB broadcasters – could help, with the advantage of being very low cost