After knocking back online proposals time and time again, the BBC’s regulating BBC Trust is giving provisional approval to the corporation’s Project Canvas proposal to create a common interface for IPTV-delivered catch-up VOD and internet widgets in the living room.

The proposal has passed both the public value test and the market impact assessments carried out by the trust. The trust concludes: “The likely public value of the proposal justifies any potential negative market impact.”

Indeed, it found three “potential negative impacts”:

• ”It could slow the future growth in subscribers to some pay TV services”
• “Contributing to the long-term shrinking of DVD rental and possibly retail markets”
• “Negatively affecting existing or new smaller hybrid DTT/IPTV platforms”

But the trust also says: “It will add a new dimension to digital terrestrial TV by enabling an increase in the range of content and services available on the platform ... There will be low barriers to access for new producers/providers of content who wish to get onto the platform – allowing a new range of low-cost services the opportunity to flourish ... Canvas is therefore consistent with the BBC’s public purposes ... (It will offer) a greater number of Internet Service Providers (ISPs) the opportunity to develop “stronger triple play”.

The trust is placing some conditions on this, but they are either light or were already pledged by the BBC - publishing the technical specs to hardware makers, getting consensus on technical standards, giving content providers fair access, plus the trust will review whether Canvas will discourage the partners from syndicating their shows to other services.

The trust has opened another consultation, allowing people to give their views on its provisional conclusion until February 2. BSkyB (NYSE: BSY) will likely use the opportunity to bark at the decision. Final decision is then expected in the Spring.

The BBC, ITV (LSE: ITV), Channel 4, Five and ISPs BT (NYSE: BT) and TalkTalk will create a new JV company, in which each has an equal stake, to devise an electronic programme guide software layer for a new range of broadband-connected Canvas boxes due in late 2010, and perhaps later integrated on connected TVs. The system will offer access to the broadcasters’ own VOD, but has also promised to offer a software developers’ kit (SDK) to encourage internet content on to the screen...

That certainly means the long-held possibility of video from the likes of YouTube, Dailymotion and Vimeo on living-room TVs, but the BBC has also been using words like “apps” and “widgets” to describe further services that may be built on top, like Twitter and Flickr.

“Canvas” was conceived to deliver VOD and online TV to the 53 percent of UK viewers the BBC says “risk falling behind” by not subscribing to pay-TV - so it’s riled News Corp.‘s satcaster BSkyB (the UK’s most popular pay-TV platform) and cable operator Virgin Media (NSDQ: VMED), the latter of which is finding big VOD success of its own. Both providers, and all comers, have been invited to place their content on Canvas, which has promised to offer payment mechanisms to content owners that wish to charge for their content. Lovefilm has shown an interest in developing a service through Canvas. BBC trustee Diane Coyle said in a Tuesday conference call: “An analogy might be apps on the iPhone, which can be paid for.”

The project will cost an estimated £115.6 million over five years, shared by the participants.

A new brand name will be picked to launch Canvas boxes on in late 2010. It will be a rescue for BT’s own IPTV service, Vision, which has not set the world alight. But, while the BBC has won approval for its involvement in the project it conceived, winning support from home electronics makers will be vital if Canvas is ever to materialise on TVs and boxes. TV makers are already retailing connected TVs with their own interfaces.

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