Sky has published its response to the BBC Trust’s provisional authorisation for the Project Canvas connected-TV venture.

The BBC Trust, in its announcement in December, conceded Canvas could have a “modest negative impact” on Sky and Virgin Media (NSDQ: VMED) if they did not embrace the platform.

The satcaster still considers Canvas an “unnecessary intervention which will distort the market” - but now its concern has turned to getting stronger measures that “adequately minimise the (market) distortions” (emphasis mine).

Because it thinks the trust underestimated Canvas’ market impact, Sky’s proposing a series of “additional requirements”, to cushion that impact - suggesting it’s accepting a possible future with Canvas, rather than just striving to prohibit it. Sky’s new proposals…

—The Canvas specification should be developed through the Digital Television Group (DTG).

—“Third party content providers should have access to the platform from launch, irrespective of business model” - this was effectively a Canvas proposal already.

—ISPs should grant fair network access to all Canvas content providers.

—BBC VOD content should be syndicated to third parties without the iPlayer brand and “without requiring distributors to carry the entirety of BBC on-demand output” (effectively meaning Sky may want some BBC VOD on either its Sky Anytime, Sky Player or forthcoming TV pull-VOD platform). BBC syndication guidelines are currently being reviewed separately.

Sky may even be envisaging a time when its own channels are on Canvas. One passage in its submission reads: “The most realistic assumptions are that Sky‟s premium channels are available via Canvas boxes and DTT.”

But Sky still reckons…
—The BBC Trust’s Market Impact Assessment and Public Value Test were “deficient” and “underestimate the negative market impact”.
—The BBC Trust’s checks against EU competition law were “deficient”. “It is wholly inappropriate for the BBC to act as a lending bank to commercial broadcasters.”
—“Proposals would constitute illegal state aid.”

It says its revenue would be hit by up to three to four percent, adding: “By way of comparison ... the Trust rejected the BBC’s Local Video proposals, with a 4% reduction in revenues described as ‘significant’.” Smart argument.