The reaction Canvas has provoked from Sky is testament to the challenge that Canvas could pose to the established order, with the pay TV giant publically criticising the BBC Trust’s consultation schedule and requesting the venture be examined by the Office of Fair Trading. Sky has been sitting atop UK pay TV market for the best part of two decades, with BT among those that have tried, and failed, to erode its market share. But the Canvas JV will be in a stronger position to compete, having the support of the PSBs and leading ISPs. Worryingly for Sky, Canvas is emerging against the backdrop of a proposal by Ofcom that the UK ‘gatekeeper’ wholesale its movie and sports content at regulated rates. Clearly, Sky sees Canvas as a credible threat but will not have failed to notice that the platform might also offer the pay TV giant a chance to extend its reach, as it has with the recent Xbox 360 deal.

Canvas appears to be plotting its roll-out along similar lines to Freeview, rather than the pay-TV propositions that have failed to make a meaningful dent in Sky’s growth. The JV is at pains to point out the openness of Canvas and is loudly proclaiming that participation is on a non-exclusive basis; details which should keep industry regulators quiet and prevent Canvas facing same fate as Kangaroo. Certainly there is nothing to prevent Sky piggybacking on a Canvas proposition.

But, at the very least, it will be fundamentally conservative in terms of consumer facing implementation, which is hardly surprising, given the founding role of the PSBs. The platform will use an iteration of the Freeview EPG for linear programming, giving the BBC, ITV (LSE: ITV) and Five top billing. The playing field might not be entirely level for VoD either, with the JV operating a first-come-first-served policy for placement in the content menu, which again allows the founding partners to take prime position. The platform could undoubtedly offer later participants significant reach but smaller players might still struggle, with the portalised approach presenting limited opportunities for promotion and reducing their offers to isolated silos of unexplored content.

With 66.7 percent of the voting, the PSBs have a firm grip on the platform; consensus between the broadcasters would be enough to sideline any dissenting voices from BT (NYSE: BT). The telco gets an endorsement as a service provider in the latest submission in the shape of an MOU on managed delivery and QoS, but the importance of this is easy to overstate; the partnership is non-exclusive and besides, is likely to be relevant for just a portion of content delivered. More significantly, the JV has quashed speculation that Canvas participants will be obliged to use BT’s CDN and is actively encouraging other ISPs and CDNs to get on board, an approach Screen Digest considers imperative if Canvas is going to live up to its billing as an open platform and avoid being relegated to BT Vision Mk. 2. If Canvas is to revolutionise the UK TV business, the platform must follow in the footsteps of Freeview and take the retail route to market.

Unfortunately for BT and other potential ISP partners Canvas looks more like a value-add than a major new source of revenue – in fact, at least one provider has told us as much. The chance of ISPs squeezing significant consumer revenues out of the platform are pretty slim: they wouldn’t make much headway charging households for STBs and the prospect of up-selling customers to a premium Canvas tier are not great as many already subscribe to ‘unlimited’ data packages (and it would be characteristic of the cut-throat UK broadband market for ISPs to undercut rival Canvas providers anyway in a bid to steal market share). If anything ISPs will take a hit shouldering the burden of distribution for Canvas as the JV has ruled out subsidising content delivery, although the most recent submission to the BBC Trust makes provision to develop a framework for ISPs getting paid for their role in content delivery. However, without further information Screen Digest believes that this could prove far more challenging in practice than the proposal let on. Content services are used to decreasing CDN fees and increasing video quality so will have to be convinced of the importance of Canvas if they are to be expected to pay a premium to keep ISPs on side, particularly with other routes to the living room, without those fees, emerging.