Pay-TV company argues trust has failed to protect licence fee payers and should make on-demand content available to rivals
BSkyB has argued that 'inherent tension' in the BBC Trust's role has meant it is not taking on board industry concerns over the video-on-demand service Project Canvas.
The pay-TV company, which has been backed by rival Virgin Media in opposing Project Canvas, says there is a conflict between the trust's role as guardian of licence fee payers as and its job setting the strategic course of the corporation. It says the trust 'missed an opportunity to achieve the BBC's public purposes in a proportionate manner' when it published it provisional decision to approve the service in December.
In its response to the trust's conclusions, BSkyB raises issues over funding arrangements, says that the scope of Project Canvas is designed to favour free-to-air broadcasters, and claims that a 'one size fits all' user interface will be the standard.
'Sky believes that the inherent tension between the two roles has led the trust to disregard too easily concerns raised by stakeholders,' it said in its submission. 'With such weak obligations on the BBC and joint venture partners, there would be a real risk of the trust failing to discharge its duties as guardian of the licence fee revenue and public interest, by favouring the BBC's short-term commercial objectives over the interests of the wider market, and the licence fee payer.'
BSkyB said that a quid pro quo for allowing the BBC to be part of Project Canvas, which has partners including BT, Channel 4 and TalkTalk, would be to force it to make its on-demand content available to rivals with no strings attached.
'Consumers will benefit if the BBC's on-demand content is widely available on multiple platforms,' said BSkyB. 'Indeed in a world with Canvas it becomes imperative that the BBC syndicate its public service content without bundling it with iPlayer, if requested, and without requiring distributors to take unreasonable volumes of material. Such a condition would reduce the main concerns of a significant section of industry to the BBC's participation in Project Canvas.'
The BBC Trust, which refused to allow Ofcom to conduct a separate market impact assessment of Project Canvas, has admitted that while benefits to consumers will be significant there will also be an impact on the businesses of pay-TV companies such as BSkyB and Virgin Media.
A 'base case' scenario, according to the trust, would be that BSkyB and Virgin Media could lose out on revenues of between £127m and £470m. However, Sky argues that the costs are likely to hit £642m, the BBC Trust's 'high case' scenario, or above.
BSkyB has also cautioned that the funding mechanism, and in particular the start-up research and development budgets that the BBC has provided, run the risk of breaching state aid rules.
The BBC, whose total research and development spending increased by almost 300% from £16.1m in 2007-08 to £47.8m in 2008-09, argued that expenditure specifically on internet TV R&D did not represent a "pre-investment" specifically on Project Canvas but general expenditure on the initiatives for the sector.
However, a BBC spokeswoman said the corporation's R&D spend had not increased 300%, as last year's annual report suggested.
"Before 2008/9 a category of development spend in FM&T [Future Media & Technology] was not included along with other R&D costs in the BBC's annual report and accounts. We identified this inconsistency in 08/09 and published the full figure. This means there has not been a 300% increase in R&D spend, in fact the amount has remained fairly stable," she added.
"Previous years accounts were not misstated (the figure was treated correctly in the main income and expenditure and balance sheet), but the total R&D figure disclosed omitted this FM&T spend."
In the publication of its provisional conclusions in December, the trust said that an independent audit needed to take place to verify that the BBC's research and development spending would be shared equally among the partners.
It is understood that the trust was aiming to publish its final decision by the end of March.
However, for a number of reasons, including the expected publication of Ofcom's pay-TV review and the Department of Culture, Media and Sport announcing the successful bidders for the three regional news pilots, it is expected to be put back to April.
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