A serious spanner has been thrown in the works for Project Kangaroo, the joint video on demand service from the BBC, ITV and Channel 4, as it has failed to gain approval from the Competition Commission.

The regulator has ruled that the scheme, that would allow BBC, ITV and Channel 4 to offer viewers recently aired and archived programmes via the web, "would restrict competition in the supply of Video on Demand (VOD) services in the UK".

Peter Freeman, chairman of the Competition Commission, said: "Video-on-Demand is a relatively new and rapidly expanding medium and UKVOD clearly has much to offer".

"However, we are concerned that a loss of rivalry between BBC Worldwide, ITV and C4, which are normally regarded as close competitors, could restrict existing and future competition for VOD. Whatever benefits viewers would gain from this rivalry would clearly be lost".

"The parties control most of that content, putting them in a powerful position in relation to competitors and viewers. We think that it would be difficult to obtain content from third parties to match UKVOD's offer in scale or attractiveness".

"The OFT originally referred Project Kangaroo to the commission in June with concerns that 'there was a danger that the platform could be too powerful'".

A final report will be published by February next year.