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Canvas to boost broadband market and free-to-air, says Morgan Stanley

Analysts at investment bank Morgan Stanley expect boxes for the proposed Canvas UK hybrid broadband-delivered on-demand TV service to cost between £150-200 (€172-230) when the service launches, and believe that it could increase demand for fixed broadband services and help cement the free-to-air share of viewing in Freeview digital-terrestrial homes (currently 50% greater than its share in pay-TV operator’s BSkyB’s homes).

Morgan Stanley believes a final decision on Canvas will be taken by the end of March, following completion of the BBC Trust’s second round of consultation on February 2. If everything is in place for a shareholders’ agreement, the service could launch at the end of this year or early 2011.

According to Morgan Stanley, the service will have a strong appeal to the six million broadband homes in the UK that are not paying for content. Canvas could improve competition by breaking down platform barriers, and Morgan Stanley believes it is unlikely that its opponents will be able to freeze the launch of the service as content is not being aggregated and the BBC’s stake will only be 16.6%. However, it notes, the Digital Television Group still needs to finalise its work with Canvas to create common standards for consumer devices.

The analysts also argue that ISPs including BT and TalkTalk could extent the reach of their own content services and therefore have more to gain than lose from the platform.