UPDATE 1-UK watchdog says won't probe Internet TV project

LONDON, May 19 (Reuters) - Britain's consumer affairs watchdog has said a joint venture aimed at giving Internet access to digital TV falls outside its jurisdiction, dealing a blow to critics of the venture like pay-TV firms.

Project Canvas plans to bring video on demand programming without subscription to viewers. Its backers include the BBC, commercial groups ITV, Channel 4 and Five, and telecoms groups BT and Talk Talk.

An earlier attempt at forming a joint video on demand platform between the BBC, ITV and Channel 4, called Project Kangaroo, was dropped after Britain's competition regulator blocked it to prevent it from becoming too powerful.

The Office of Fair Trading said in March it would look into Project Canvas, which could have been a precursor to another investigation by the Competition Commission.

However, it said on Wednesday the project fell outside its remit because none of the partners were contributing a pre-existing business.

'Regardless of the potential significance of Project Canvas JV for the future of internet connected television, the notified proposals do not give rise to a merger qualifying for substantive investigation by the OFT,' it said.

Pay-TV groups BSkyB and Virgin Media have both expressed concerns about the project. BSkyB said in December the BBC was exceeding its public service remit.

(Reporting by Mark Potter; editing by Elaine Hardcastle) Keywords: OFT PROJECT CANVAS/ ([e-mail]; [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.