First announced in November 2007, Project Kangaroo was billed as a 'one-stop shop' for video content online and was expected to offer users more than 10,000 hours of TV, with around 90 percent available for free and the rest available for rent or purchase. However, the Commission began investigating the service after rivals including Sky and Virgin Media raised concerns.
Following its investigation, the Commission has announced its provisional findings, which claim the service is not competitive.
"We are concerned that the loss of rivalry between BBC Worldwide, ITV and Channel 4, who are normally regarded as close competitors, could restrict existing and future competition for video-on-demand," said Peter Freeman, chairman of the Competition Commission.
"At the extreme, [Project Kangaroo] might withhold content from its rivals altogether. Any reduction in access to content would be likely to impact unfavourably on viewers," he added.
The Commission has outlined ways this can be rectified but has also warned that if none of these solution are effective "prohibition would also be an option". The Commission is now calling for interested parties to submit their ideas on how the competition problem can be resolved.
"We will continue to make the case for a service that will be both in vast majority free and non-exclusive, and of great benefit and value to British consumers" Project Kangaroo said in a statement.
However, Project Kangaroo hasn't commented on how these provisional findings will affect its plans to launch an alpha test version of the service this month.
Alki David, founder of online portal FilmOn.com, said: "Right now the market place doesn't really know what Project Kangaroo is, other than just another video on demand platform and there are plenty of new content forms and content makers, with brands to back them. There are evolving technologies and better technologies being developed every single day. Who's to say that whatever appears this time next year won't be outdated a year after?".
The final decision is expected to made in February next year.