Ofcom has stalled complaints that Project Canvas, the internet-based digital terrestrial TV project owned by the BBC, ITV, Channel 4, Five, BT, TalkTalk and Arqiva, is anti-competitive.
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The telecoms regulator said it was too soon to open an investigation because IPTV technology is immature, and there was no way to assess the impact of Canvas's YouView, the next generation of Freeview set-top boxes, on the market.
The decision comes as market researcher Parks Associates revealed that the number of European households with an internet-connected TV will grow from less than four million in 2009 to 47 million in 2014, and the number of households with a connected Blu-ray player will rise from five million in 2010 to 66 million in 2014.
Peter White, CEO of Rethink Technology Research and editor of Faultline, a specialist video technology magazine, said Canvas was an attempt to provide the BBC and ITV with a consumer lock-in in the face of the growing switch to pay-TV and declining TV advertising revenues.
"BBC and ITV will survive because the government's must-carry rules that means pay-TV broadcasters must also carry their channels for free," he said.
White said the purest available form of internet TV was BT Vision, which uses the Internet Protocol plus adaptive streaming to adjust the packet sizes to suit the conditions on the line. This ensured a smooth video picture at all times, whereas Skype video, which does not use adaptive streaming, produced a pixellated picture when the line got congested or noisy, he said.
According to White, Europe and most of the world's digital TV broadcasters had plumped for the HbbTV (Hybrid Broadcast Broadband TV) consumer interface.
"Canvas had said it would be a superset of HbbTV, but it has dropped it," White said. "This means that YouView set-top boxes won't work in Europe and vice versa, except that set-top box makers will support both in the same unit," he said.
Virgin Media and IP Vision complained to Ofcom that alleged potential breaches of the Competition Act 1998. Ofcom also received submissions from 11 other parties, including BSkyB, it said.
Ofcom said, "At the current stage of YouView's development, it would be premature to open an investigation because IPTV is still an emerging sector, and the impact of YouView on the market will not be known with any confidence for some time."
It added that YouView was likely to benefit viewers and consumers. "Any potential harm to competition would need to be offset against these benefits," it said.