Channel Five is joining forces with the BBC and ITV on Project Canvas, the digital TV service that plans to provide broadband-connected digital television receivers.

The open-platform service, which could be made publicaly available as early as next year, is also thought to offer HD broadcasts through Freeview and TV-on-demand similar to the BBC's iPlayer. There will also be no restriction on the ISPs that can offer broadband access through the set-top box.

According to Dawn Airey, the chairman and chief executive of Five, Project Canvas would be a would be "a major technological advance in broadcasting".

"It will extend choice and significantly improve the television experience for viewers," she added.

Canvas project director Richard Halton, added that he was "delighted" Channel Five has joined the project.

"Canvas aims to unlock the huge potential of internet-connected TV."

However, it is thought Ofcom is concerned about the BBC's involvement in Project Canvas. If there is any doubt over the effects of the service on competition in the industry, Project Canvas may face the same fate as Project Kangaroo - a TV-on-demand service from the BBC, ITV and Channel4, which was shelved earlier this year after the Competition Commission said it wouldn't benefit viewers.

The move comes as Microsoft announced it was bringing its MSN Video Player to the UK. The TV-on-demand service was launched in the UK yesterday and plans to offer up to 300 hours of free shows.