An ambitious plan to create a rival to YouTube, jointly owned by the BBC, ITV and Channel 4, was killed off this morning after regulators said that it was anti-competitive.

Project Kangaroo had hoped to create a single website where viewers could catch up on recently transmitted programmes from the three broadcasters, but in a surprise ruling, it failed to win the Competition Commission's approval.

Peter Freeman, the chairman of the Commission, said that the proposed venture "would be too much of a threat" in the developing market for video on demand, because the three broadcasters would have an incentive to restrict supply of their programmes elsewhere.

The ruling left the three broadcasters stunned, and is a blow to both ITV and Channel 4, who both hoped that they would generate substantial advertising revenues from the venture, with viewers lured to the site by the presence of BBC programming.

Michael Grade, the chairman of ITV, said that he was surprised by the verdict. "We believed that the Kangaroo joint venture, competing in a crowded online world against dominant global brands, was an attractive UK consumer proposition, free at the point of use."

It had been widely expected that Kangaroo would be approved with modifications imposed by the Competition Commission to ensure that BBC, ITV and Channel 4 programmes were available elsewhere.

ITV had hoped that the television website would make a significant contribution by generating £150 million in revenue online by 2012. Originally the broadcaster had aimed to achieve that total by 2010, but had pushed the target back two years as Kangaroo ran into problems.

Channel 4 is under pressure to generate alternative sources of revenue as television advertising dries up, and its model of including expensive, lower rating current affairs programmes as part of its schedule could lead to losses rising to £100 million a year in the next decade.

The three broadcasters did little to conceal their frustration. In a joint statement, the Kangaroo three said: “While this is an unwelcome finding for the shareholders, the real losers from this decision are British consumers. This is a disproportionate remedy and a missed opportunity in the further development of British broadcasting.”

However, the Commission rejected that claim, arguing that the Kangaroo joint-venture would not be the only way in which television would be made available online. In its report, the regulator said: "We thought it unlikely that this JV [joint-venture] was the only way that customer benefits could be realised".

The Competition Commission looked at a range of possible remedies that would allow the website to go ahead with pre-conditions, such as insisting that the broadcasters sell their programmes to other websites separately, and that each broadcaster had a separate section of the Kangaroo website under a so-called "farmer's market" model.

However, in the end the regulators felt that the BBC, ITV and Channel 4 had too little incentive to help out competitors to the Kangaroo site, and so Commission officials concluded that they had no choice but to ban the site.

Kangaroo was intended to owned equally owned by the BBC's commercial arm, ITV and Channel 4, and would feature an archive of ITV and Channel 4 shows, plus BBC programmes seven days after their original transmission.

Shows would have been mostly free to watch, with the advertising revenue shared between the three according to a formula that partly depended on how much viewing each broadcaster attracted.

Separately, staff at ITV have been warned to expect more cost saving measures, to be announced next month.

In an internal email to staff, John Cresswell, ITV chief executive, said the broadcaster would reveal its blueprint for "weathering the recession" on the day it publishes its financial results on March 4.

"The consensus among forecasters is that the TV advertising market will be down around 8% this year, with some analysts predicting 10% or more. This would place our business under severe strain. So the need for immediate action remains," he said.

Mr Cresswell added that cost-cutting recommendations would be reviewed by the ITV board this week.

"We are planning to release the reviews conclusions on March 4, alongside our results for 2009. On that day we intend to brief you all on the actions that we need to take to ensure that ITV will weather the recession and have a strong future in the new broadcasting world," he said.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive