BSkyB to fight premium channels plan

Author: By Kelly Macnamara, Press Association

The satellite giant said it disagreed “fundamentally with Ofcom’s approach,
analysis and conclusions”.

Its comments followed the third consultation document by Ofcom, which believes
BSkyB has “an incentive to restrict the distribution of premium channels”.

The watchdog said the satellite broadcaster is thought to be charging high
prices to competitors for the use of its premium content.

It said the situation had a “detrimental effect on consumers” by reducing
choice and constricting innovation in the pay television market.

Ofcom set out proposals for pricing which it said were above the level needed
to allow BSkyB to make a “reasonable return”.

But BSkyB said: “In light of Ofcom’s determination to pursue its preferred
outcome, we will use all available legal avenues to challenge this
unwarranted intervention.”

Ofcom has already warned BSkyB that it wants it to wholesale its premium
content out to rivals more freely.

It believes that content such as movie premieres and live top-flight sport is
particularly attractive to viewers.

BSkyB holds the rights to many top sporting fixtures and all major Hollywood
releases and Ofcom said the satellite broadcaster kept a stranglehold on the
wholesale supply of channels with this premium content.

Ofcom said that while it would not try to make “far-reaching changes” in the
way content rights were bought and sold, it was considering “targeted
interventions” in the areas of subscription video on demand movie rights and
the next FA Premier League football rights auction.

Cable platforms are more suited to providing on-demand content than satellite
because of the two-way nature of the technology.

Ofcom said it was considering whether splitting rights for movies on demand
from standard subscription rights would improve competition.

“Sky currently holds the subscription video on demand rights for all the major
film studios, but does not exploit them on its satellite platform,” the
watchdog said.

It added it would consider referring to the Competition Commission on the
issue, but would first consult with the Hollywood studios.

Ofcom also said it would review the plans of the Premier League over how it
auctions its matches in the future.

The league’s games allocations were recently in the spotlight after it pulled
a contract for 46 matches with Setanta after the troubled broadcaster failed
to make a payment.

Rights to the Premier League games cannot all go to one firm after a ruling by
the European Commission, but this runs out before the next auction of live
broadcasts in 2012.

Ofcom said it would explore whether the league was “willing to provide further
commitments”.

The regulator began investigating the pay TV market in 2007 after concerns
were raised by BT, Virgin Media, Setanta and TopUp TV.

“Ofcom believes that requiring Sky to make its premium channels available to
other retailers on a wholesale basis is the most appropriate way of ensuring
fair and effective competition,” the watchdog said.

“Ofcom believes that this remedy will enable other TV broadcasters to access
and offer these premium channels, thereby promoting choice and innovation.

“We do not believe that this proposed remedy would have a disproportionate
impact on Sky, since we consider the proposed prices are above the level
required to allow Sky a reasonable return on its content costs.”

It said it believes BSkyB’s wholesale revenues would rise under the scheme
because the content would be more widely available.

Ofcom also added that the proposed pricing would not be an easy ride for
competitors.

“Our objective is to enable effective competition from efficient operators
that are prepared to make a substantial long-term investment in pay TV, not
to enable weak entrants to earn short-term profits at Sky’s expense,” it
said.

Gavin Patterson, chief executive of BT Retail, said: “UK consumers are
benefiting hugely from the most open and competitive broadband market in the
world so it is time for Ofcom to open the doors of the pay TV market and let
in the fresh air of competition.

“Prices have been too high for too long but this could all change if Ofcom
breaks Sky’s stranglehold by creating a level playing field.”

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