Update: Ofcom ruling angers Sky, disappoints BT

31st Mar 2010 07:08

Telecoms regulator Ofcom is on a collision course with BSkyB after it ordered the satellite broadcaster to make its two top sports channels available to rivals at a 23% discount to the current price.The new price will be £10.63 (per subscriber per month) for each of Sky Sports 1 and 2 channels, when sold on a standalone basis, which is 23.4% below the current wholesale price to cable operators. Most consumers currently buy packages which include Sky Sports 1 and 2 and the wholesale price for this service bundle has been reduced by 10.5% to £17.14, Ofcom said. Sky must also offer wholesale high-definition versions of Sky Sports 1 and 2.In addition, Ofcom said Sky is restricting the distribution of premium movies and there is ineffective exploitation of subscription video-on-demand movie rights and is consulting on a decision to refer the markets to the Competition Commission."Sky has market power in the wholesale provision of premium channels. Ofcom has also concluded that Sky exploits this market power by restricting the distribution of its premium channels to rival pay TV providers. This prevents fair and effective competition, reduces consumer choice and holds back innovation and investment by Sky's rivals," the regulator said.BSkyB responded furiously, saying it will immediately challenge Ofom's decision at the Competition Appeal Tribunal adding, "There should be no doubt that Ofcom's actions represent an unprecedented and unwarranted intervention."The widely awaited ruling from Ofcom follows a three-year investigation after complaints from rival broadcasters BT, Virgin and Top Up TV that they cannot break into the sports or films markets because of Sky's dominance. Ofcom said it would act to counter any moves by Sky to find workarounds to the watchdog's ruling. "Ofcom recognises that a potential response to the remedy from Sky could be to attempt to undermine it by shifting content onto channels not covered by the remedy. If Sky was to do this to any material extent, Ofcom would review the remedy and would consider extending it to include the relevant channels," the Ofcom statement said.One of Sky's wholesale customers, BT, said Ofcom's ruling was "disappointing but a step in the right direction," and pledged to offer Sky Sports 1 and 2 "at lower prices than those which have been available." BT Retail chief executive, Gavin Patterson, suggested that Ofcom's directive should have included all Sky Sports channels as well as the movie channels. Ofcom said the matter of Sky Movies was an issue for the Competition Commission to look into.Other measures proposed today include approval for Sky to offer pay TV on the terrestrial network but only if it opens up its sports channels and a guarantee to offer its movies to other digital terrestrial TV operators.BSkyB said "This is a marketplace where customers are well served with high levels of choice and innovation. Consumers will not benefit if regulators blunt incentives to invest and take risks. "After three years of engagement with Ofcom, we now look forward to a judicial process which will apply impartial analysis and clear legal standards."BSkyB has been given six weeks to make a reference offer to other pay-TV providers.