Sky criticises broadcasters' call for Ofcom investigation

LONDON - Ofcom has confirmed it will investigate the pay television industry, after it received a request from BT, Irish-owned broadcaster Setanta, Top Up TV and Virgin Media, asking for an investigation into the industry that has drawn criticism from BSkyB.

The investigation follows Virgin Media's spat with BSkyB after the Rupert Murdoch-controlled broadcaster BSkyB made good on its threat to pull Sky One, Sky Sports News and Sky News from the Virgin Media platform at the beginning of March.

Pay TV includes subscription and video-on-demand television services on all platforms, cable, digital terrestrial television, satellite and television over DSL.

Ofcom said it will now approach the broadcasters involved in the pay television market and, following this assessment, will decide whether to approach the Competition Commission under the Enterprise Act 2002, which deals with unfair competition and cartel operations.

Provisions under the act can also mean that any director found in breach of copyright law can face up to a 15-year disqualification from the industry.

Ofcom will also consider whether any concerns would be better addressed using sectoral powers or the Competition Act 1998, which addresses anti-competitive agreements and abuse of dominant market positions. Any company found in breach of the act can face a fine of up to 10% of annual turnover.

In response to Ofcom's proposed investigation, a Sky spokesman said: "The marketplace for entertainment and communications services is fiercely competitive and changing fast. From the BBC to Google, BT to Apple and Vodafone to Virgin Media amongst many others, customers have never had a broader set of businesses competing for their time and custom."

A Virgin spokesperson said: "Virgin Media welcomes today's announcement by Ofcom. This investigation, while in its early stages, is an opportunity for Ofcom to ensure that fair and effective competition is introduced into the UK's pay TV market for the benefit of consumers."

Consumer groups, including the Ofcom Consumer Panel and the National Consumer Council, have also expressed concerns to Ofcom about one aspect of the pay-TV market -- the loss of BSkyB channels on Virgin Media's pay-TV platform.

The Richard Branson-backed venture is now threatening to sue Sky in 15 days should an agreement not be reached.

Separately, Sky has announced a proposal to launch a new pay-TV service on Freeview, based on new set-top box specifications.

On receipt of a licence application, Ofcom said it would consult on whether to approve the licence variations needed for the service.

In the meantime, the regulator said, the implications of the possible entry of Sky into the pay DTT market, including impact on consumers and emerging competition, will be part of the market investigation announced today.

The Sky spokesman added: "We note the references in Ofcom's statement to Sky's proposed pay-TV service on the DTT platform and the dispute with Virgin Media regarding the availability of Sky's basic channels.

"BT, Top Up TV and Setanta all have a commercial interest in preventing Sky from increasing customer choice by developing a new pay-TV service on the DTT platform.

"Recent events have also drawn attention to the fact that cable is a closed network with substantial protections. In any market investigation, we'd expect Ofcom to look at the physical and legal barriers and business practices that shield Virgin Media from true competition and prevent consumers from enjoying lower prices in broadband and telephony and greater innovation and choice in television."

Several television broadcasters are now understood to be lining up in opposition to BSkyB's plans to ditch its free channels on Freeview, with the BBC, ITV and Channel 4 all set to lobby Ofcom.

The broadcasters are uniting to put pressure on Ofcom, following Sky's plans to remove Sky News, Sky Sports News and Sky Three from the free-to-watch platform in advance of the new service.

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