ITC Backs Cable Merger But Raises Questions Over BSkyB/Vivendi Tie In
The Independent Television Commission (ITC) has backed the proposed merger between cable companies NTL and Cable & Wireless Communications (CWC), but has said that there are competition issues raised by Vivendi’s plans to take a 24.4% stake in BSkyB. Both proposed deals were referred by the secretary of state for Trade and Industry to the Competition Commission last month (see Cable & Wireless Communications “Disappointed” By Stephen Byers Move). The Competition Commission then invited the television watchdog to make its own comments on the two acquisitions.
The ITC believes that a merger of NTL and CWC would not act against the public interest and would be likely to increase competition in the bargaining for programme rights. The deal would also provide the cable industry with a stronger base in the face of rising competition from rival pay-TV services.
Pay-TV services – received primarily from cable, satellite and digital terrestrial television – have been substantially driven by the provision of premiered feature films and sport, particularly football. In the bargaining for rights to films and sport, the ITC notes, it is often those groups with the largest existing subscriber base that have the strongest bidding power. It is in turn those services which offer the films and sports channels which are likely to attract further subscribers, providing funds for more competitive bidding.
“The majority of films and sports programming offered to viewers by the cable companies is bought from BSkyB in its role as wholesaler,” says the Commission’s response. NTL and CWC, on the other hand, have very little presence in bidding for these programme rights. “The new [merged] NTL would be able to exert more buyer power, and this should increase competition in the wholesale markets for programme rights… The ITC believes, therefore, that it is in the public interest for the proposed acquisition to proceed.”
This response is likely to annoy Rupert Murdoch’s BSkyB which had hoped to see the merger blocked. At the same time the ITC has raised a number of concerns regarding French pay-TV group Vivendi’s plans to acquire a 24.4% stake in BSkyB.
Between them Vivendi and BSkyB represent a powerful force in the European pay-TV market. The ITC is concerned that together their combined subscriber base and funds would give the two groups a particular advantage when bidding for programme rights. “The resources (deep pockets and combined viewer base) of Vivendi and BSkyB taken together are likely to be greater than for most if not all competitors for the acquisition of exclusive rights,” the ITC has told the Competition Commission.
The conditional access systems used by pay-TV broadcasters to block unsubscribed channels are also an issue in the Vivendi/Sky deal. Vivendi owns 49% of Canal Plus which, in turn, holds a 50% shareholding in a company called SECA. It is SECA which licences Mediaguard, the access system for ONdigital, a major rival of BSkyB’s in the UK digital TV market. BSkyB’s conditional access system is licenced by News International, a 39% stakeholder in Sky.
The ITC is concerned that confidential information about ONdigital could therefore be leaked to BSkyB via the Mediaguard system. There is also the possibility that the Mediaguard system could be discontinued over time, leaving ONdigital with the significant cost of transferring to a new conditional access system.
The ITC has asked the Competition Commission to consider these points before it makes a final report on the two deals on or before the 25 February 2000.
Independent Television Commission: 0171 255 3000 NTL: 01252 402 000 Cable & Wireless Communications: 0171 674 5440 BSkyB: 0171 705 3000