Ofcom forces Sky to share premium channel content
Ofcom has announced plans to introduce a ‘wholesale must-offer’ obligation that will force Sky to make its premium channels available to other broadcasters.
The regulator’s consultation document, which was published today after Ofcom’s investigation in to the pay TV market, aims to address concerns over the restricted distribution of premium sports and film channels operated by BSkyB.
Ofcom also sets out a case for specific targeted interventions in relation to subscription VoD film rights and the next FA Premier League auction of live broadcast rights.
Ofcom said its proposals “aim to ensure consumers benefit in the short term from an increased choice of supplier and of platform, and in the longer term from enhanced innovation and investment, especially on non-Sky platforms”.
The report claims that consumers have a restricted choice of channels and platforms directly as a result of Sky having market power in the wholesale supply of channels containing “top-flight sport and first-run Hollywood movies”.
Ofcom believes Sky is currently “acting on an incentive to limit the distribution of these channels to rival TV platforms”.
In the long term, this will prevent new platforms based on innovative distribution technologies from developing, according to the report.
Sky is earning aggregate returns in excess of its cost of capital at the moment, and is likely to continue to do so, which Ofcom said is likely to be reflected in high prices paid by viewers.
As a result, Ofcom’s proposed remedy will force Sky to make its premium channels available to other retailers on a wholesale basis, which the media regulator said is “the most appropriate way of ensuring fair and effective competition”.
Ofcom is also working on putting into place a wholesale must-offer obligation, which will contain a range of regulated prices.
The regulator said: “This remedy will enable other TV broadcasters to access and offer these premium channels, thereby promoting choice and innovation.”
However, this will not have a “disproportionate impact on Sky” as the proposed prices are above the level required to allow Sky a reasonable return on its content costs, according to Ofcom.
In addition, the regulator is also considering a case for targeted interventions on VoD subscription film rights and the next FA Premier League auction.
Although Sky currently holds the SVoD rights for all the major film studios, Ofcom said it does not exploit them on its satellite platform.
However, the report said that “separating the sale of subscription video on demand movie rights from standard subscription rights could allow innovative new services to be provided, especially on internet TV and cable platforms”.
Ofcom plans to explore the commercial intentions of the Hollywood studios before considering referring this issue to the Competition Commission.
In terms of the FA Premier League live football rights, which are due to be auctioned in 2012, Ofcom will carry out a review to ensure that the Premier League’s auction complies with competition law.
The review will cover the supply of Premier League football to commercial as well as residential customers.
Ofcom intends to publish a statement on the Sky/Arqiva proposal, a joint venture to create a new pay TV service on digital terrestrial TV called ‘Picnic’, on conclusion of its market investigation.