| MUMBAI:
UK media watchdog Ofcom has proposed measures to improve competition in pay TV.
The consultation
sets out details of a proposed 'wholesale must-offer' obligation. This is designed
to address concerns about the restricted distribution of premium sports and movies
channels operated by BSkyB. In
addition, the consultation notes that there may be a case for specific targetted
interventions in relation to subscription video on demand movie rights and to
the next FA Premier League auction of live broadcast rights. Ofcom's
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. One
of its concerns is the limited distribution of football and movies. Some programming,
such as live top-flight sport and first-run Hollywood movies, is of particular
importance to consumers. Limited
distribution of channels : Ofcom considers that Sky has market power in the
wholesale supply of channels containing this attractive content, and that it is
acting on an incentive to limit the distribution of these channels to rival TV
platforms. As
a result, Ofcom believes consumers face a restricted choice of channels and platforms
in the short term. In the longer term, new platforms based on innovative distribution
technologies may be prevented from developing without access to this content.
Higher
returns : A new Ofcom-commissioned study suggests that Sky is earning aggregate
returns in excess of its cost of capital, and is likely to continue to do so.
These returns appear to be higher in Sky's wholesale business than its retail
business, and higher in the wholesale of movie channels than sports channels.
Ofocom's concern is that they are likely to be reflected in high prices paid by
consumers. According
to Ofcom, The proposed remedy to limited distribution 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. It is, therefore,
also consulting on proposals to put in place a wholesale must-offer obligation,
containing a range of regulated prices. Ofcom
believes that this remedy will enable other TV broadcasters to access and offer
these premium channels, thereby promoting choice and innovation. The regulator
says that it does not believe that this proposed remedy would have a disproportionate
impact on Sky, since it considers that the proposed prices are above the level
required to allow Sky a reasonable return on its content costs. According
to the regulator's thinking, Sky's wholesale revenues would increase under the
proposed remedy, due to its channels becoming more widely available. Remaining
concerns in football and movies : Ofcom is also considering whether there
is a case for targeted interventions on subscription video-on-demand (SVoD) movie
rights and the next FA Premier League auction. Films
on demand : SVoD allows customers to pay a subscription to watch movies on
demand, on platforms which support this capability. Sky currently holds the SVoD
rights for all the major film studios, but does not exploit them on its satellite
platform. 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
is considering a market reference to the Competition Commission on this subject.
However, it proposes first to explore the commercial intentions of the Hollywood
studios, and whether these would reduce the need for regulatory intervention.
Ofcom
to review next football rights auction : The existing European Commission
FA Premier League commitments expire before the next auction of live broadcast
rights due in 2012. Ofcom,
therefore, intends to review with the Premier League how it intends to ensure
that this auction complies with competition law. That will involve exploring with
the Premier League whether it is willing to provide further commitments. It expects
that review to cover the supply of Premier League football to commercial as well
as residential customers. Sky's
proposal for pay TV channels on digital terrestrial TV : The competition concerns
and proposed remedies in Ofcom's pay TV market investigation are of direct relevance
to its assessment of the proposal from Sky and Arqiva for a new pay TV service
on digital terrestrial TV, called "Picnic". Ofcom
therefore intends to publish a statement on the Sky/Arqiva proposal on conclusion
of its market investigation.
Ofcom
is aware that Sky's plans for Picnic are currently no longer
under active consideration.
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