David Prosser: Cheaper television? Maybe, but all the fighting makes for a blurry picture
Friday 02 July 2010
Outlook BT and Sky are at it yet again. Anyone who thought the deal reached in the aftermath of Ofcom's ruling that BSkyB should make its content available to rivals more cheaply would put an end to the feud between these two clearly underestimated the depth of the animosity between them.
Sky's latest complaint is that BT's launch of Sky Sports 1 and 2 yesterday at prices well below its wholesale rate undermines the case the telecoms company has been making to Ofcom these past few years, that it could not make money by selling on these channels to its own viewers. BT, meanwhile, is cheesed off that Sky chose yesterday to put its own retail prices up, which enables it to charge more on wholesale too.
It is all good knockabout stuff, of course, but let's try to move past the rhetoric. The truth is that BT is a telecoms company trying to break into TV. So it is offering a cheap deal on its television service that will be paid for by revenue from its traditional businesses (check the small print on the broadband deal that BT expects customers to sign up to). Similarly, Sky is a TV company that wants to break into telecoms. Thanks to all those subscribers, Sky is able to offer phone and broadband services that are just as cheap as BT's television offer (and rely on its network just as BT has to use its content) – the cross-subsidy works the other way round, in other words.
All the shouting really reflects is that both Sky and BT would like the competition appeals process on which they are embarking following the Ofcom ruling to offer a regulatory compromise that cuts them a better deal. Fair enough – it is their prerogative to jockey for position – but let's not pretend there is some fundamental injustice being perpetrated here, on either of the parties that are feigning injury.
The problem with all the rowing – and the way Ofcom approached the pay-TV inquiry in the first place, in fact – is that it blurs the debate for consumers wondering where to source the services that BT, Sky and others offer.
For all the talk of who offers Sky Sports, a phone line or broadband at the keenest price individually, the business model of the main players in these markets is now to offer them as a bundled package. Look at any one of the services in isolation – either as a consumer or a regulator – and you will get a misleading picture.
For what it's worth, BT says that on a comparable bundle, its latest deal will work out at around £200 a year cheaper than Sky's. Maybe so, but the bundles aren't comparable, since BT's overall television offer is less comprehensive and requires longer contracts.
The point is not that BT is seeking to mislead, any more than Sky is, but that while we hear lots of noise about price wars and regulatory interventions to protect consumers, this has become a supremely confusing marketplace. And all the public sniping only adds to the puzzle.
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