Murdoch's hold over pay TV under attack

Furious UK cable companies have complained to the Office of Fair Trading and competition authorities in Brussels over Rupert Murdoch's control of the pay TV market in Britain.

A formal complaint has been launched with the European Commission asking that agreements signed between BSkyB, the satellite and cable broadcaster 40 per cent owned by Mr Murdoch's News Corp, and two UK cable companies be overturned on the grounds that they restrain trade.

The OFT has also been asked to look at the contracts, and has formally requested copies from Nynex CableComms and TeleWest, two large cable companies.

Mr Murdoch's pay TV woes came to a head just as he confirmed to an Italian newspaper that he was prepared to buy outright Silvio Berlusconi's three commercial television stations in Italy.

The cable company contracts were signed earlier this month. A copy of the Nynex contract, seen by the Independent, enjoins Nynex from investing in or carrying products that compete directly with Sky programming. In exchange, the company receives advantageous rates for the carriage of Sky's movies, sports and general interest channels.

Sky's rates and programming packages for cable companies were the subject of an informal undertaking from BSkyB earlier this year, following complaints from the cable industry. The OFT and BSkyB agreed that cable companies could buy Sky services a la carte, and that a standard rate card would be established. BSkyB offered to provide programming at a discount for companies willing to sign a fixed-price agreement.

CableTel is leading the battle against BSkyB. Its chief operating officer, Steven Wagner, said yesterday that "companies operating without a fixed contract are facing large increases" in the amount they must pay BSkyB for programming. Mr Wagner said his costs would rise 20 per cent, which he would have to pass on to customers.

Several other cable companies are supporting CableTel's complaint. They argue that BSkyB's control over encryption technology, by which television signals are scrambled and unscrambled, gives it a gatekeeper role in pay TV. In addition, they complain that Mr Murdoch's arrangements with Astra, the satellite company, restrict access to the UK market for other players. Finally, they believe Mr Murdoch has secured key programming rights at high prices, limiting the amount of non-Sky broadcasts available to the cable industry.

In an effort to build alternative sources of programming, several cable companies, including CableTel, Nynex and TeleWest, together secured rights to various programmes. Some were sold to Mirror Group when it decided to launch LiveTV. The remainder of rights have been retained by a joint venture established by the consortium of cable companies.

Earlier this week, Nynex refused to continue to finance the alternative package beyond 31 May. TeleWest said it would consider extending its funding role only if the cable companies brought in BSkyB as a partner.

Meanwhile, Mr Murdoch's intentions toward Mr Berlusconi's TV empire became clearer yesterday. He told the Turin daily La Stampa that as far as he was concerned Mr Berlusconi had already decided to sell everything. Mr Murdoch was interested in buying as many television stations as he could get hold of, or failing that a share in the business as a whole.