BT challenges Sky's dominance of pay TV

BT has renewed calls for greater regulatory control of Sky's alleged dominance of the pay television market as the telco's on-demand entertainment service upped the ante by offering customers free access to Setanta Sports 1.

As part of its strategy to move away from simple telephony and into "converged communications", all BT's broadband customers automatically receive a BT Vision Freeview receiver and digital recording device. The service also has 5,000 hours of on-demand content that can be bought either on a pay-per-view basis or as part of its three tariff packages – all of which will now come with Setanta Sports 1 bundled in. The upgraded deal also includes exclusive access to 28 on-demand Scottish Premier League games.

Sport and films are key battlegrounds in the pay TV sector. But the fledgling entertainment service is also vocal in its condemnation of the existing regulatory environment.

Dan Marks, the chief executive of BT Vision, said yesterday that the current set-up is out of date. "There is a real problem in the regulatory regime in the converged market – the rules that apply to telecoms and to pay TV are completely asymmetrical," he said.

"Telecoms regulation exists to ensure there is a competitive broadband market, but there are no commensurate strictures on the pay TV side."

With the advent of broadband, BT was forced by the regulator to offer a wholesale product and to erect Chinese walls between the retail and wholesale divisions of the business.

"Sky has 75 per cent of the market on a retail level, and owns 100 per cent of subscription movie rights and 80 per cent of broadcast sports rights, but has no such wholesale obligation," Mr Marks said.

The issue is under review by Ofcom, which is expected to report in the autumn. But even if Ofcom concludes that there is an issue, the subsequent Competition Commission evaluation could take a further two years to complete.

The pay TV review is not the only regulatory thorn in Sky's side. The outcome of its appeal against the Government's ruling that it must reduce its 17.9 per cent stake in ITV to below 7.5 per cent is expected imminently.

ITV's share price closed up 12 per cent at 42.9p, fuelled by rumours of possible bidders for the Sky stake.