BT locks horns with Sky over pricing for sports
Friday 02 July 2010
BT ratcheted up the battle for pay TV viewers as it yesterday unveiled aggressive prices to offer customers Sky's premier sports channels. The move prompted a war of words between the two rivals.
The telecoms giant will charge customers of BT Vision £16.99 a month for Sky Sports 1 and 2, with ESPN also bundled in, while a pared-down package goes as low as £6.99 a month.
Gavin Patterson, the chief executive of BT Retail, said: "We expect that entry prices as low as £6.99 will welcome in a huge number of extra customers who'd love to enjoy these channels, but thought they were too expensive."
Rivals said that to take advantage of the deal customers will have to sign up to a two-year broadband contract at £17.99 a month and pay telephone line rental, bringing it closer in line with Sky and Virgin's pricing levels.
Sky was furious about BT's new pricing model. Mike Darcey, Sky's chief operating officer, said: "BT has spent three years persuading Ofcom that it needs a wholesale price cut in order to compete in pay TV." He continued: "It is now clear that Ofcom has been duped and that BT wants to set retail prices below wholesale prices. Their agenda is all about using artificially cheap TV to sell expensive broadband and phone services. This is not price competition, it is cross subsidy."
John Petter, consumer managing director at BT, hit back, saying Sky had been using BT's infrastructure to sell cheap broadband, in a style that "didn't feel too different" to its strategy over selling sports content.
Mr Petter believes the sports package will be a "significant" driver to boost its 467,000 customers. Almost 10 million households have Sky.
BT believes there is a huge market to play for after it carried out research that found four million homes were interested in Sky Sports content but currently found it too expensive. It also hopes the lower prices will tempt Sky customers to defect.
Toby Syfret of Enders Analysis said the sports packages would be crucial in preventing BT's customers leaving for Sky or Virgin, which also shows Sky Sports content. "There has been a lot of drift from BT to Sky; this will help head it off."
He added that when broadband and telephone line prices were factored in, there was not a huge difference in price between the rival pay TV providers.
The packages were made available yesterday, allowing households to sign up before the new football season.
The news came after it emerged that Sky had lifted its pricing more than expected. Increasing the price for its retail customers also brings wholesale prices up, putting more pressure on BT's pricing offer. BT said it was caught by surprise when Sky raised its prices, but added "it doesn't change our plans. We are in this for the long term. We're surprised they raised prices despite the extra element of price-based competition". Mr Syfret said: "This is just one of a number of aggressive actions Sky has taken to stall the competition."
He added that given the extra costs of adding an extra package of Premier League matches, it was not a surprise the company raised prices.
The price war was kicked off by the media regulator, Ofcom, in March, when it ruled that Sky should reduce its wholesale prices for rival pay TV providers to access premium sport and movies. Sky is contesting the decision with the Competition Appeal Tribunal. As part of the process, BT is fighting to reduce the wholesale price further. Ofcom said: "Our decisions will therefore deliver competition, choice and innovation in the pay TV market, regardless of changes to Sky's retail prices."
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