Murdoch in fresh attack on Ofcom as HD soars at Sky

Broadcaster celebrates as 280,000 new users sign up for high-definition service

James Murdoch, the chairman of BSkyB, unveiled another stellar set of results yesterday and renewed his attacks on Ofcom, saying the broadcasting watchdog was "threatening" investment in the UK.

Presenting Sky's annual general meeting in London yesterday, Mr Murdoch said Britain needed regulatory certainty and a business climate that welcomes investors, innovators, and professionals. "These aspects today are less evident than is desirable," he said, adding: "The current proposals by Ofcom to intervene in the pay-TV industry represent a threat to the climate for investment in this country."

This was the latest in a series of broadsides against the media regulator, after it proposed to force Sky to offer wholesale premium content, such as Premier League football and Hollywood movies, to rivals more cheaply.

His comments came hours after Sir Richard Branson, founder of the Virgin Group, called for Sky to be reigned in so that other pay-TV companies, including his Virgin Media, could compete more effectively in the market.

Pay TV has "a dominant incumbent with an iron grip on the supply of key content that uses all its muscle to prevent competitors coming into the market", Sir Richard said. "Intervention is needed to allow consumers to experience more choice, lower prices and greater innovation," he added.

BT, which offers a television service through BT Vision, and Virgin complain that Sky's dominance over football and films has skewed the market to a level where it dominates: it has 85 per cent of premium pay-TV subscribers. Sir Richard said: "This is about unleashing the forces of competition and making a dysfunctional market work in the interest of consumers who are being short-changed." He said Ofcom's proposals could see operators offer Sky Sports 1 for 20 per cent below the lowest price offered by Sky.

But Mr Murdoch said: "Regulators should respect the free operation of the marketplace and contemplate intervention only on the evidence of abuse or of a breach of competition law."

Sky has mounted a sterling defence against Ofcom's proposals. A spokesman said yesterday: "The only failure in the market-place is that of big companies, such as Virgin and BT, to accept the challenge of competition by investing and taking risks."

Ofcom consultation has closed and the regulator is poring over hundreds of pages of submissions. A final ruling is expected in the new year. "The interests of consumers are best served by businesses that invest and compete fairly, not by regulators who attempt to reshape a market to their own design," Mr Murdoch said.

The spat re-emerged as Sky said it had continued to lift revenues and customer numbers in the three months to the end of September. Revenues rose 10 per cent to £1.3bn in its first financial quarter. Operating profits rose 9 per cent to £198m. The strong numbers were driven by the surge in sales of its high-definition TV service. Sky signed 287,0000 customers to HD over the quarter, bringing the total to 1.6 million.

The group enticed 94,000 net new households to subscribe to Sky during the quarter bringing its total customers to 9.5 million. Sky, along with Virgin and BT, are concentrated on "bundling" their products: offering customers cheaper deals if they take two or more of their television, home telephone and broadband services. Mr Murdoch said that 17 per cent of its customers had all three services.

Matthew Walker, an analyst at Nomura, said the results were "very impressive across the board".

Sky's rise: How the broadcaster came to dominate cable and satellite TV

*1989

Sky launches with only four channels, a handful of customers and several hundred staff. It merges with British Sky Broadcasting the following year and brings The Simpsons to Britain.

*1992

A year after launching its first sports channel, Sky wins exclusive rights to show matches in the new FA Premier League, hosted by the former Scotland international Andy Gray (right). Sky makes its first operating profit.

*1998

The UK's first digital television service, Sky Digital launches with 140 channels.

*2001

The company launches Sky+, which allows users to pause live broadcasts and record programmes on set-top boxes. Total subscriber numbers reach five million.

*2003

James Murdoch begins five-year tenure as chief executive, stepping up to the chairman's office last year and appointing Jeremy Darroch as his successor. Sky subscriptions now top 7.5 million.

*2006

Sky introduces broadband and home telephony services, as well as launching high definition (HD) television.

*2008

Sky is now in more than one in three households across Britain. It demonstrates three-dimensional television for the first time with a standard HD box.

*2009

Sky creates 1,000 more jobs as half-year profits rise 26 per cent to £388m. HD customers now total 1.67 million. Sky appeals against an Ofcom ruling that it must share its exclusive football rights with rivals at lower prices.

Kyran Pick

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