Ofcom launches review of pay-TV competitiveness

Ofcom has identified a number of "warning signs" that competition in the UK's burgeoning pay-TV market may be limited in the future despite ruling that the sector has delivered significant benefits to consumers.

Ofcom launched a wide-ranging review into the competitiveness of the pay-TV market in March after receiving a submission from a consortium of companies comprising Virgin Media, BT, Setanta and Top-Up TV, which asked it to consider whether Sky has an unfair position in the market and whether, as a result, it is stifling competition. It is arguably the most important of a number of regulatory investigations into Sky's strategies that have been launched over the past year.

However the regulator's preliminary consultation document, published yesterday, has stopped short of ruling that Sky's dominant position in pay TV has harmed consumer choice, as the company's rivals have argued. Instead, Ofcom said the pay-TV market "has delivered significant benefits to consumers, growing from almost nothing in the early 1990s to one that now provides services to over 11 million consumers". It described customer satisfaction levels as "reasonable" and said that with revenue of over 4bn, the pay-TV market provides the single largest source of revenue to the broadcast industry.

However the regulator did identify three "warning signs" in areas that could lead to consumer choice being limited in the future. It said that it was concerned that companies like Sky have no incentive to make premium content, such as sports and movie rights, available to rivals on a wholesale basis a key sticking point for the likes of Top-Up TV which has wanted to wholesale Sky's premium content for years. The regulator was also concerned whether companies can compete at the wholesale level for premium content. The third warning sign that Ofcom identified was the policy where pay-TV providers force customers to subscribe to a basic TV package in order to get access to premium content.

Ofcom concluded that prices for pay TV-subscriptions were not "excessive".

Ofcom will take further submissions over the coming months before publishing a further consultation in the Spring of next year.

Jeremy Darroch, Sky's chief executive, said: "Ofcom has found no evidence of excessive prices and recognises that customers are benefiting from significant and increasing choice and innovation in a marketplace that is evolving all the time. While other companies are busy lobbying Ofcom, no one is doing more than Sky to create choice, competition and value for customers."

Broadband next target

Fresh from its review into the pay-TV market, Ofcom is under pressure to turn its attention to the broadband sector. The Consumer Panel, the independent consumer watchdog, called on Ofcom to establish a mandatory code of practice for internet providers for broadband connection speeds. Many consumers are concerned that the internet access they have paid for is not as fast as was advertised. The code would force ISPs to give the customer the best information during and after the sales process and give them more flexibility to switch between different packages for better speed and services.