BT and Virgin Media reacted angrily yesterday after the Competition Commission confirmed it would not intervene in the pay-TV market for premium movies, giving a major boost to the leading player, BSkyB.
The telecoms giant BT said the commission's decision "flies in the face of BT's experience as a retailer and the experience of other retailers".
Meanwhile, Virgin Media described the watchdog's ruling as "extremely disappointing".
The commission's ruling that Sky's position "does not adversely affect competition" is the final decision in a two-year marathon inquiry and marks a major U-turn.
Until this year, the regulator had appeared to agree with BT and Virgin which argued that Sky distorted the market because it had exclusive deals with all of the big six Hollywood studios, including Disney and Fox.
BT and Virgin, which have their own pay-TV services, claimed the result was that the wholesale price which Sky charged them to carry its Sky Movies channels was too high.
But the regulator said in the spring that new film websites such as NetFlix and LoveFilm had dramatically changed the market and introduced more competition for the most prestigious rights. These rights are known as the first subscription pay-TV window – a fixed period after the initial cinema box-office release.
A Sky spokesman welcomed the ruling, saying: "Sky considers there to be overwhelming evidence that UK consumers are well served by strong competition between a growing number of TV providers."