Watchdog launches probe into Sky's charges to broadcasters

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The Independent Online

The broadcasting watchdog Ofcom is to carry out an investigation into the system under which BSkyB charges millions of pounds to channels to allow them to broadcast on satellite television.

The inquiry could have far-reaching repercussions for the television industry, and if Ofcom finds against BSkyB, whose chairman and biggest shareholder is Rupert Murdoch, the company could suffer significant financial consequences.

If the investigation, which could last four months, finds that BSkyB's charges are not "fair, reasonable and non-discriminatory", the company could face having to pay back millions of pounds to scores of television channels. Ultimately, the watchdog has powers to levy a fine for anti-competitive practice of up to 10 per cent of BSkyB's annual turnover of £4.1bn.

BSkyB charges channels £76,800 a year for a numbered place on the Electronic Programme Guide (EPG), which satellite viewers refer to when selecting a channel to watch.

But a David and Goliath challenge to the system has been brought by Rapture TV, a youth entertainment channel that was launched last year.

After weeks spent examining the complaint, Ofcom believes it is a "dispute" which it is obliged to investigate under the Communications Act 2003.

In a letter written to David Henry, the managing director of Rapture, David Stewart, Ofcom's director of investigations, said: "Having carefully considered the representations received from Sky and Rapture, Ofcom has concluded that it has jurisdiction to determine the dispute between Sky and Rapture about electronic programme guides listing charges under sections 185 and 186 of the Communications Act 2003. Accordingly, Ofcom has opened an investigation under the Act."

Rapture believes that the cost of the provision of a place on the EPG is minimal and that a reasonable charge would be £3,400 a year. It has complained that in France the broadcaster Canal + does not charge channels for a place on the EPG.

BSkyB argues that its EPG charges are nominal and are justified in view of the investment risk the company took in establishing the programme guide.

Mr Henry said: "We are saying they are not providing it on a cost-related basis. It's only a piece of code they type into a computer. The idea that it takes months is ludicrous - they can remove you within two hours and that's the same amount of work. Although £76,000 a year might not be a lot to ITV or Channel 4, it is a lot to us."

Rapture also disputes the manner in which BSkyB allocates numbers on the EPG, saying that two months after the channel was launched it was obliged to switch from position 288 to the current 193.

Mr Henry believes that the dispute, which has also been examined by Sean Williams, Ofcom's competition partner, will have "large ramifications for the whole industry". He claims that other broadcasters have been unhappy with the system but have been wary of challenging BSkyB. Rapture has also threatened to take the matter to the competition regulators in Brussels.

A Sky spokesman said: "Rapture's claims are without merit. Sky has treated Rapture fairly at all times and we look forward to demonstrating this to Ofcom." Sky argues that it offers access to greater numbers of broadcasters than its rivals, increasing competition.

Meanwhile BSkyB has announced the appointment of a new chief operating officer, Mike Darcey, who has been promoted from group commercial and strategy officer. Didie Lebrat joins from Vodafone Italy in the newly created role of chief technology officer.