OFT raps cable contracts

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The Office of Fair Trading has found that programme supply contracts between satellite broadcaster BSkyB and cable companies Telewest and Nynex CableComms are "significantly anti-competitive". It has given the companies 30 days to revise them or face a reference to the Restrictive Practices Court.

International CableTel, Videotron and General Cable, which had complained vociferously about the agreements, greeted the announcement with relief, but said in a joint statement that the OFT "still has a very long way to go" to reduce the dominance of BSkyB, 40 per cent owned by Rupert Murdoch's News Corporation, in the market for pay TV in Britain.

"We need a thorough investigation of BSkyB practices toward cable operators in the UK," Steven Wagner, group operating director of International CableTel, said. "The OFT needs to make sure that the investigation includes discriminatory pricing, premium channel bundling, and the lack of security of supply and pricing for cable operators."

A spokesman for Telewest said the company disagreed with the OFT's view of the contracts but said it would sit down to discuss the situation with BSkyB. Nynex said it would not comment until the 30-day period was over.

BSkyB played down the announcement. "This is part of a perfectly normal procedure," a Sky spokesman said. "We are confident that the parties will reach a satisfactory conclusion within the prescribed period."

In the past, BSkyB has been less restrained, privately accusing cable companies of complaining to the regulator rather than competing openly in the marketplace.

In a formal statement, the OFT said the contracts, which govern the long- term supply of BSkyB's programming to the two cable companies, contained restrictions it considered to be "significantly anti-competitive".

As revealed first in the Independent, the contracts include "non-competition" clauses restricting the two cable companies from investing in or broadcasting film and sports programming that directly compete with BSkyB.

The cable industry had been hoping to develop cable-exclusive film and sports programming to attract viewers to its fledgling service. Most major cable operators, including Telewest and Nynex, had been in talks to develop a pay-per-view film channel on cable and to create sports programming that would not be seen on satellite or terrestrial networks.

The long-term agreements signed with BSkyB led to the departure of both Nynex and Telewest from the programming development talks, which have since all but collapsed. The two cable companies represent 40 per cent of the British cable market.

Telewest said it would not rejoin the talks, even if the BSkyB contracts are watered down significantly. "We prefer BSkyB's pay-per-view product," the spokesman said.

A cable industry executive said: "There must be more than one supply of programming in this country, and we can't leave BSkyB to set the terms." He said efforts to develop cable-exclusive material would continue, perhaps in league with non-cable media companies.