Sky set to `unbundle' Disney channel

Cathy Newman

BSkyB is to make far-reaching changes to the way it packages its channels, with an announcement expected early this week that satellite and cable television customers will be allowed to buy the Disney Channel without having to subscribe to two other channels as well.

The move follows an investigation by the Independent Television Commission (ITC) into whether "bundling" channels together was an anti-competitive practice.

The ITC investigation began last autumn in response to a complaint from the cable industry. It is thought Sky has decided to pre-empt the ITC's verdict, taking action on Disney before the watchdog forced it to do so.

The Disney Channel can only be bought at the moment by subscribing to Sky Movies and the Movie Channel as part of Sky's Premium Bonus package.

Many cable operators have argued that forcing customers to buy large numbers of channels, many of which they may not want, has prevented people from subscribing to pay-television.

Most cable operators reacted warmly to the news that Disney may soon be available "a la carte".

Steven Wagner, group managing director of the cable company NTL, said: "If and when this announcement is made, I would welcome it. Operationally, bundling denies consumers choice.

"At the wholesale level, it's the dominant position of a programmer like Sky which can force bundling on the retailer. It's not in the consumer's or the retailer's best interest. Anything which could create more flexibility for the retailer, I welcome."

But others involved in the cable industry questioned how many customers would be interested in buying the Disney Channel if they had to pay extra for it on its own.

And some warned that there might be adverse repercussions if the ITC carried its enthusiasm for unbundling too far.

Brent Harman, managing director of Flextech Television, a supplier of programmes to cable and satellite operators, said: "If every channel had to be offered a la carte, it would ruin the channel economics, and would be an administrative nightmare."

The economic effects of offering channels a la carte is unknown, as it has not been tried before. At the moment, the only "mini-pay channels" - those for which customers pay for individually - are porn services.

However, some suggested that it was highly unlikely that all channels would be unbundled and offered separately. One source at a large cable company said: "There is likely to be a happy medium, where only premium channels are unbundled."

Sky's premium channels include Sky Movies, the Movie Channel, Sky Sports 1, Sky Movies Gold and the Disney Channel.

The ITC is now likely to launch a more extensive investigation into the issue of unbundling. The watchdog indicated its commitment to the issue when it awarded British Digital Broadcasting - which is owned by Granada Group and Carlton Communications - three licences to broadcast digital terrestrial pay-TV services.

British Digital Broadcasting subscribers will get 12 channels at a basic rate, but will have to pay extra to get three premium channels.

The ITC said at the time that BDB - which has secured a long-term programming deal with Sky - may in future be obliged to let consumers pick and choose the individual channels without having to pay extra.