BSkyB to fight premium channels plan

BSkyB vowed today to "use all available legal avenues" to challenge the communications regulator's plans to force it to sell its sports and movies content to rivals at regulated prices.

The satellite giant said it disagreed "fundamentally with Ofcom's approach, analysis and conclusions".

Its comments followed the third consultation document by Ofcom, which believes BSkyB has "an incentive to restrict the distribution of premium channels".

The watchdog said the satellite broadcaster is thought to be charging high prices to competitors for the use of its premium content.

It said the situation had a "detrimental effect on consumers" by reducing choice and constricting innovation in the pay television market.

Ofcom set out proposals for pricing which it said were above the level needed to allow BSkyB to make a "reasonable return".

But BSkyB said: "In light of Ofcom's determination to pursue its preferred outcome, we will use all available legal avenues to challenge this unwarranted intervention."

Ofcom has already warned BSkyB that it wants it to wholesale its premium content out to rivals more freely.

It believes that content such as movie premieres and live top-flight sport is particularly attractive to viewers.

BSkyB holds the rights to many top sporting fixtures and all major Hollywood releases and Ofcom said the satellite broadcaster kept a stranglehold on the wholesale supply of channels with this premium content.

Ofcom said that while it would not try to make "far-reaching changes" in the way content rights were bought and sold, it was considering "targeted interventions" in the areas of subscription video on demand movie rights and the next FA Premier League football rights auction.

Cable platforms are more suited to providing on-demand content than satellite because of the two-way nature of the technology.

Ofcom said it was considering whether splitting rights for movies on demand from standard subscription rights would improve competition.

"Sky currently holds the subscription video on demand rights for all the major film studios, but does not exploit them on its satellite platform," the watchdog said.

It added it would consider referring to the Competition Commission on the issue, but would first consult with the Hollywood studios.

Ofcom also said it would review the plans of the Premier League over how it auctions its matches in the future.

The league's games allocations were recently in the spotlight after it pulled a contract for 46 matches with Setanta after the troubled broadcaster failed to make a payment.

Rights to the Premier League games cannot all go to one firm after a ruling by the European Commission, but this runs out before the next auction of live broadcasts in 2012.

Ofcom said it would explore whether the league was "willing to provide further commitments".

The regulator began investigating the pay TV market in 2007 after concerns were raised by BT, Virgin Media, Setanta and TopUp TV.

"Ofcom believes that requiring Sky to make its premium channels available to other retailers on a wholesale basis is the most appropriate way of ensuring fair and effective competition," the watchdog said.

"Ofcom believes that this remedy will enable other TV broadcasters to access and offer these premium channels, thereby promoting choice and innovation.

"We do not believe that this proposed remedy would have a disproportionate impact on Sky, since we consider the proposed prices are above the level required to allow Sky a reasonable return on its content costs."

It said it believes BSkyB's wholesale revenues would rise under the scheme because the content would be more widely available.

Ofcom also added that the proposed pricing would not be an easy ride for competitors.

"Our objective is to enable effective competition from efficient operators that are prepared to make a substantial long-term investment in pay TV, not to enable weak entrants to earn short-term profits at Sky's expense," it said.

Gavin Patterson, chief executive of BT Retail, said: "UK consumers are benefiting hugely from the most open and competitive broadband market in the world so it is time for Ofcom to open the doors of the pay TV market and let in the fresh air of competition.

"Prices have been too high for too long but this could all change if Ofcom breaks Sky's stranglehold by creating a level playing field."