Leading article: Free competition is in the best interests of viewers

Ofcom is right to seek to level the pay-TV playing field

Saturday 04 January 2014 05:03

Whatever other faults might be laid at its door, one thing Ofcom cannot be accused of is cowardice. In challenging BSkyB's position in the pay-TV market, the regulator is taking on a business with formidable resources and awesome lobbying power.

But does the watchdog have a case? Ofcom suggests that BSkyB is distorting fair competition in the market by refusing to sell the rights to air its sports and movie channels to rival broadcasters. The anti-BSkyB argument, to put it crudely, is that the satellite broadcaster, having stitched up cosy deals with Hollywood studios and the Premier League, is determined to keep what it has acquired in its own hands so that anyone who wants to watch must pay a hefty satellite subscription fee.

The solution Ofcom proposes is to force BSkyB to make these channels available to rivals at set prices in order to boost competition in the pay-TV market. It also argues that these new requirements would not unduly penalise BSkyB because what the broadcaster might lose in subscription revenue would be made up, in part at least, from increased revenues from selling its content to rivals. BSkyB's competitors yesterday welcomed the move, saying it would bring down prices for viewers. BSkyB, not surprisingly, has pledged to fight the regulator all the way.

The contribution that BSkyB has made in sports broadcasting must not be overlooked. It has given an extraordinary boost to top-level British sport over the past two decades. Its revenues have swelled the coffers of Premier League clubs, helping top teams to attract some of the best players in the world and outside investment from various oligarchs, oil sheikhs and tycoons. The broadcaster has also offered a fair deal to British sport viewers. Despite the nostalgia of some fans, the days before BSkyB were hardly a golden age for televised sport.

We should also be wary of taking the complaints of BSkyB's competitors at face value. BSkyB had to take risks to get to where it is now. When Rupert Murdoch founded Sky in 1989, there were no guarantees that the British public would be willing to pay to watch television. The start-up costs were considerable and it took several years for the broadcaster to turn a profit. BSkyB is right when it argues that it should not be punished for being successful. And the fact that it makes large profits now does not mean it constitutes an abusive monopoly.

Yet BSkyB has clearly grown to dominate the pay-TV market. The plunge into administration of the sports broadcaster Setanta UK this month cannot be attributed solely to the power of its larger established rival. But BSkyB's dominance certainly played its part in the shambles of the Irish broadcaster's collapse. Setanta UK's owners made big mistakes, but they also had little choice but to take risks to have any hope of growing into a serious challenger to BSkyB.

Despite the Setanta debacle, it was right of the European Commission to rule in 2005 that the rights to air all the games of the Premier League should not go to a single broadcaster. And despite the tough fight that BSkyB will doubtless pose to this latest regulatory challenge, Ofcom is also right to attempt to level the playing field for any prospective competitor to BSkyB.

This is not about punishing success, but serving the consumer. Free competition offers the best deal for viewers. And in the UK pay-TV market, that competition does not, at present, look free enough.

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