BSkyB has reacted furiously to Ofcom's proposition to force them to sell its sports and premium movie rights to other platforms at regulated prices. Ofcom said such a move may be a “most appropriate way of ensuring fair and effective competition”.
BSkyB has immediately rejected the proposal, saying it will “use all available legal avenues”, and that it “fundamentally” disagreed with Ofcom. Ofcom has asked interested parties to respond to the proposals, which are the latest to flow from its investigation into the whole pay-TV market, by 18 August. Ofcom said its proposal would enable more rival broadcasters to access and offer the channels to viewers, “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,” said Ofcom.
Ofcom set out a range of prices below what Sky currently charges the cable operator Virgin Media. The aim is to make channels such as Sky Sports 1, Sky Sports 2 and Sky Movies more widely available on pay-TV services such as Top Up TV, BT Vision and other broadband services.
The regulator proposes dropping the cost of buying Sky Sports 1 or Sky Sports 2 from £13.48 (E15.9) to between £9.41 and £11.24.
At the lower end, that is just 34p above the “cost-plus” price, the point at which Sky has covered all its costs and made a “reasonable return” on its investment.
A bundle of Sky Sports 1 and 2 and the movie channels â€“ which now costs Virgin £23.40 per subscriber to buy wholesale from Sky â€“ would cost between £16.98 and £20.43, a 27% discount on current prices and the same as Sky’s cost-plus price. Virgin Media would be expected to pass at least some of this discount on to its cable TV subscribers.
The watchdog also outlined plans to examine the terms of Sky’s rights agreement with the FA Premier League. And it warned that it could refer the other cornerstone of Sky’s subscription success, its deals for movie rights with Hollywood studios, to the Competition Commission.
Ofcom is to hold a further 12-week consultation before setting out its final verdict.