Watchdog will probe Sky's grip on pay-TV

The regulator was responding to complaints from Virgin and other rivals that Sky, headed by James Murdoch, controls the pay-TV market through its grip on premium sports and films. Ofcom has set a 10-week deadline for submissions to a first consultation document published today. It will draw even more aggrieved responses from Virgin Media, Setanta, BT Vision and Top Up TV, which first called for the investigation in March.

"There are some warning signs, such as areas where consumer choice may be limited," Ofcom said. It listed three areas on which it plans to focus and which could lead it to refer Sky or the industry to the Competition Commission. These are:

The supply of premium content such as films and sports where vertically integrated firms such as Sky have little incentive to make these available to competing broadcasters and platforms.

Whether there is sufficient effective competition when firms bid for premium content.

Forcing consumers to buy a basic subscription package before they can have access to premium services.

The anti-Sky lobby has already accused it of creating a "vicious circle" of control that prevents fair competition. But Sky described the claims as "misconceived, exaggerated and cynically self-serving".

Ofcom today said it had gone "straight down the middle", with the consultation document emphasising that while there could be some competition issues ahead, "that doesn't mean that those exist now or will do in the future".

However, Sky is already under regulatory pressure on several fronts. It could hear this week whether or not Business Secretary John Hutton will order it to cut its 17.8% stake in ITV, and next month faces Virgin in the courts over the removal of its basic programme package from the company's schedules.

Ofcom's consumer panel and the National Consumer Council have told the regulator they are worried about the loss of Sky channels from Virgin. Ofcom said its initial assessment of the pay-TV market found it delivered significant benefit for consumers, growing from nothing in the early 1990s to an industry that now serves more than 11 million customers. It is also the largest source of revenue for the broadcasting industry at just over £3 billion a year.

But its analysis also reveals Sky's dominance, with 8.2 million customers against Virgin's 3.4 million and very small numbers for the other players. It did, however, note the European Commission's intervention in the bidding for Premier League Football rights, which for the first time since 1992 stopped Sky having total control of them this year.

You can make your own submissions to Ofcom at www.ofcom.org.
To read the regulator's full report and other submissions, including from Sky and the anti-Sky lobby, see:

http://www.ofcom.org.uk/consult/condocs/market_invest_paytv/