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War was declared today in the British pay-TV market, as the regulator Ofcom said it will break up Sky's dominance.
Sky responded by saying it will fight Ofcom every inch of the way through every court in the land.
In the biggest challenge to Sky since it gained supremacy in subscription television in the UK nearly two decades ago, Ofcom said it is not only going to force Sky to sell on its sports and movies, it will intervene to prevent the company stitching up the next auction of Premier League football rights.
Ofcom said it believes Sky's parent company British Sky Broadcasting is making super-profits from buying up sports rights and the output of Hollywood movie studios.
BSkyB's response could barely have been more succinct - or angry.
"We disagree fundamentally with Ofcom's approach, analysis and conclusions," said a spokesman. "In light of Ofcom's determination to pursue its preferred outcome, we will use all available legal avenues to challenge this unwarranted intervention."
After months of investigation, Ofcom today published its proposed set of regulated prices to makes sure BSkyB sells on content to the likes of Virgin Media or BT at a fair price.
Of these proposals, which Ofcom calls its "wholesale must-offer" obligation, the regulator said: "This is designed to address our concerns about the restricted distribution of premium sports and movies channels operated by BSkyB."
But Ofcom says it is to go further by directly intervening in the next auction of Premier League rights in 2012, an open sore for many fans who must turn to Sky and pay hundreds of pounds a year to watch top-flight football.
The regulator also said it plans to stop Sky from cornering the market in films for the fledgling subscription video on-demand market.
"Ofcom's proposals aim to ensure consumers benefit in the short term from an increased choice of supplier and of platform, and in the longer term from enhanced innovation and investment, especially on non-Sky platforms," it said.
"Ofcom considers that Sky has market power in the wholesale supply of channels and that it is acting on an incentive to limit the distribution of these channels to rival TV platforms."
The regulator says not only is the consumer getting a raw deal, BSkyB is also profiteering.
"A new Ofcom-commissioned study suggests that Sky is earning aggregate returns in excess of its cost of capital, and is likely to continue to do so," it said. "Our concern is that they are likely to be reflected in high prices paid by consumers.
"Ofcom believes [regulated wholesale prices] is the most appropriate way of ensuring fair and effective competition. 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."
Ofcom said it will intervene in the Premier League rights auction because current European Commission directives ordering competition will have expired by 2012.
"We intend to review with the Premier League how it intends to ensure that this auction complies with competition law," the regulator added.
Reader views (12)
Irrespective what people say about the BBC it must be stressed that the BBC still offers good quality programmes.
The BBC is very cost conscious and there is evidence for this. When the BBC restructured it passed many "in-house" programming to outside programme providers and greatly reduced its staff levels. The staff who lost their jobs were very loyal to the BBC and gave the public high quality programmes and so to avoid an even greater increase in the license fee they, as I have said, restructured its services. So believe it would be fair to ease off complaints about the BBC. Should the BBC close it would only result in even more of lowering standards!!
- Arthur Lincoln, Roeselare, Belgium
most of the comments on here backing ofcom are ill thought out.
When the EPL accepted bids for rights it was open to all broadcasters in the uk. as a result of the bids sky won4 and setanta 2. Bt and Virgin media werent even involved in the bidding process, preferring access them on the cheap.
So bt and virgin both offered free setanta with their respected top packages. on sky, setanta was available for between £10-£15 per month. setanta had 1.2 million subscribers through sky and access to 4.3 million in total. it was by allowing access to bt and virgin on the cheap that contributed to setanta going bust. not enough paying subscribers. the ofcom way was tried by setanta and failed.thisapears to nothing more than a vendetta against a company who took the risks, who constantly invest the subscribers money in new technology and 1st class programming.it we the consumers who have made sky the success it is today. and by contining to subscribe it shows we believe in them.virgin media said in 2008 it was £110 cheaper per year on its platform to watch the premier league than on sky. It didnt that make everyone take up virgin? because the product delivered by sky is the best.Virgin media own channels like gold,uk living and bravo. they are selling them. who too? Sky, and then what will they do? buy access to them from sky at a reduced rate.Bt and virgin have deep pockets yet prefer to live on the back like parasites of a successful company like sky. i had a choice. i chose SKY.
- Aland, Livingston
From a layman's point of view it seems that because Sky has swamped the air waves with too many channels showing the same or similar programmes, advertisers have to spread their advertising over dozens of channels to obtain the same amount of audience that they would in the past have obtained from just ITV and Channel 4 and so these traditionally core channels are no longer receiving the amount of advertising that they did in the past and they cannot demand the fee that they otherwise would. The introduction of Sky was originally a good idea providing some competition and for those with cash to spare, to have a choice of films to watch. But it has gone way too far! Sky with its income from advertisers and viewers is now robbing the rest of us of sporting and other programmes that would have been free to us. It can afford to pay a higher premium for almost anything it wants. It has snowballed into a giant monopoly and it will eventually result in only the BBC able to provide quality programmes. This will result in more people signing up for Sky and eventually even the BBC may close as it wont be able to pay the inflated fees that the programme makers demand , all caused by Sky. Far fetched did you say? I don't think so - the less money ITV and Channel 4 have will result in poorer programmes and fewer people watching them. We are being 'robbed' by Sky. It's like protectionism -'you pay me and I will let you watch the programmes that you previously enjoyed free.' AND WHERE'S HD?
- Rogercr, Berkshire, UK
Even though Sky is better run, Ofcom is not going to let it compete with BBC. The people of the UK are not complaining because Sky pioneered this genre and delivers good service at a fair price. Political entities cannot see anyone grab money other than themselves. Sky is a good and acceptable example of free enterprise . Leave SKY alpne. Anutime this governemt puts it hands on anything, they screw it up. Go after BBC if you want to break up a tax eating monopoly. Ofcom--another arm of this Nanny State Government. They do pay tax in thier proifits therefore they give to the Government. BBC, only takes, and takes and takes. Wake up UK. Haven't you learned what happens when polticians get thier hands on FREE ENTERPRISE.
- Ruck, Myrtle Beach USA
This is about time in coming.Sky with its virtual monopoly of the UK's satellite TV has bled the industry white,It originates nothing,has wrecked British football with a few selfish bloated clubs in the Premiere League and made a fortune with its dual income stream from advertising revenue AND subscriptions.Its film channels show films many months afer they have been shown on on French and German pay-tv channels.It has been a lousy deal for the British consumer for many years now but making a fortune for News Corporation since Murdoch with Margaret Thatcher's help broke the embargo on simultaneous ownership of televison companies and newspapers.It is high time that this was corrected and that watching football was not a case of having to "Pay Rupert"! Go to it Ofcom and break Sky's stranglehold.
- Chris Davies, Stalybridge UK
Funny how a Quango wants to stamp on Sky's dominance, but no one with authority bats an eyelid at the global dominance of Tesco.
Butt out, Offcom, and do more to cut mobile charges which would benefit more people.
- Tom Watson, London
It`s time we returned television to public service broadcasting, with fewer irritating commercial breaks, less mindless chav shows, and saw the accendence of decent UK-make programming.
Pay TV should continue, but it should only be allowed to charge it`s subscribers -and not run adverts.
Leave advertising to ITV, Channel 4 & Cannel 5 and British broadcasting will return to what it used to be -the best in the world.
- Andy Parks, London, UK
Ofcom are a total waste of taxpayers money.We are supposed to be in a free market and the highest bidder wins.Virgin and bt should bid higher.
It is my choice who i go with.The Sky product is very good,their service,if needed,is first class and the quality of picture and multichannel sound is great.
Ofcom should find out what Sky offer their customers especially when it comes to HD and Multichannel sound.
The word is quality.
ray
london
- Ray, london
Sky just have the power to take offcom on and beat them, thats just the way it is, but it would be nice if Sky allowed there HD content to be output via Virgin even at a cost.
- Brian, Wiltshire
If Sky put their price up to £100/month then sure, get involved, but this is pointless meddling from a pointless and meddlesome Government. Have they learned nothing from Setanta. These zelaous economists need to put down their text books and realise that there is such a thing as a natural monopoly and it's not as bad as the alternative.
- St, London
Have to say, I agree with Sky on this one. If they run their business properly to the extent that people want to pay for what they offer and to the extent that they can afford to pay top dollar for TV football, then Ofcom shouldnt interfere. Why not prevent the Premiership selling blanket coverage and instead get them to sell matches to the broadcasters one-by-one? This is free market interference. Sky were the ones who took the business risks all those years ago when they set-up - they deserve the success they get. Now they will have to re-sell packages to their competition without taking into account the strategic value of having football rights??? This is badly thought out policy by Ofcom
- Dc, London
Sky has shown the way to present sporting events and has developed HD transmissions that shames the limp and paltry output of Auntie BBC.
Ofcom have picked a great time to raise this topic so soon after the death of Sentana, the best example of incompetence and greed to the detriment of the TV viewer that anyone could have dreamt up.
Ofcoms' target ought to be the BBC and to demand why with it's monopoly of great state occasions, like the The State Opening of Parliament, they fail the viewer on the development of HD but promote creeps like Woss and mainly show sitcoms for the few hours of HD they transmit each week.
Even Channel Four sets a better example than The Beeb and Sky deserve a better reward than effectively being broken up for it's efforts.
- Frank H., London UK.
