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BT and Sky Face Challenges as Ofcom Launch New UK Pay TV Review

Friday, December 19th, 2014 (8:15 am) - Score 1,550

As expected the United Kingdom’s communications and media regulator has today opened a new consultation into regulation of the Pay TV market, which will predominantly focus on BT and Sky’s (Sky Broadband) impact on sports content (e.g. Premier League football) and will also examine the related impact of new broadband based delivery methods (e.g. NOW TV, Netflix etc.).

Ofcom’s Pay TV consultations have somewhat of a torrid history and that was certainly the case in 2010 when the regulator’s last review imposed an obligation upon Sky (formerly BSkyB), which required the TV operator to offer wholesale access (“Wholesale Must Offer“) to its Sky Sports 1 and Sky Sports 2 channels and at prices set by the regulator.

Sadly that ruling also created a four year legal squabble, which finally ended last month with Sky being forced to accept the regulators ruling (here). Since then the Sky Sport’s content has finally arrived on BT’s new YouView (IPTV) platform (here).

The bad news for Ofcom, which out of necessity has become a glutton for punishment, is that the regulator now needs to launch another consultation on the same market. The reason for this is that much has changed since their last review in 2010, not least the emergence of so-called “Over-the-top” style Internet based TV delivery methods like Netflix and Amazon Prime Instant Video.

On top of that BT’s consumer division has also entered the market for premium Pay TV rights by offering FREE Premier League football matches and other sporting content alongside their broadband and phone packages or BT TV bundles.

Ofcom Statement on its 2014 Pay TV Review

Ofcom’s assessment indicates that Premier League and Champions League football are key content likely to be capable of influencing consumers’ choice of pay TV retailer. Therefore, Ofcom is consulting on its view that limited distribution of this content may harm competition between pay TV retailers.

Sky currently holds over 75% of live rights to Premier League football and has more than 80% of market revenues from the supply of key sports channels.

The content Sky has is likely to influence the purchasing decisions of a sizeable proportion of high-value customers. Retailers that do not have access to this content would find it more difficult to compete for these customers.

Given Sky’s continued strong market position, Ofcom is seeking views on its assessment that if there was limited distribution by Sky of its key sports content, competition between pay TV retailers may be harmed. Ofcom is also seeking views on whether, given its market position, Sky may have incentives to limit distribution of its key sports content.

BT holds around 25% of live Premier League rights, generating between 10% and 20% of revenues, but has acquired all live rights to Champions League football from next season.

BT may also have incentives to limit distribution of its key sports content. But given the amount of content rights it currently holds and its market position, it is less clear that limiting distribution of its sports channels would harm competition. Ofcom is seeking views on this assessment.

Admittedly Virgin Media, TalkTalk, JT, KC, EE and other ISPs across the United Kingdom also now offer their own IPTV service platforms to consumers (mostly via the YouView platform), although most of those need to purchase related premium TV content from Sky or BT.

Lest we not forget that Virgin Media has separately lodged a formal complaint into how the Premier League sells or abuses its live TV and related rights for football matches (here), which the cable giant perceives as a necessary move in order to stop the costs of related content from getting out of control.

Ofcom has pledged to factor all of these new developments and issues into their consultation, which is open for responses until 27th February 2015. But the regulator won’t announce its final proposals until a second phase of the review has been completed in 2015, which means that we could be on the doorstep of 2016 before a decision has been reached and then there’s always the prospect of more legal squabbles.

In the meantime ISPreview.co.uk can still recall an era when TV sports were broadly much more accessible (remember when sports were fun rather than series business?) and often without the high costs involved. Today we’ve noted how some children at school tend to show less interest in some sports, such as Cricket or Rugby, because most of the related content is locked behind a paywall. Over time this can have a negative social impact on a sport and thus hinder the supply of new talent. Perhaps Ofcom should also be considering that aspect.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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