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BT Calls on Ofcom to Tackle Sky’s “Dominance” of UK Pay TV

Thursday, July 9th, 2015 (5:05 pm) - Score 1,190

The CEO of BT’s Consumer Division, John Petter, has today hit back at Sky (Sky Broadband) for calling on Ofcom to launch a competition review of the operators BTOpenreach division. BT has now similarly demanded that the regulator include Pay TV into its Digital Communications Review and tackle Sky’s “dominance“.

At the end of June Sky formally called upon the national telecoms regulator to launch a competition review of BTOpenreach (here), which manages BT’s underlying broadband and phone infrastructure. Sky, which wants to see Openreach being completely separated from BT, complained that the telecoms giant was “failing” broadband consumers and not investing enough into their underlying infrastructure.

Naturally BT wasn’t going to take that lying down and in a speech to the Broadcasting Press Guild the embattled Petter described Sky’s move as a “smokescreen” designed to obscure the “real market failings in pay TV” where Sky is still broadly dominant, although the rise of Netflix and YouView based services may be eating into that dynamic.

In his speech Petter suggested that Sky’s Pay TV services were overpriced and that related customers are paying close to £50 a year more than the EU average for basic pay TV channels and potentially sums greater than £75 a year more if they opt for premium sports and movie packages. Mind you it probably doesn’t help when both BT and Sky are bidding silly money on sporting rights (here).

By comparison Petter pointed out that broadband prices are falling, although anybody reading the last few weeks of news (lots of price rises) will be forgiven for scratching their heads over that one. Lest we not forget the way that providers also like to shift rising costs onto Phone Line Rental too, despite the underlying wholesale cost holding fairly steady.

John Petter, BT Consumer CEO, said:

Whereas in the energy market regulators have criticised the Big Six operators, in pay TV Sky has a 64 per cent share, so there is really only the Big One. Relative to EU averages Sky customers are paying around a half a billion pounds more per year for the basic packages of pay TV channels*. Switching in pay TV is 50 per cent lower than the levels seen in broadband, so it is clear we just aren’t seeing the right levels of competition for Sky.

We think Ofcom should heed the call of Sky’s biggest shareholder. James Murdoch once said in relation to Sky that 21st Century Fox fought for ‘a level playing field and to have competition policy applied with an even hand’. But when it comes to competition in pay TV, the message from Sky seems to be ‘talk to the hand’. We think Ofcom should make Mr Murdoch happy and give the UK a competitive pay TV market that is fit for the next decade.”

Petter also noted that the broadband market has four major players, but none with over 32% market share, yet in the pay TV market he claimed that there’s still one dominant player with a 64% share (Sky) leaving “major barriers to entry for new players“. Petter also wants to see tougher wholesale obligations, so that Pay TV is treated more like broadband provision.

Mind you Ofcom are already known to be looking at the issue of Pay TV, albeit primarily focused upon Premier League sporting rights. But the last time they attempted to intervene in that market it resulted in years of legal battles and history might yet repeat itself.

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18 Responses
  1. Avatar finaldest says:

    So we have VM, SKY, TalkTalk, and BT not to mention online steaming services so the market seems to be doing ok to me.

    The last time the regulator stuck its nose in the cost of sport skyrocketed due to having to subscribe to numerous providers.

    I no longer take any sports packages but it was not that long ago that I could get the full package from Sky for £35.

    As for Broadband there is BT or VM unless you are lucky to have an altnet nearby. So in my opinion there is an argument against the BT monopoly but no so much towards the Pay TV market.

    1. Avatar FibreFred says:

      “As for Broadband there is BT or VM”

      And errr Sky and TalkTalk? 🙂

    2. I suspect he was including Sky and TalkTalk as Openreach resellers.

      My gripe on the TV side is that BT is abusing its market position by providing BT Sport to its broadband customers for free (prices did not go up when it got bundled in), but forcing other ISPs to pay for it.

      To be honest, I think the whole Sport PayTV market is screwed up. I really do not agree that one (or a couple) of companies should be able to bid silly amounts for sports rights in the full knowledge that they will then be able to fleece the poor consumer who loves to watch sport.

      I would much prefer a model where the content “providers” (ie the sports bodies themselves) put the content out in a manner where consumers could subscribe to it directly rather than having to go through a middleman who’s sole intent is to make humungus amounts of money out of acting as nothing more than a middleman.

    3. Avatar FibreFred says:

      But they don’t use wholesale big difference they use their own kit, no comparison to the TV market.

    4. sorry Fred, don’t understand what you mean

    5. Avatar FibreFred says:

      Well I read Finaldest’s comment as if so say, if you want a choice of broadband provider in the UK you’ve got BT or VM only and some altnets, everyone else has to wholesale from BT.

      So the comparison would be that Sky has a huge share of the TV market and most people have to wholesale from it and its the same for broadband (in BT’s favour)

      But the broadband comparison and market share isn’t right, its not just BT and VM its also TalkTalk and Sky they both have a massive share of the broadband market and use their own LLU kit so they do not wholesale from BT

    6. Avatar Steve Jones says:

      @wirelessspacman

      You are confusing BT’s wholesale market position with that of retail. BT Retail does not have market dominance by a long stretch. In any event, Ofcom are being very interventionist over BT Sport, not just applying a predatory pricing test, but a “margin squeeze” one too. As for bundling things like content, then how is this different to what Sky broadband do?

    7. Avatar Al says:

      Of course there is those in the final 10% whose exchanges aren’t unbundled, who likely don’t have VM. So really only have the option of BT or a retailer who resells the BT openereach connectio,. so in essence no competition in the broadband market. Perhaps ofcom should launch another investigation into how those are charged for broadband and introduce cost controls which have to be passed onto the end-user the last ones wheren’t when the price BT openreach could charge for lines was falling well below RPI.

      But why is Sky so dominant, well lets see

      VM isn’t nationwide or certainly less nationwide than Sky’s coverage

      Those pesky rural areas again, with some still on 20CN so not ideal for streaming over the net and as yet not enabled fibre.

      As for BDUK, rather than targetting it at the slow areas first i.e those 20CN exchanges they went for numbers able to receive superfast braodband i.e Those areas which might have already had a decent ASDL2/2+ got enabled before the slower ASDLMax

      So for some people they only have one choice, Sky.

      Of course some people just stick with the devil they know.

    8. @Steve Jones

      Depends on your definition of dominance – a word I did not use in any event.

      BT retail most definitely has significant market power for broadband – as do VM, Sky and TalkTalk. Collectively they account for the vast majority (over 90% iirc) of broadband connections. Look at the way they raise the so-called line rental every year without fail (following BT’s lead each time), even though the underlying wholesale cost is not increasing.

    9. Avatar Steve Jones says:

      @wirelesspacman

      None of the retail broadband operators are considered to have SMP according to Ofcom.

    10. Avatar Cammy says:

      BT PLC as a whole is deemed to have SMP and has done for some time…
      http://www.btplc.com/Thegroup/RegulatoryandPublicaffairs/RegulationsintheUK/index.htm

    11. Avatar Steve Jones says:

      @Cammy

      Just what part of “BT has been designated with SMP in a number of markets” have you interpreted as “BT PLC as a whole is deemed to have SMP”. Just a tip. If you want to make a point, its wise to read what you are linking to.

      Incidentally, on a purely technical point, it’s not possible to designate a company as having SMP overall. The whole point about competition policy is identifying markets.

      What Ofcom have been concerned about is BT exploiting it’s SMP in certain wholesale markets, such as that for GEA/FTTC and hence the implementation of a VULA margin. But that is manifestly not the same as having SMP in the retail ISP market.

      http://www.ispreview.co.uk/index.php/2015/03/ofcom-impose-rule-to-keep-bts-fttc-superfast-broadband-prices-fair.html

    12. Avatar Cammy says:

      Not sure i appreciate the snappy rude attitude, the link clearly states…
      “following a review of that market. BT has been designated with SMP in a number of markets.”
      What you think is irrelevant.

    13. Avatar Steve Jones says:

      @Cammy

      Let’s make this nice and simple for you. Firstly I stated that certain BT products in the wholesale market area are regulated on the basis that that BT has SMP in those areas. I also said that no retail ISP has been found to have SMP. You then posted a response (presumably to contradict this) saying that BT PLC as a whole had been deemed to have SMP. This is manifestly untrue. Firstly, it’s not even possible. Companies are deemed to have SMP in market areas, not overall. Secondly this blanket assertion that BT PLC has been found to have SMP (which is incorrect) was clearly aimed at undermining my point. Now if you can find where Ofcom has deemed BT to have SMP in retail ISP operations, then fine. But you have not.

      Note that Ofcom have been looking at Margin Squeeze tests to see if BT are exploiting SMP for the GEA-FTTC product, but that’s clearly a wholesale product, not a retail one.

    14. Avatar Cammy says:

      As stated “What you think is irrelevant.”

  2. Avatar New_Londoner says:

    Given Sky’s dominant share of the pay TV market, especially for sport and films, it would seem long overdue for regulatory investigation and overview.

    For example, why aren’t there regulated wholesale prices? It clearly has significant market power,with long-term links with sport and Film rights holders etc, meets the usual definitions of a monopoly.

    Why shouldn’t Sky be subject to regulation to restrict its ability to abuse its dominant position?

    1. Avatar Steve Jones says:

      Ofcom already mandate wholesale services (and prices) for some Sky content, albeit that there is nothing remotely like the “equivalence” rules that apply in the case in wholesale services provided by BT.

      http://media.ofcom.org.uk/analysts/regulated-prices/

  3. As far as I can see, the only exclusive channel Sky have is Atlantic, everything else is available on other services and sold to other providers at wholesale prices?

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