UPDATE Uncertainty for BT as Ofcom Lift Sky’s Pay TV Sport Regulation

The 2010 decision that helped to grow BT’s broadband based TV business, which involved Ofcom imposing regulation that required Sky to offer wholesale access (“Wholesale Must Offer“) to their Sky Sports 1 and Sky Sports 2 channels (at prices set by the regulator), has today been removed.

Apparently the reasoning behind today’s decision centres on the fact that Sky now makes Sky Sports widely available through “commercial wholesale arrangements” with its pay TV competitors, including BT (BT Vision), TalkTalk and Virgin Media. Sky Sports channels are also available on Sky’s internet-based NOW TV service, which can be accessed on a range of platforms and devices.

By comparison the only supply arrangement for Sky Sports 1 and 2 under Ofcom’s wholesale must-offer regulation is with BT for its newest YouView (IPTV) service, which is now the primary BT TV platform. However BT has been campaigning hard for Ofcom to tackle Sky’s “dominance” of the Pay TV market (here and here) and as such they may be unhappy with today’s development.

The regulator notes that, since 2012, BT has invested over £2bn in building its sports empire, such as by securing 25% of Premier League rights and exclusive rights to broadcast all Champions League matches live until the 2017/18 season. BTSport is similarly now available on a number of platforms and devices, as well as being bundled with BT’s broadband service for free.

Ofcom Statement

“Ofcom continues to monitor the pay TV market closely. Should evidence emerge of practices which we consider to be prejudicial to fair and effective competition, we will quickly reassess the need for regulation. In particular, Ofcom wants to be sure that consumers continue to have access to, and a choice of, packages and services containing Sky Sports 1 and 2.

Pay TV is an important market that is valued by consumers, with 58% of UK homes now subscribing to a pay TV service. Ofcom wants to ensure choice and innovation is delivered to consumers through fair and effective competition.

Ofcom is examining how pay TV content is bundled with telecoms services as part of its wider Strategic Review of Digital Communications. Ofcom is considering responses to its July discussion document and initial conclusions are expected to be published at the turn of the year.“

It’s worth pointing out that Ofcom’s Wholesale Must Offer regulation has for the past five years been the subject of an almost continuous legal battle, which is still on-going today and that’s despite last year’s “interim” decision by the Competition Appeal Tribunal (CAT) to uphold Ofcom’s original 2010 ruling (here).

At the same time today’s Pay TV market is much more competitive and dynamic than the one from five years ago, which is why Ofcom are taking another look at it. On top of that Ofcom continues to investigate BT’s 2013 complaint, which alleged that Sky was abusing a dominant position by making wholesale supply of Sky Sports 1 and Sky Sports 2 to BT’s YouView platform conditional on BT wholesaling its BT Sport channels to Sky for retail on Sky’s satellite platform.

UPDATE 8:21am

We have a comment from Sky.

A Sky Spokesperson told ISPreview.co.uk:

“We are pleased that Ofcom has decided to remove the WMO condition. As the evidence demonstrates, we are, and have always been, more than happy to make our channels available on other platforms.”

UPDATE 9:41am

Now BT.

A BT Spokesperson told ISPreview.co.uk:

“BT is very disappointed that Ofcom has proposed the removal of the wholesale must offer obligation on Sky to provide wholesale access Sky Sports 1 and 2 on regulated terms. We will consider our legal options in the light of this decision and, in the meantime, continue to offer our customers access to Sky Sports 1 and 2.

Ofcom has said it is important for Pay TV retailers to have access to key Sky content to be able to compete effectively in this market, and that they want consumers to have access to these channels. We therefore expect Sky to behave appropriately so that we can continue to offer our customers access.

Ofcom have also said they will monitor the situation closely and step in if necessary, which is something we welcome.

We still believe that effective remedies are essential to address the failure of competition in the Pay TV market, in which Sky has had around 75% share of retail subscription revenues for more than 10 years.”