Ofcom announces pay-TV sector probe

Media regulator Ofcom has announced a wide-ranging investigation into the UK's pay-TV industry after receiving a submission from Virgin Media, BT, Setanta and Top Up TV as well as a call by Ofcom's independent consumer panel to solve the dispute between Virgin Media and BSkyB.

Panel chairman Colette Bowe last week said the loss of Sky's basic channels on Virgin Media's cable platform following the failure of both parties to agree carriage fees had "disadvantaged" consumers since they were still paying for services they could not receive. Earlier this month the National Consumer Council accused Sky and Virgin of "behaving like children" in the pricing dispute, and threatened to make a "super-complaint" which could prompt a review of the UK's digital television market by the Office of Fair Trading. Virgin Media later gave Sky a 30-day deadline to resolve the dispute, or face the cable operator in the high court. That deadline expires in 15 days' time.

Ofcom said its probe would include the full pay-TV market, taking in satellite, cable, digital terrestrial and IPTV, and would focus on "control over content, ownership of distribution platforms, retail subscriber bases and vertical integration". The investigation would decide whether to make a market reference to the Competition Commission under the Enterprise Act 2002. "Ofcom will also consider whether any concerns would be better addressed using sectoral powers or the Competition Act 1998," said the regulator in a statement.

Ofcom said its investigation would look at the implications of Sky's possible entry into the digital terrestrial pay-TV market. Last month Sky announced it planned to launch a pay-TV service on digital terrestrial, removing Sky News, Sky Sports News and Sky Three from Freeview, and using the capacity to broadcast four subscription channels offering movies, entertainment and live Premiership football using the more efficient MPEG-4 video compression standard.

Ofcom said that while no request to change licences held by Sky and National Grid Wireless, the transmission group which currently carries Sky's three channels on Freeview, had been received, discussions between Ofcom and Sky had identified the need to consult on Sky's plans to launch a new DTT set-top box using MPEG-4; the impact of the loss of Sky's three channels on Freeview; and whether new licence conditions were needed to ensure fair competition.

Ofcom is already conducting two probes into Sky's acquisition in November of a 17.9% stake in ITV; one is an initial investigation to determine whether the stake raises public interest issues, the other is looking at whether the stake purchase amounts to a change of control that could effect ITV's public service programming obligations. Both investigations will be completed next month.

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