UK regulator targets BSkyB movie, sport dominance

LONDON — British Sky Broadcasting’s premium sports and movie channels should be more broadly available through other television platforms, Britain’s communications regulator said Friday, adding that it may force a wholesale offer of the services.

The Office of Communications said it believes BSkyB is limiting distribution of these channels to rival TV platforms, thereby restricting consumer choice.

OFCOM said that requiring Sky to make its premium channels available to other retailers on a wholesale basis was the best way to ensure fair competition.

The agency said it was therefore seeking comment on proposals “to put in place a wholesale must-offer obligation, containing a range of regulated prices.”

Interested parties have until Aug. 18 to respond to the proposals.

BSkyB rejected the regulator’s analysis and proposed remedies.

“In light of OFCOM’s determination to pursue its preferred outcome, we will use all available legal avenues to challenge this unwarranted intervention,” BSkyB said in a brief statement.

The company has the largest share of live coverage of Premier League football broadcasts. Of 138 matches available to broadcast each season, BSkyB won rights to 115 beginning next year to 2013. It is controlled by Rupert Murdoch’s News Corp., which holds a 39 percent stake.

OFCOM said it was also considering the need for targeted interventions on subscription video-on-demand movie rights and the next Premier League rights auction in 2012.

OFCOM said that “some content — various sporting events and first-run Hollywood movies — is of sufficient importance to consumers that channels including this content are in their own narrow wholesale markets; i.e. they are not replicable, and other channels are not good substitutes for them.”

“Despite lengthy negotiations and its own claims that it has an incentive to distribute its channels as widely as possible, Sky has still concluded no wholesale agreements for premium channels with non-cable retailers,” the regulator’s report added. “This situation is not consistent with fair and effective competition.”

British Telecommunications PLC, a major broadband provider, welcomed the regulator’s report.

“U.K. consumers are benefiting hugely from the most open and competitive broadband market in the world so it is time for OFCOM to open the doors of the pay TV market and let in the fresh air of competition,” said Gavin Patterson, chief executive of BT Retail.

“Prices have been too high for too long but this could all change if OFCOM breaks Sky’s stranglehold.”

Steve Liechti, analyst at Investec Securities, said the proposed remedy “would actually increase Sky wholesale revenues in theory, but cut margin, while clearly it would also help boost competitive offerings such as Virgin Media and BT.”

“The devil will be in the detail, but there is still no major shakedown of Sky in terms of a separation of content and distribution,” Liechti said, calling this good news for the company.

BSkyB shares were up 0.7 percent at 455.00 pence on the London Stock Exchange.

On the Net: www.ofcom.org.uk/