In their separate responses to Ofcom’s ruling on the wholesaling of BSkyB’s premium sports channel, there is one point of agreement: the regulator got it wrong.
BSkyB, BT and the FA Premier League have joined Virgin Media in disputing Ofcom’s findings that Sky Sports 1 and Sky Sports 2 should be subject to a regulated ratecard. Where the parties differ is in their standpoint, which is predictably dependent on what they have to lose.
In its appeal to the Competition Appeal Tribunal (CAT), BSkyB argues that Ofcom has no jurisdiction or power to make the decision under the Communications Act 2003. It says Ofcom has failed to give credence to the charge that Sky has a strategic incentive to withhold the supply of its channels and that it had an incentive to weaken Virgin Media. Sky also believes the regulator has failed to assess the impact of forcing it to distribute its interactive services and Sky Sports HD and Sky Sports 2 HD.
As part of the purchase of Virgin Media’s TV business, Sky has now agreed a wide-ranging content agreement with the cableco, though it is unclear what impact the failure of its appeal might be on the carriage fees received for the distribution of its HD and interactive services.
The FA Premier League (FAPL), which could potentially lose several million pounds as a result of Sky’s loss of exclusivity, has said Ofcom has “failed to consider or apply the well established principles applicable to a refusal to supply or margin squeeze case”. Instead it says the regulator has come up with “an entirely novel theory of consumer harm” that does not justify the position of the remedy. Arguing that Ofcom’s approach is fundamentally flawed, the FAPL says it has over estimated the benefits and erroneously concluded that Sky’s revenues are likely to substantially increase as a result of the imposition of the remedy.
Like Virgin Media, BT argues that Sky Sports 3 and 4 should also be included in any wholesaling agreement. The telco says the channels are close substitutes for Sky Sports 1 and that Ofcom’s analysis failed to take into account that Sky Sports 3 is taken only as part of packages with Sky Sports 1 and Sky Sports 2, whilst Sky Sports 4 is generally sold as part of such packages and is not actively marketed on a stand-alone basis. However, in its ruling Ofcom did set out that it would ensure Sky did not start moving programming onto channels outside the scope of its wholesale must offer.
BT also disagreed on the prices set by Ofcom, arguing the regulator had ‘cherry picked’ cost numbers and there was nothing to stop Sky reducing its consumer prices to a level below the wholesale rate.