Sky ordered to cut wholesale prices

Sky has been ordered to offer its sports channels at wholesale prices
12 April 2012

Sky must offer its Sky Sports 1 and 2 channels to other broadcasters at a wholesale price set by Ofcom, the broadcasting regulator has ruled.

Ofcom said its decision, after a three-year investigation into the industry, would ensure "fair and effective competition".

Parent company BSkyB immediately said it would challenge Ofcom's conclusions before the Competition Appeal Tribunal.

Ofcom has set a wholesale price of £10.63 per subscriber per month for each of Sky Sports 1 and 2 when sold on a stand-alone basis, 23.4% below the current wholesale price to cable operators. Most consumers currently buy packages which include Sky Sports 1 and 2 and the wholesale price for this service bundle has been reduced by 10.5% to £17.14, Ofcom said.

The regulator had warned Sky, which holds the rights to many major sporting fixtures, that it wanted to wholesale its premium content out to rivals more freely.

Ofcom began investigating the pay TV market in March 2007 after concerns were raised by BT, Virgin Media, TopUp TV and Setanta, which has since gone bust.

It said: "Ofcom has concluded that Sky has market power in the wholesale provision of premium channels. Ofcom has also concluded that Sky exploits this market power by restricting the distribution of its premium channels to rival pay TV providers. This prevents fair and effective competition, reduces consumer choice and holds back innovation and investment by Sky's rivals.

"The decisions are therefore designed to ensure fair and effective competition which should lead to greater investment, innovation and choice for consumers."

Commenting on Ofcom's ruling, a Sky spokesman said: "There should be no doubt that Ofcom's actions represent an unprecedented and unwarranted intervention. This is a marketplace where customers are well served with high levels of choice and innovation. Consumers will not benefit if regulators blunt incentives to invest and take risks.

"After three years of engagement with Ofcom, we now look forward to a judicial process which will apply impartial analysis and clear legal standards."

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