BSkyB probe launched

Broadcaster BSkyB today came under renewed pressure with the launch of an Ofcom investigation into the pay-TV market.

While the investigation is designed to look at the whole market – including subscription and video-on-demand services on cable, satellite, digital terrestrial television (Freeview) and TV over DSL (TV through broadband) – it will be the latest inquiry encompassing BSkyB’s recent activities.

The current investigations involving BSkyB are:

:: OFT competition inquiry

On January 12, the Office of Fair Trading (OFT) announced that it was conducting an inquiry into BSkyB’s acquisition of a 17.9% stake in ITV in November.

The OFT is looking to see if the purchase constitutes a merger and, if so, whether this would be acceptable under the Enterprise Act 2002 or if it would reduce competition in the TV market due to the dominance of one party over others.

The OFT issued a formal invitation to comment, which closed on January 25.

It is now in the process of assessing the situation to decide on whether to refer the case to the Competition Commission.

The OFT is expected to report back on its progress by the end of next month.

:: Ofcom’s public interest inquiry

On February 26, Alistair Darling, the Secretary of State for Trade and Industry, contacted Ofcom asking it to conduct an initial investigation into whether BSkyB’s acquisition of the 17.9% stake in ITV raised public interest issues.

The move came after complaints from broadcasters and MPs, who said that the unprecedented move threatened choice in the media.

On March 1, Ofcom opened an inquiry to investigate if the move increases Sky’s control within the TV sector, therefore limiting consumer choice and impacting the public interest.

If this is judged to be the case, it would contravene UK regulations which specify that the UK’s media must be controlled by a variety of sources.

Ofcom will report to the Secretary of State by April 27.

:: Programming obligations

At the same time as the public interest inquiry, Ofcom are also examining whether the acquisition has led to a change of editorial control at ITV.

If it decides that this is the case, it would need undertake a review of the effects or likely effects that this would have on ITV’s programming obligations.

:: Pay-TV industry

Today, Ofcom announced it is launching an inquiry into the whole of the pay-TV industry to decide if it needs to refer the market to the Competition Commission.

The investigation follows a series of concerns from smaller broadcasters about the levels of competition in the market. Competition is necessary to ensure the maintenance of customer choice and fair prices.

In addition to concerns raised by broadcasters, Ofcom is also acting in response to the National Consumer Council’s announcement on March 1 that it was considering making a super-complaint to Ofcom regarding the removal of Sky’s channels from the Virgin Media service on March 1.

It also received a letter from the Ofcom Consumer Panel regarding the same issue.

:: Pay-TV on Freeview

In February, BSkyB said it was set to launch a paid-for TV service on the digital Freeview services.

Ofcom said that it would run a public consultation as part of the regulatory procedure for granting a licence for such a service.

The industry regulator added that it will be considering the impact on customers of the entry of pay-TV into the Freeview sector as part of its pay-TV investigation.

:: BSkyB’s response

BSkyB, which is 39% owned by Rupert Murdoch’s News Corp, said that the market for entertainment and communications services was now “fiercely competitive” with more businesses competing for customers than ever before.

In February, BSkyB said the decision by Mr Darling to order an initial inquiry in terms of the public interest “contradicts the Government’s published guidance”, claiming that Parliament expressly considered that plurality would be protected if Sky were to own no more than 20% of ITV when it debated the 2003 Communications Act.

In response to the investigation into pay-TV, the group said that broadcasters have a “commercial interest” in preventing Sky from developing a new pay-TV service for Freeview.

It also pointed out that cable was a “closed network with substantial protections” and said that any market investigation should “look at the physical and legal barriers and business practices that shield Virgin Media from true competition and prevent consumers from enjoying lower prices in broadband and telephony and greater innovation and choice in television”.