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Summary

Introduction

1.1 This statement and guidelines set out how Ofcom would normally interpret the requirement on Sky to ensure that its terms, conditions and charges for providing access to its technical platform services (“TPS”) are fair, reasonable and non-discriminatory.

1.2 Broadcasters and operators of interactive TV services who wish to gain access to viewers using Sky’s digital set top boxes can purchase TPS and Sky is required to provide these services on fair, reasonable and non-discriminatory terms.

1.3 In the event of a dispute or complaint about Sky’s TPS terms, conditions and charges, Ofcom would normally expect to follow the guidance in this statement when interpreting the meaning of what is fair, reasonable and non-discriminatory. However, Ofcom cannot legally fetter its discretion in advance and therefore retains the ability to depart from the guidance where the circumstances warrant it.

1.4 Ofcom first consulted on this subject in November 2005 (“the first consultation”). Having carefully considered the responses to the first consultation Ofcom developed a draft version of this explanatory statement and guidelines.

1.5 Ofcom consulted on the draft explanatory statement and guidelines on April 21 2006 (“the second consultation”). This consultation closed on 16 June 2006. Ofcom has also given careful consideration to the responses to the second consultation in finalising this statement and guidelines.

Summary of the guidelines

1.6 The Guidelines (set out in Annex 1) set out Ofcom’s approach to considering in the event of a dispute or complaint whether Sky has complied with the conditions requiring it to provide access to TPS on fair, reasonable and non-discriminatory (FRND) terms (the “Conditions” ). The Guidelines are formed of two parts. The first part sets out general principles that Ofcom would apply in assessing whether Sky has complied with the Conditions. The second part provides more detail on Ofcom’s normal approach to particular aspects of cost recovery and assessment of benefits received in assessing whether Sky has complied with the Conditions.

1.7 The general principles that Ofcom would normally apply when considering whether TPS terms offered by Sky are consistent with the conditions requiring it to provide access on FRND terms are:

• The costs that Sky should be entitled to recover from TPS customers should be restricted to costs which it reasonably, necessarily and efficiently incurs in the provision of TPS to those customers or in order to develop and operate the DSat platform.
• Sky should be entitled to recover its allowable costs and make a risk adjusted return on its investment.
• Costs should only be recovered from those customers that directly cause the costs to be incurred, or that benefit from the costs being incurred.
• Where costs incurred are of benefit to more than one TPS customer then they should be recovered from each TPS customer in a way that takes due account of the benefits derived by TPS customers from those costs being incurred.

1.8 The Guidelines provide further detail on a FRND approach to cost recovery and non-price terms associated with the provision of TPS:

• A potentially reasonable approach to recovering common costs maybe one in which these costs are recovered from each TPS customer in relative proportion, based on a percentage of their incremental benefits derived from using each TPS.
• Ofcom considers that incremental revenues derived by a TPS customer from using TPS are a reasonable proxy of incremental benefits received.
• In the interests of practicability, Ofcom considers that a fixed fee for an EPG listing may potentially be a reasonable charging methodology for smaller broadcasters that earn relatively low incremental revenues from being available on DSat.
• Guidance on how costs might reasonably be recovered over time and how over and under recovery of costs may be adjusted for in later periods.
• Guidance on non price terms Ofcom considers are necessary to satisfy the FRND requirement. These include lead times for provision of regulated TPS, information relating to the development of new regulated TPS and the need to unbundle TPS where technically feasible.

1.9 Sky is required to publish a notice specifying its charges, or specifying the methodology that is to be adopted for determining its TPS charges. It is Ofcom’s view that the charging methodology should provide an existing or prospective TPS customer with sufficient information to allow it to determine the TPS charges that it would expect to pay without having to enter into a commercial negotiation with Sky.

Application of the new guidelines

1.10 Ofcom considers that for reasons of practicality Sky should be allowed a reasonable period of time to implement any changes to its charges or charge methodology as a consequence of the new guidelines. Therefore, the new guidelines will apply as from 1 January 2007, on which date Sky must either publish its revised charges or its charging methodology.

The full document is available below:

• Provision of Technical Platform Services - Guidelines and Explanatory Statement [pdf]
  Full Print Version

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