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04|10|07

Ofcom considers Sky proposal to offer pay TV services on digital terrestrial TV

Ofcom today published a public consultation on a proposal from British Sky Broadcasting Ltd (Sky) and National Grid Wireless Ltd (NGW) to replace Sky’s free-to-air channels with pay TV services on the digital terrestrial television (DTT) platform.

Sky and NGW’s proposal

Sky currently provides Sky News, Sky Sports News and Sky Three on the DTT platform on a free-to-air basis. Under the proposal, these channels would be replaced with Sky Sports 1 and, in the evening, Sky One (including an hour of Sky News content) and Sky Movies SD1. Sky would use the remainder of its capacity to retail two further channels from third party providers in the daytime: a factual channel and a children's channel.

Development of further services continues to be a matter for discussion between the two parties concerned.

Sky and NGW require consent from Ofcom before they are able to implement their proposal. The proposal raises various issues which Ofcom must consider, in particular in relation to its impact on competition.

Impact on competition and the consumer interest

As a result of the success of Freeview, the DTT platform has become the single largest platform for the delivery of digital TV in the UK. As digital switchover approaches, the DTT platform is reaching a significant transition point which may have implications for the development of pay TV services.

It is essential that Ofcom considers how it can best ensure fair and effective competition for the benefit of consumers in the light of the development of the DTT platform, Sky’s strong market position in pay TV and the specific aspects of the proposal.

The Sky / NGW proposal would increase the choice and availability of retail pay TV services on the DTT platform. Consumers would be presented with an increase in choice of sports, movies, factual, children’s and general entertainment programming.

However, it would also have an impact on competition for pay TV services on DTT and possibly across other digital TV platforms. For example, if as a result of Sky’s position in the wholesale provision of sports and movies channels, Sky were to emerge as the main retailer of pay TV services not only on the satellite platform but also on DTT, other providers of pay TV services may find it more difficult to enter the market. This may not be in the long term interest of consumers.

Ofcom wants to ensure that consumers have the benefit of innovation and new services on digital TV while ensuring fair and effective competition in pay TV, both on DTT and more widely. Such an outcome would maximize benefits for consumers now and in the future.

Next steps

Ofcom is not making a specific recommendation at this stage but is keen to receive views on three broad options:

1. Consent to the proposal unconditionally;
2. Consent to the proposal, but impose additional conditions to reduce the risk of competition problems; or
3. Not consent to the proposal at this time.

The possible types of conditions identified for consultation include the wholesale provision of key content to other retailers, conditions which involve technical interoperability of pay TV services and set-top boxes, and limiting Sky’s ability to retail channels directly on the DTT platform.

The closing date for responses to the consultation is 14 December 2007. The full consultation document is published at: www.ofcom.org.uk

Ends.

NOTES FOR EDITORS AND CSEs

1. Ofcom’s role involves a variety of duties. It has a principal duty to further the interests of consumers in relevant markets, where appropriate by promoting competition.
2. On 26 June 2007, Ofcom announced that it would conduct a public consultation on the proposal from Sky and NGW, including a consideration of how Ofcom can best ensure fair and effective competition for the benefit of consumers.
3. Ofcom is the independent regulator and competition authority for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services.

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