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18|12|07

Pay TV Market Investigation Consultation

Ofcom today published a consultation document investigating the pay TV market.

The purpose of this consultation is to seek stakeholders’ views on Ofcom’s initial assessment of the operation of competition in the market and the outcome for consumers.

Initial assessment

Our initial assessment of the pay TV market suggests that it has delivered significant benefits to consumers, growing from almost nothing in the early 1990s to one that now provides services to over 11 million consumers today. It delivers reasonable levels of consumer satisfaction and, at just over £4bn, provides the single largest source of revenue to the broadcast industry. There are however some warning signs, such as areas where consumer choice may be limited.

There have been a number of important recent developments, such as the emergence of new platforms, new content providers, and the increasing importance of convergence. These mean that the future development of the market cannot simply be projected forward from the past. In these circumstances it is particularly important that we take a forward-looking view, and ensure that consumers receive the maximum benefit from new forms of competition. Our initial assessment has led us to identify possible concerns ahead relating to:

• Whether vertically-integrated firms have the incentive to make their premium content, such as sports and movies, available to other retailers and other platform operators;
• Whether firms are able to compete effectively at the wholesale level for premium content; and
• The enforcement of buy-through (the practice of requiring consumers to purchase a basic package before they are allowed to buy a premium service) at the retail level.

Background and context

Ofcom has a general duty to promote competition in broadcasting markets.

Ofcom announced on 20 March 2007 that it had received a submission from BT, Setanta, Top Up TV, and Virgin Media, which asked Ofcom to investigate the pay TV industry and to consider whether to make a market reference to the Competition Commission under the Enterprise Act 2002.

Since then these parties have provided a further and more detailed submission, which Sky has been given the opportunity to respond to. The further submission and Sky’s response were published by Ofcom on 6 December.

The joint submission alleges that competition in the UK pay TV industry is not working effectively and that there are features in the industry that prevent effective competition taking place. The response from Sky disputes this, citing a number of reasons why it believes that competition is effective and is delivering benefits to consumers.

Next steps

Ofcom welcomes views and comments on our initial assessment of the operation of competition in the market and the effect on consumers. The responses will help us to examine whether there are competition problems that require further action. Ofcom expects to publish a further consultation in Spring 2008.

Ends.

Note for Editors and CSEs

1. Pay TV includes subscription and video-on-demand television services on all platforms: cable, digital terrestrial television (DTT), satellite and IPTV.

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