3. The ITC's underlying objective is to increase viewers' freedom of choice in relation to basic channels and to minimise actual or potential anticompetitive effects of buy-through. This means that distributors of pay-TV services must retain sufficient flexibility in their commercial agreements to package channels in a way which enables them to respond to viewer demand.
4. In this context the ITC is concerned with viewers who are themselves subscribers to pay-TV services and not with viewers who watch pay-TV services in commercial premises, such as pubs, hotels, etc. In the latter case, the choice is being made for the viewer by the owner of the premises and the decision to subscribe, and terms on which the subscription is made, is not within the control of the ultimate viewer.
5. Moreover, the lTC's interest lies in the choice available to viewers in the UK. It is not, therefore, seeking to regulate the terms on which channels are provided to distributors for broadcasting in overseas markets where the range of services, competitive structure of the market, competitive behaviour and practices may be quite different.
6. The ITC recognises that there may be, in existing contracts, impediments to the supply of channels on an a la carte basis, i.e., the basis which would maximise viewers' freedom of choice. For instance, there are cases where rights holders have required channel providers not to sell the channel on an a la carte basis. The ITC expects, however, those barriers to be kept to a minimum and that no new contracts will have similar terms.
7. An important facet of the ITC's remedies is that viewers will be able to purchase premium channels without the encumbrance of the big basic package. Viewers must be able to buy premium channels in combination with any package of basic channels offered by a distributor, including any so-called 'access pack', ie, the smallest basic package currently available. Premium channels (with the exception of premium bonus channels and rescheduled versions of premium channels) must, therefore, be available a la carte, although it would be acceptable for them also to be sold in bundles.
8. The lTC's Direction does not require premium channels to be sold separately from a basic package, i.e., it has not prohibited buy-through. Consequently, BSkyB, for example, is not required to sell its premium channels to a subscriber via a basic package offered by another distributor if that distributor does not have in place the necessary commercial arrangements with BSkyB. Where, however, the necessary commercial arrangements are in place, it is not acceptable for the premium channel provider to prevent the distributor from selling the premium channels separately, albeit in conjunction with every basic package.
9. The provision of premium bonus channels by BSkyB is subject to undertakings given by BSkyB to the DGFT. The ITC is concerned that no further bonus channels should be provided by BSkyB or any other distributor, particularly where this may be an attempt to circumvent the terms or spirit of the Direction. This could happen, for instance, where a bonus channel is of interest to a sufficiently large number of subscribers to justify its offer on a standalone basis. There may, however, be other cases where the provision of a premium channel free-of-charge and in combination with other premium channels extends viewer choice. This would be the case where the content of two main channels is rescheduled, or time-shifted (or multiplexed), so that a viewer can watch programmes which were originally scheduled at the same time. The time-shifted or rescheduled versions of these premium channels would not need to be available a la carte.
10. Subject to the overall requirement of the Direction and the terms on which this guidance is being provided, the ITC is aware of a number of types of terms, either individually or in combination with each other, which are unlikely to be acceptable. The examples which follow are not exhaustive but give some illustrations of agreements and practices which are likely to fall within the definition of MCR in the Direction.
11. It is unlikely that any contractual term which permitted the carriage of a channel only on the basis that it is linked to the most widely distributed channel would be acceptable, This may occur, for example, if the distributor is required to package the channel with a 'must carry' channel (in digital cable broadcasting (e.g. BBCl or ITV) where a charge (whether in the form of equipment rental, etc) is made for the reception of those services) or a 'must have' channel such as Sky One is currently perceived to be.
12. Restrictions on a distributor's flexibility to package channels in a way which satisfies viewers' preferences may appear in different forms. The Direction, therefore, seeks to control MCRs by reference to their effects. For example, an obligation to place a channel in every package from which a premium channel can be bought is tantamount to an MCR. This would not be acceptable.
13. Whilst it is not the lTC's intention to regulate the financial terms of contracts and agreements, the ITC is unlikely to find acceptable terms which impose on the distributor a significant financial disincentive to develop, market and retail packages of basic channels, or a combination of a basic channel package and a premium channel, offered to a particular subscriber or group of subscribers in the UK.
14. The ITC places great emphasis on distributors using the flexibility given to them by the Direction to respond to the preferences of viewers. It is, therefore, important that distributors do not discriminate unduly in favour of, or against, channels or groups of channels, particularly ones they may themselves provide, in marketing and positioning channels. The composition of packages must reflect, so far as is practicable, viewer demand. To this end, channel providers should be able to influence the positioning of their channels.
15. For viewers to make a choice, it is essential that they are informed of what is on offer. The ITC expects, therefore, distributors to include promotional material from channels in their mailings to subscribers and to provide adequate reference to all channels in their TV guides. Failure to do so is likely to be considered by the ITC as an example of undue discrimination.