By: Russ
Withering Sky response to Ofcom Pay TV market investigation…
From Sky’s recent response to Ofcom’s Pay TV market investigation:
‘However, despite the evidence in its own Consultation Document, Ofcom has set out - and then expressly sought evidence to bolster - a series of hypothetical concerns. This approach is inconsistent with both Ofcom’s regulatory principles and its statement in the Consultation Document that it has not yet reached a view on the existence of competition problems. For reasons that we detail in this Response, Sky believes that Ofcom commenced this investigation with preconceptions both as to the scope of relevant markets and as to market power in the relevant markets. Further, we believe that these preconceptions lead Ofcom to ignore or downplay the significance of any evidence that is inconsistent with these preconceptions or that would undermine its theoretical concerns. These preconceptions lead Ofcom to believe that there must be a problem somewhere, which it just needs to uncover.’
* * *
‘Ofcom must also be mindful of the context in which its investigation is taking place. Ofcom acknowledges in the Consultation Document that its investigation was triggered not as a result of any evidence of widespread consumer dissatisfaction or harm, but as a result of a Complaint made by certain of Sky’s competitors. The investigation has inevitably become a quasi-adversarial process in which Sky is the Defendant and the Complainants the Claimants. This means that not only must Ofcom be even more vigilant in distinguishing between the protection of consumers and the protection of competitors, but it must also be wary of putting Sky in a position in which the burden of proof is reversed and in which Sky must comprehensively disprove wide ranging and fanciful allegations by the Complainants.’
My take: It looks to me like Sky have stopped engaging with Ofcom and are now simply preparing for judicial review or political oversight of what might follow, given Ofcom’s leanings and adversarial position. That’s a shame. The regulator should maintain a solid reputation for cutting straight corners with regulated firms. It looks like in this case Ofcom have crossed an imaginary line and Sky simply believe they are being targeted.
Ofcom are way out on a limb here. There is probably now pressure within the regulator to justify this investigation by coming up with something damning about Sky’s activities. Basing all of this on allegations from competitors — some of whom have absolutely no credible marketplace offering of their own — really does put a odd twist on things. To make matters worse, Ofcom have put the brakes on any new Sky products or services, such as Picnic, that require regulatory approval. Now, Ofcom announce they continue to ponder over the matter all the way through the summer. This is not good. At a time of transition — both DSO and the launch of Freesat — it’s a particularly bad time for Ofcom to go after Sky in this blunderbuss fashion.
Tall poppy syndrome?
May 13th 2008
I think the most interesting thing here is how slow Ofcom have gone on this. It was back in March 2007 when Ofcom said it would look at the Pay TV market - as Sky says, from a complaint made by BT, Setanta, Top Up TV and (of course) Virgin Media. It took Ofcom until January THIS year to consult on it (Sky/NGW proposal was consulted on in Oct 07), and now it is putting off until the end of summer issuing further consultations, pretty much guaranteeing that no action will be taken, one way or the other, until the start of 2009. I actually think that Ofcom is hoping that if it drags thing out long enough that any possible case against Sky might evaporate.
Sky’s attempts to play the victim here, don’t really wash with me either. This is not to say I don’t think they make some valid points, but as with Virgin Media in their battle with Sky over carriage rights, it all sounds just a little to self righteous and arrogant to me. Ofcom certainly do not have it in for Sky, our friend at Rapture TV would certainly attest to that. Whether or not there is a case really rests on the level of importance given the Sky’s power in the wholesale market.
The Association of Licensed Multiple Retailers submission , in regard to pay sports coverage via Sky is interesting. They say: “For this segment of the market, premium sports are exclusively available through one platform and one provider… There is no choice of platform available to commercial subscribers because of BSkyB’s policy on wholesale pricing for commercial services – and in particular premium sports broadcasting - to competing platforms. Subeconomic pricing has seen the exit of cable competitors from the commercial market. Moreover, Setanta Sports is only available to commercial subscribers as a buy-through from Sky’s basic tier service. We believe that this is only the case for commercial subscribers, but the pub and club agreement makes clear that sourcing Setanta via another route will be in breach of the contract.”
This kind of thing is likely to catch Ofcom’s eye more than whinges from Virgin et al. That all said, at the end of the day I actually feel Tiscali get it right when they say in their response “It is vitally important that Ofcom’s focus remains on the facts of the UK market and what might need to be done to protect and advance the interests of competition and thus the consumer, rather than commercial and public conflicts between large companies.”