Ofcom’s Ed Richards on Pay TV investigation (Dec 09)
This is testimony before the CMS/BIS Committees back in December 2009, but it just appeared in written form on the CMS committee’s website. It’s always helpful to be able to review the transcript and see exactly what was said:
Q72 Mr Wright: Your report accepts that pay TV has seen substantial growth in recent years and now has a value of up to £4 billion. Clearly, there was concern amongst other providers leading to consultation that you held in 2008 which came to certain conclusions. But one of the matters that has not been decided is whether you should force Sky to give sport and film content to their competitors at a competitive price. Will there be a decision on that?
Mr Richards: We expect to publish a final statement in March of next year. At the moment we are going through a huge volume of submissions and responses to our last consultation. Many of them are very important, well argued and provide evidence that we need to consider very carefully and we are in process of doing that. We expect to conclude that process between now and the start of next year and our board will move towards making final decisions towards the tail end of the first quarter of 2010.
Q73 Mr Wright: Do you accept that from Sky’s point of view—it was highlighted in a newspaper article by Mr Murdoch—if any regulation by Ofcom is forced upon them it would devalue their future investment in television?
Mr Richards: We do not necessarily see it that way. A number of different things are going on. Ofcom has not made a decision on it yet, so in a sense there is nothing from which one can assess the consequences. In what we have argued and proposed in the documents so far we have been careful to ensure we take a broad view of where the consumer interest lies and what the constituent parts of a healthy pay television and broader television environment are. We have made clear that we think a good outcome requires high-quality content and obviously investment. Both of those things are pillars of our approach. The intervention we proposed in the last consultation would be designed to address our concern, which we have documented very carefully, about the restriction of choice and availability of the premium channels, football and movies, and also the risk that the restricted distribution of those channels will dampen innovation and investment in new platforms, particularly IPTV but also digital terrestrial. Our concerns here are about the consumer interest and the health of competition. Those things encapsulate investment and high-quality content as well, so they are uppermost in our minds when thinking about the implications of the responses we have received.
Q74 Mr Wright: Presumably, you would agree with the Premier League that any move in this direction will impose restrictions on their ability to invest in the sport. There is a balance here between what the consumer wants to pay to watch and the ability of the Premier League or Sky in terms of film programming to provide content at a reasonable price to stop that invasion. Do you take on board what the Premier League says in terms of investment in the sport in particular?
Mr Richards: We are considering what the Premier League has said about those issues. A number of sports bodies have given us responses and those are the arguments and the evidence we are considering at the moment. That is one argument. Let me reiterate that one of our criteria for this investigation is to make sure there is a continued healthy environment for investment in high-quality content including sport. We are very conscious of that issue and have been careful to consider it. Indeed, that is one of the reasons why in earlier consultations we considered a range of different approaches to the problem brought to us by the four parties who argued for a much more interventionist approach than the one we have proposed. One of the other options open to us in that area is to go further upstream and start to intervene in the sale of the rights. One of the reasons we proposed a wholesale obligation was our concern about the consequences of intervening in the sale of rights in terms of the amount of money that rights holders could generate and therefore the quality of content. That is an example of where we have been very conscious and careful about striking the right balance among a number of competing interests and arguments which are sometimes slightly in tension with one another.
Earlier in his testimony Richards made a dig at Sky:
‘It is often the case that people observe or criticise us for being over-regulatory, but in some cases one finds that it is a response to a specific area of activity. You quoted James Murdoch as making that observation. We know full well that Sky and Mr Murdoch are uncomfortable about our investigation into pay television obviously because Sky is at the heart of that investigation. It is worth remembering that the source of that investigation was not an Ofcom initiative but a serious, significant complaint by four separate companies. Having been presented with that complaint we are bound to consider issues of that kind. You would be very surprised if we did not do that. Therefore, an initiative of that kind is frequently not ours; it is brought to us by other parties. The second observation is that it is often those companies that are concerned about our activities in one area that would be most concerned if we were not active in another. Mr Murdoch is concerned about the pay television investigation, but equally Sky now has a very strong position in the broadband market. If we removed regulation from the broadband market that business would be under serious threat. Therefore, on the one hand there is concern that we might be doing too much; on the other hand, within the same company in this case there would be a concern if we did not do enough.’
Ed Richards makes a fair point: Sky is calling for increased regulation in the Openreach context. However, I would note that the local telecoms network in most European countries was built with public money and has generally been considered an essential facility / natural monopoly … and by contrast the Pay TV matter basically involves entertainment content that has been auctioned to the highest bidder via an open process.
