Ofcom’s Pay-TV Inquiry: Round One To BSkyB’s Rivals

Ofcom’s initial verdict in its assessment of the UK pay-TV market, prompted by complaints by rivals – pretty good, could do better. The regulator said the sector had grown from nothing in the early nineties to 11 million subscribers and £4 billion revenue today, delivering “significant benefits” to viewers – but there are “some warning signs, such as areas where consumer choice may be limited”.

The inquiry was sparked by a tag-team complaint from BT, (NYSE: BT) Setanta, Top Up TV, and Virgin Media (NSDQ: VMED) in March after BSkyB (NYSE: BSY) pulled its channels from Virgin’s platform, pledged to pull them from Freeview to build a pay-for layer on top of the platform and scuppered the former NTL’s bid for ITV (LSE: ITV) by taking a 17.9 percent stake.

And it’s pretty much a round-one victory for the joint complainants. In its preliminary findings out this morning, Ofcom identifies future concerns around whether firms that own both production and distribution platforms are incentivised to make premium sports and movies available to other operators. It also questions whether operators can compete effectively for premium programming at wholesale level against rich incumbents and whether operators should be allowed to withhold premium packages from consumers until they buy a basic package. All three of which are the core complaints offers by BSkyB’s rivals.

It’s not a done deal yet, though. Ofcom has now invited consultation from others on the issue with a February deadline, and will issue another in March before making a ruling.