Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
5.16 Fourth, as highlighted by Sky, we recognise that where there is a great deal of
product differentiation this brings to the fore several limitations of relying on market
shares. Suppliers that lie outside of the market may exert a moderate constraint upon
suppliers within the relevant market. Similarly, suppliers within the relevant market
may not exert a particularly strong constraint because their products are
differentiated. However we have addressed these limitations in a number of ways:
� As is entirely standard, we calculate the market shares of suppliers within the
relevant market. However we also supplement this with a discussion of the
closeness of substitution between those suppliers.
� To reflect the potential constraint imposed by products outside of the relevant
market, we have also calculated market shares that include ‘out of market’
products that are likely to exert a moderate constraint. As highlighted in the
Second Pay TV Consultation, it is important to treat these market share figures
with a degree of caution since they will overstate the strength of the constraint
exerted by these moderate substitutes.
� We have not calculated market shares taking into account products that are more
remote substitutes for Core Premium channels. Market shares that include more
remote substitutes would be an unreliable guide to the constraints facing
wholesale suppliers of Core Premium channels, since they will significantly
misrepresent the strength of the constraint exerted by those more remote
substitutes. While it is not the case that the more remote substitutes impose
absolutely no constraint on the wholesale supply of Core Premium channels, we
consider that that constraint is too weak to alter our conclusions.
Wholesale Core Premium Sports channels
5.17 Below we set out a summary of our assessment of market power in the wholesale
supply of Core Premium Sports channels. First, a background section explains which
channels lie within the relevant market, summarises our position in the Second Pay
TV Consultation, summarises the further representations we have received and
provides a brief overview of further developments. We then consider the strength of
any competitive constraints on suppliers in this market, namely:
Background
� Competition from existing competitors.
� Competition from potential competitors.
� Countervailing buyer power (“CBP”).
The channels within the relevant market
5.18 As set out in section 4, we consider that the relevant market is the wholesale supply
of channels regularly featuring live sporting events which a significant number of
consumers find highly valuable 278 . For the reasons given in paragraphs 4.94 to 4.134,
278 Note that this differs from the definition adopted in the Second Pay TV Consultation, namely the
wholesale supply of channels or packages of channels containing live FAPL matches, in two ways.
First, we now take a wider view on what sports content is necessary for a channel to lie within the
relevant market, rather than solely focusing on live FAPL matches. Second, we now exclude other
components of wholesale bundles supplied with the sports channels of interest. Note that the sports
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