Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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enjoys an appreciable degree of market power at the retail level, over and above the
market power it already enjoys by virtue of its dominant position at the wholesale
level.
The position at the retail level if wholesale market power were not exercised
5.119 The discussion above highlights the interrelationship between the situation at the
wholesale and retail levels. Given that we have concluded that Sky possesses
market power at the wholesale level, this raises the question of how strong retail
competition would be, if Sky did not exercise its wholesale market power. We identify
factors that are relevant to this question. We refer to these factors in section 10 as
part of our assessment of remedies. For example, in order to evaluate the extent to
which a particular remedy would increase retail innovation, it is necessary to
understand how strong retail competition would be if that remedy were in place 320 .
Retail television bundles containing Core Premium Sports channels
5.120 At least until very recently Sky, Virgin Media, Setanta, Top Up TV and BT Vision
retailed Core Premium Sports channels 321 322 . Sky retails Sky Sports 1 and 2 on its
DSat platform 323 . Virgin Media retails Sky Sports 1 and 2 and Setanta Sports 1 on its
cable platform. Setanta retails Setanta Sports 1 on Sky’s DSat platform and to
customers using DTT platforms. Top Up TV and BT Vision both retail Setanta Sports
1 on their respective DTT platforms. These channels are only available as part of a
bundle that includes other channels (e.g. so-called basic-tier channels or other
Setanta Sports channels). Retail bundles may also include other television related
components (e.g. a set top box) and non-television components (e.g. broadband,
voice telephony).
5.121 In the following pages we:
� First, briefly consider whether Sky possesses a dominant position applying the
‘standard’ approach to assessing retail market power (namely the ability to
charge retail prices appreciably above the competitive level);
320 For the avoidance of doubt, we do not consider that this in any way prejudges our assessment of
whether there are competition concerns and (if so) what remedy (if any) is appropriate. Market
definition and the assessment of market power always look ahead to later parts of the analysis. For
example, the market definition exercise is carried out to inform the assessment of a particular
competition concern. However this in no way presupposes that there will subsequently be a finding
that that competition concern is well founded.
321 Setanta Sports 1, Sky Sports 1 and Sky Sports 2 are also available on Tiscali’s IPTV platform and
from some smaller cable retailers (Wight Cable and Smallworld Media Communications). However
few subscribers access these channels from these platforms and thus we do not discuss them further
in this section.
322 Obviously this position may change following Setanta’s loss of the Live FAPL Rights from 2009/10
onwards. At the time of writing, ESPN has not yet reached distribution agreements with retailers other
than Sky although it has announced its intention to widely distribute its channel. Since these
developments have occurred at an extremely late stage in our analysis, and given the considerable
uncertainties surrounding Setanta and ESPN at the time of writing, the market share calculations set
out below relate to the position prior to Setanta’s loss of the Live FAPL Rights.
323 Sky also directly retails its channels over Tiscali’s IPTV platform.