Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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inconvenience associated with the installation process (such requiring a visit
by an engineer).
o In contrast, we stated that the switching to some of the newer platforms might
be somewhat less costly. IPTV or DTT-based platforms involve fewer
additional changes in hardware than cable and satellite. IPTV-based platforms
use the existing telephone line and DTT-based platforms use the existing
aerial.
5.143 Finally, in the Second Pay TV Consultation, we stated that further switching costs
may arise due to the bundling of pay TV and other services. For example, BT Vision
is only available to consumers purchasing retail broadband from BT, so consumers
wishing to switch to or from BT Vision may also have to migrate their broadband
service. This may result in additional costs and/or lead time which could discourage
switching. The finding that bundling creates additional barriers to switching is
supported by more recent Ofcom research 328 .
5.144 Research for Ofcom also found some evidence that customers’ perceptions were a
barrier to switching, although not exclusively and in varying degrees. Survey
evidence indicates that, in the case of multichannel TV, consumers that have actually
switched regard switching as easier than those that have not switched. In contrast,
consumers of bundles of services had similar views regardless of whether or not they
had previously switched. Moreover they regarded switching as more difficult than
multichannel TV consumers.
5.145 Finally, certain households do not have access to some retailers’ service, for
example because no cable network serves their location. This acts as an absolute
barrier to switching to consumers in some parts of the UK. Research for Ofcom found
that, in 2008, 98% of households had access to digital satellite television, 78% had
access to DTT and 47% had access to digital cable 329 .
5.146 In summary, we consider that switching costs vary depending on which retailer a
customer is switching to and from. There do appear to be appreciable costs to
switching to a number of retailers, particularly Virgin Media and Sky’s DSat business.
These costs will tend to dampen the strength of the retail constraint exerted by these
businesses on rival retailers. That said, switching costs (and the associated impact
on competition) should not be overstated – it would be incorrect to suggest that they
are very high 330 .
328 For example, qualititative research for Ofcom found that respondents largely looked to switch their
services as a bundle rather than to unbundle and revert to using individual suppliers for each service.
This research implied that that the more services that were bundled, the less interest in switching. The
consumer experience, 2008 research report, Ofcom (“Consumer Experience 2008”), page 96
available at: http://www.ofcom.org.uk/research/tce/ce08/research.pdf
329 Consumer Experience 2008, Figure 10 on page 14.
330 Of multichannel TV consumers that had switched supplier, in 2008 66% reported that it was “very
easy” and a further 23% reported that it was “fairly easy”. Only a total of 6% reported that it was “fairly
difficult” or “very difficult”. In contrast, of consumers who had not switched supplier the respective
figures are 24%, 37% and 20% (with 19% responding “don’t know”). Consumer Experience 2008,
figure 132 on page 99 and figure 133 on page 100.