Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
6.76 We recognise that there are challenges to developing an IPTV service. However, we
consider that the view that there is no commercial urgency is somewhat at odds with
the repeated requests by other retailers for a wholesale deal. The investment in
developing an IPTV network is substantial, and BT and Orange would reasonably
wish to secure rights to retail Core Premium channels on their networks before
making this investment. The fact that Tiscali is already distributing a number of Sky's
linear channels, including live sport, is evidence that IPTV distribution is possible
over BT's copper access network. We are not aware of any technical reason why
other operators could not develop an equivalent IPTV capability in a relatively short
time frame which would allow linear channels to be distributed to the majority of their
broadband customers.
6.77 Sky also argued that it could not broadcast its premium channels via DTT without first
securing DTT capacity. It said it had no means by which it could offer its channels to
any of the DTT retailers for distribution 392 . It argued that, as its Picnic application was
pending, it had no means by which to facilitate the provision of its channels either to
itself or to any other retailer over the DTT platform. However, we note that a third
party retailer such as TUTV would have scope to use one of its own videostreams for
premium channels, or purchase capacity from another broadcaster and use it to carry
Sky’s premium channels.
6.78 Next, Sky argued that [ � ]. It said that ensuring that Sky’s channels were
distributed in a secure manner was fundamental to Sky’s business model, and that it
would be irresponsible for Sky to distribute its channels on any platforms that were
not secure. 393
6.79 We recognise that Sky’s concerns about security are genuine, [ � ] 394 . [ � ] 395 .
6.80 However we note that Sky has been willing to discuss retail supply on DTT while
failing to engage in discussion about wholesale supply, despite security issues
arising in respect of both arrangements (i.e. the same Conditional Access system
would be used regardless of whether supply was wholesale or retail). [ � ] 396 .
6.81 As such, we do not consider that Sky’s past reluctance to engage in negotiations for
wholesale supply can be explained solely by its concerns about security. Looking
forward, we take account of Sky’s security concerns in Section 9 on the scope of a
wholesale must-offer remedy.
Effect of retail by Sky
6.82 Our Second Pay TV Consultation expressed the view that Sky had the incentive to
restrict the supply of its Core Premium channels to other retailers and other
392 Sky response, Section 5, paragraph 2.41.
393 Sky response, Section 5, paragraph 2.42.
394 [ � ]; Sky response dated 9 Apr 2009 to Ofcom information request dated 20 Mar 2009, question
3
395 [ � ].
396 Sky response dated 9 Apr 2009 to Ofcom information request dated 20 Mar 2009, question 3; [ �
]. However it is not clear why Sky would have less control over security as a retailer than as a
wholesaler, and this has not been the basis of Sky’s arguments to us.
197