Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
increase in content, the flexibility over how it can be consumed and a lower real
price 480 .
7.45 Virgin Media reiterated its concerns that Ofcom's analysis failed to provide any
information on customer satisfaction levels which might otherwise prevail under more
competitive market conditions. It believed that the current results in that respect are
biased 481 .
Our current view
7.46 We distinguish between effects which arise from restricted distribution of Core
Premium channels and restricted exploitation of particular content rights, and those
which arise from high wholesale prices.
7.47 Restricted distribution of Core Premium channels and restricted exploitation of
content rights affect both the choice which is available to consumers, and the scope
for innovation (including the large scale adoption of innovative products) in the
market. High wholesale prices are likely to be directly reflected in the retail prices
consumers pay for pay TV services which include Core Premium channels. We
consider each of these effects in turn.
7.48 We have not conducted any further analysis of consumer satisfaction. However we
share Virgin Media’s concern as to the limited usefulness of survey evidence in this
regard. Customers may well express high levels of satisfaction if a service is
provided at a quality and price they have come to expect, but that does not rule out
the possibility that a change in the market, through greater price competition or more
innovation, would greatly increase consumer welfare.
7.49 We consider in this section both those effects from our competition concerns that we
can observe already having an impact on consumers now, and also those effects that
are likely to have more of an impact as the pay TV landscape develops into the
future.
Choice
7.50 Consumers have a limited choice of retailers from whom they can purchase Core
Premium channels. As we have set out in section 6, distribution of the most important
pay TV content is limited to certain platforms. Given that only around half of all
homes are in areas where cable is available 482 , this means that around half of UK
households only have a single option 483 for subscribing to a pay TV service which
includes these channels.
7.51 Many consumers have strong preferences for particular TV channels or content, as
we set out in section 3 and in our market definition analysis in section 4. Consumers
are also likely to have preferences for a particular delivery platform, since different
480 Sky response, section 2, paragraph 4.6.
481 Virgin Media response, Annex 1, paragraph 23.4.
482 Virgin Media reaches 12.6 million homes in the UK out of a total of around 25.7 million (Source:
Virgin Media, Annual Report 2008, page 7; National Statistics, Social Trends 2008).
483
Some of these households may not be able to access Sky DSat either, because of technical or
other restrictions.
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