Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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premium channels has been distorted in favour of satellite and away from cable
over time.
� These concerns are exacerbated as we look forward to the future; we are at a
point where the potential choice of platforms is increasing, and is set to increase
further. The chances of these options developing fully to the benefit of consumers
are likely to be limited by the restricted availability of Core Premium channels.
� We also have a current and forward-looking concern related to the possibility of
market power in Core Premium channels distorting choice of wider bundles,
which again is a concern that increases over time, as bundling becomes more
widespread.
7.82 We consider on the basis of the above that Sky’s approach to the wholesale supply
of Core Premium channels results, and is likely to result in future, in an adverse
effect on the interests of consumers.
Innovation
7.83 In our Second Pay TV Consultation (paragraphs 7.44 – 7.47) we noted that the
record of innovation in platform enhancements was strong in the UK, particularly on
Sky’s satellite platform. However, we noted that the PwC report commissioned by
Sky focused on types of innovation that were well suited to satellite, and on which
Sky had performed strongly, including HD, DVRs, and digital TV itself.
7.84 We remain of the view that innovation in platform enhancement has been strong in
the UK, but that it has been stronger in developments that favour satellite platforms,
and less strong in those that favour non-satellite platforms.
7.85 Looking forward, we see scope for platforms using technologies such as IPTV to
develop much more substantially. We would expect to see the fastest progress in
these areas if companies other than Sky were able to push them forward. Sky might
also make some progress in IPTV, as an example – some of its set-top boxes
already have the technical capability. However, as we set out in section 6, we believe
that Sky has an incentive to manage the relative success of different retail
businesses in favour of its core satellite platform. A much more dynamic environment
would be likely if other companies were to gain access to the critically important Core
Premium channels, to enable them to push forward with new ways of delivering TV.
7.86 Figure 61 illustrates major innovations that have taken place in the pay TV sector in
recent years.