Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
Section 8
8 Remedies – channel distribution
Summary
8.1 We continue to believe that a wholesale must-offer remedy is an appropriate way of
dealing with our concerns about the lack of fair and effective competition, stemming
from Sky’s approach to the wholesale supply of Core Premium channels. There are
various questions as to the right scope of this kind of remedy, which we address in
this section. In particular, we believe we should set prices and other key terms for a
wholesale must-offer. We propose to set prices on a retail-minus basis, although
using cost-plus as a cross-check.
8.2 Our current view is that it would not be more appropriate to proceed in relation to
some or all of the matters in question under CA98. We welcome comments on that
view.
Introduction
8.3 In section 6 we reached the view that as a result of Sky’s approach to the wholesale
supply of Core Premium channels, there is not, and is not likely to be, fair and
effective competition in the wholesale supply of Core Premium channels and the
retail supply of bundles which include Core Premium channels.
8.4 We identified a further concern that Sky might restrict the exploitation of content
rights that it owns. Our specific concern related to SVoD rights. We return to this
issue in section 12.
8.5 We also identified a concern that market power at the wholesale level could result in
high wholesale prices; the margin made as a result of those high prices might either
go to Sky or upstream to rights holders. Our view based on Oxera’s analysis is that
Sky is indeed making high wholesale margins.
8.6 In section 7 we explained the adverse effect on consumers that we consider has
resulted, and is likely to result, from Sky’s approach to the wholesale supply of Core
Premium channels.
8.7 In this section we consider, as required under s317(2), whether it would be more
appropriate to proceed under CA98 than under s316. We then continue to consider
what form of remedy (if any) might be imposed under s316 in order to ensure fair and
effective competition so that we can address the adverse effects on consumers
identified in section 7.
8.8 In section 9 we set out various issues relating to the terms of a wholesale must-offer;
this is focused on price, but also considers non-price-related issues such as security.
8.9 In section 10 we consider whether a licence condition in the proposed form is
proportionate by reference to the purpose of s316, and in light of our duties under
CA03. That includes the carrying out of a full impact assessment. In section 11 we
consult on the drafting of a proposed licence condition.
8.10 Throughout these sections, we take into account consultation respondents’ views on
our positions as set out in our Second Pay TV Consultation. We also take into
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