Pay TV phase three document - Stakeholders - Ofcom

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Pay TV phase three document – non-confidential version however identified a competition concern that Sky has an incentive not to supply potential new entrants. The consumer harm we have identified which flows from that will exist irrespective of whether Sky continues to supply on cable. In these circumstances there is a risk that the test for a refusal to supply under CA98 might not be met, but that there would still exist a competition concern leading to consumer harm which it is appropriate to address through the use of Ofcom’s sectoral powers. 8.20 Even if it were the case that the conditions of a refusal to supply case under CA98 were met, we would face the limitations discussed above that might arise from trying to bring action against individual instances of a refusal to supply. The competition concern is Sky’s incentive to restrict supply – i.e. not to reach agreement on the terms for the wholesale of the Core Premium channels. We recognise however that there are various genuine and complex issues to resolve in settling the non-price terms of any wholesale agreement – e.g. on encryption standards. A CA98 case on refusal to supply which concerned non-price terms is likely to focus on whether Sky was objectively justified in failing to reach an agreement in respect of that issue. If a case was brought in relation to a position taken by Sky on a particular issue, in a particular negotiation, this may not resolve the problem because (a) Sky might shift the focus of its concerns in that particular negotiation to another non-price term; and (b) Sky is still under an incentive to delay over the same issue in other, or future, negotiations with other purchasers. 8.21 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. In the following paragraphs of this section we therefore proceed to consider the principles of a potential wholesale must-offer remedy. Principles of a wholesale must-offer remedy 8.22 We said in our Second Pay TV Consultation that we could eliminate Sky’s ability to act on its incentives to restrict distribution of Core Premium channels by requiring it to provide wholesale access to particular channels on regulated terms. We proposed to do this using our sectoral competition powers under s316 CA03. We believed that this would strengthen competition between competition between retailers and platforms, while maximising choice for consumers. 8.23 Sky argued in response to our proposals that there is no justification for new regulation. Sky emphasised that Ofcom has a legal obligation to ensure that its regulation is, among other things, targeted only at cases in which action is needed. It believed that the proposed regulation fails this test. The requirement that regulation should be targeted only at cases in which action is necessary means that Ofcom must establish that its proposals are aimed at remedying significant and persistent consumer detriment and capable of remedying the identified consumer detriment cost-effectively. 8.24 Others agreed with the general approach of a wholesale must-offer. For instance, BT believed that a wholesale must-offer represented the first step towards enabling it to compete with Sky in the retail market, although it stated that this would not be a complete solution to all the competition issues it had identified in pay TV. [ � ] agreed with this position, supporting a wholesale must-offer, but saying that on its own it would not be an adequate solution. The Four Parties also took this approach, saying that Ofcom’s proposed remedy would facilitate greater competition in pay TV. However they also believed that this would only be a partial solution, pointing to what they felt were problems at all tiers of the value chain – for example, the barriers to entry upstream. 247
Pay TV phase three document – non-confidential version 8.25 We set out in section 2 our framework for proceeding under s316. For the reasons set out in this sub-section, we still believe that a wholesale must-offer form of obligation is capable of addressing the concerns we have identified. A wholesale must-offer would require Sky to supply particular channels to other retailers. Such a remedy would be a very direct approach to addressing the concerns we have identified. We have identified a lack of wholesale supply to retailers that have sought it. We also find that Sky’s wholesale prices to Virgin Media provide it with no incentive to supply premium channels to existing customers. Requiring Sky to wholesale its channels to others would be a way of ensuring that it does not exercise its market power by restricting supply. Pursuant to section 316(1) the regime for every licensed service shall include the conditions that Ofcom considers appropriate for ensuring fair and effective competition in the provision of licensed services and connected services. Under s316(2) those conditions must include the conditions (if any) that Ofcom considers are appropriate for securing that the provider of a service does not engage is a practice which Ofcom considers, or would consider, to be prejudicial to fair and effective competition. We consider that a wholesale must-offer obligation in the proposed form falls within the scope of s316(1) and also satisfies the requirement in s316(2). 8.26 Beyond this overall principle, there are a number of important aspects of a wholesale must-offer that we need to consider. Setting out our view on these questions enables us to propose a specific form of wholesale must-offer remedy for consultation. However, it would be open to us to take different approaches on any of these questions, taking into account views from consultation respondents. 248 � To which wholesalers should it apply? � Which channels should it cover? � Should a must-offer apply to retailers on all platforms? � Should a must-offer apply for the purposes of onward retail to commercial premises? � Should we set specific terms, particularly prices? � If we were to set prices, what approach should we adopt? � Should a must-offer include enhanced versions of relevant channels – HD and interactive? � Should a must-offer include on-demand services that accompany the linear channels? 8.27 We discuss each of these issues below and explain our current position. This results in a specific proposal for the content of a wholesale must-offer obligation for consultation. We remain open to submissions on each element of the resulting proposal. To which wholesalers should it apply? 8.28 We proposed in our Second Pay TV Consultation to apply a wholesale must-offer remedy to Sky. We considered whether a similar obligation should apply to other firms, and suggested that any such proposal be considered against the following criteria.
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Pay TV phase three document Propose
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Section 1 1 Summary Pay TV phase th
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(4) In this section— Pay TV phase
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Pay TV phase three document - Stakeholders - Ofcom

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