Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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Modern Greats HD, Sky Movies Indie or and Disney Cinemagic and the HD
versions of these channels, (see below for our discussion of HD) 510 .
8.33 Various respondents to our Second Pay TV Consultation argued that all of the Sky
Sports channels should be included within the scope of the wholesale must-offer
obligation, on the basis that Sky’s market power stemmed from its aggregation of a
wide variety of content. Sky responded to these views in an additional submission to
Ofcom on 5 June 2009. In that document, which we have published alongside this
consultation, Sky criticised the Four Parties’ proposal that we should include non-
Core Premium channels in our remedy.
8.34 We have considered the arguments by the Four Parties and others in our analysis of
market definitions and market power, and whilst we accept that Sky’s market power
does in part derive from its aggregation of content, we do not accept that any content
which Sky aggregates automatically results in the creation of market power. We
remain of the view that the obligation should apply to those channels which we have
identified as the source of Sky’s market power, as set out above.
8.35 This conclusion is of course based on our current market definitions. The evidence
on which these market definitions are based can only relate to existing channels, and
the existing distribution of content rights across those channels. We noted in our
Second Pay TV Consultation the possibility that Sky might change the way in which it
distributes its content rights across its channels, and we are also mindful of the
international study by Value Partners, which shows that wholesale must-offer
remedies in other countries have been limited in their effectiveness where there has
been a lack of clarity over what constitutes a “premium channel”, allowing the remedy
to be gamed. If Sky were to create new channels, containing a significant amount of
content currently broadcast on channels within the scope of the proposed remedy,
then we would clearly need to consider extending the scope of the remedy to those
channels.
8.36 As we set out in sections 4 and 5, we see the Core Premium Sports and Movies
channels as including a sufficient quantity of the most important content to be a
source of market power. Based on the same evidence as we used to come to that
conclusion, we believe that including both Sky Sports 1 and 2 in the remedy, but not
3 and Xtra, is appropriate in order to ensure fair and effective competition. Similarly,
we believe it is appropriate to include all the Core Premium Movie channels in the
remedy. Our views on market definition and market power indicate that only including
some of the channels would be likely to result in a continued risk to fair and effective
competition.
Should a must-offer apply to retailers on all platforms?
8.37 There is a question as to whether it would be appropriate for a wholesale must-offer
remedy to apply to all retailers, regardless of the platform on which they retail. In our
Second Pay TV Consultation, we set out a view that it might not be appropriate to
extend the requirement to retailers on Sky’s own platform(s).
8.38 The FAPL expressed its view that any obligation on Sky to wholesale its channels to
third party retailers on the DTH platform would be excessive and disproportionate
and would be likely to eliminate competition for the FAPL's rights.
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We refer in this paragraph to the names of the channels as used in the relevant broadcasting
licences.