Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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� It might be appropriate to extend the supply obligation to Sky’s own platform(s) if
there was evidence that Sky was earning high retail margins, which might be
reduced by stronger intra-platform competition. However, we do not have
evidence that this is the case.
� It might be appropriate to extend the supply obligation to Sky’s own platform(s) if
there was evidence of a lack of retail innovation. Some such evidence does exist,
in particular in relation to a lack of entry-level premium packages. However, it is
likely that this specific concern can be remedied by a supply obligation on other
platforms. DTT in particular is likely to be well-suited to the provision of new entry
level premium packages.
8.48 In addition to remedying the downstream effects of Sky’s market power, the
wholesale supply obligation that we propose may provide a mechanism to make
upstream rights markets more contestable, thereby reducing Sky’s market power at
source. The reason for this is that access to a large subscriber base is likely to play a
role in companies’ ability to bid successfully for content rights. This is essentially a
‘ladder of investment’ argument. In order to maximise this effect, it might be
appropriate to enable alternative retailers to retail Sky’s premium channels via Sky’s
satellite platform(s), thereby gaining direct access to the [ � ] million subscribers on
that platform. It might also be appropriate to enable alternative retailers to sell Sky’s
premium channels to ‘pubs and clubs’ (see below).
8.49 However, while we believe there is likely to be a relationship between subscriber
base size and ability to bid for rights, this is only one factor influencing companies’
ability to bid. Additionally, we believe it should be possible for alternative retailers to
address Sky’s existing subscribers via other platforms, particularly those based on
DTT (given the low switching costs associated with DTT).
8.50 On balance we do not believe that an additional intervention associated with
extending the obligation to Sky’s platform(s) would be appropriate for ensuring fair
and effective competition.
8.51 Note that in reaching this conclusion we do make a distinction between a ‘platform’
and a ‘distribution technology’. Our proposed remedy applies to a variety of
distribution technologies: cable, satellite, IPTV, DTT, mobile TV. There may then be
several different ‘platforms’ on each distribution technology, each platform being
defined by the set of conditional access technology and reception equipment that is
particular to it.
8.52 We do not propose to extend our proposed remedy to Sky’s platform(s), but we do
propose that it should extend to other platforms using the same distribution
technologies as Sky. For example, both Sky and Freesat operate satellite platforms,
and our proposed remedy would apply to an alternative retailer on Freesat (obviously
subject to that being part of Freesat’s strategy, and a suitable conditional access
system being put in place).
Should a must-offer apply for the purposes of onward retail to commercial
premises?
8.53 We proposed in our Second Pay TV Consultation not to apply a wholesale must-offer
for onward retail to commercial premises, instead restricting the obligation to offer to
retailers to residential customers.