Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
8.54 Many respondents questioned the level of attention given to commercial premises in
other parts of our analysis. Virgin Media specifically stated that the remedy should
apply equally in favour of retailers to residential and commercial customers.
8.55 The ALMR was disappointed that Ofcom did not apply the remedy to the commercial
market, “where the effects on competition are already clearly felt and readily
identified”. It further explained the importance of extending the obligation in favour of
retailers to commercial subscribers. It said first that a must-offer could also be
applied to commercial customers, and that if it did not, an alternative route must be
taken – either a reference to the CC under EA02, or a retail price cap.
8.56 The Four Parties disagreed with our provisional conclusion to apply the remedy in
relation to the residential sector only. They saw no reason why an ex ante pricing rule
based on a retail-minus methodology could not function by reference to a retail ratecard
based on rateable values. The Four Parties argued that given that Sky’s
revenues from the commercial market represent nearly one third of its total
expenditure on sports rights/programming, a failure on Ofcom’s part to address
competition concerns in the commercial market would perpetuate one of the most
significant barriers to entry upstream. Furthermore, in the absence of a remedy
applying to the commercial market, Sky would have access to a very large stream of
revenue and profit that would be denied to rival pay TV retailers. The Four Parties
warned that there is a high likelihood that the application of a wholesale must-offer
remedy just for retailers to the residential market will be undermined by Sky’s
exclusive access to the commercial market.
8.57 Additionally, [ � ] noted that Ofcom did not address the issue of Sky’s commercial
revenue from its supply of content to commercial premises. It believed Ofcom should
consider extending its review to incorporate consideration of the dynamics of the
commercial market.
8.58 The BBC considered that the commercial market is a key one for premium sports
content: “increasing competition in the commercial sector could not only have a
positive effect on prices, but also allow Sky’s competitors to benefit from a stronger
income base, therefore increase their ability to challenge Sky in auctions for Premium
Sports content”.
8.59 Freesat felt it was inconsistent to apply a remedy to channels addressing residential
customers but not commercial customers.
8.60 [ � ] felt comfortable with Ofcom’s focus on the residential market given the
importance of the market.
8.61 The FAPL agreed with Ofcom's conclusions that any wholesale remedy should only
apply in relation to residential customers. It recognised that there are different
considerations for commercial subscribers.
8.62 Our view is that extending the proposed remedy to include persons retailing to
commercial premises would be a significant additional intervention. It could only be
justified if it was appropriate in order to ensure fair and effective competition. The
effects relevant to that assessment are similar to those which we considered above
in the context of our discussion of retail on Sky’s own platform(s), namely:
� Effects which arise from remedying the downstream effects of Sky’s wholesale
market power.
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