Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
commercial customers, potentially as part of any further action we may pursue
relating to the sale of FAPL sports rights (see section 12 below).
Should we set specific terms, particularly prices?
8.68 In our September 2008 Consultation, we stated that it would be necessary to specify
an ex ante pricing rule for the channels contained within any wholesale must-offer. If
a wholesale must-offer remedy is appropriate, we note that in order to ensure that
this can be an effective means of ensuring fair and effective competition, we may
need to set a specific price. If we did not set a price, then in order for the remedy to
be effective, we would certainly need to establish a mechanism for the rapid
resolution of pricing disputes.
8.69 In Sky’s view, a major flaw was that Ofcom considered some significant issues such
as the range of services and the commercial matters to which regulation would apply
as simply a matter of “getting the detail right”. Sky thought this was a fundamental
misconception. It insisted that Ofcom instead properly considers the necessity and
proportionality of extending the scope of compulsory licensing beyond linear standard
definition versions of Sky’s premium channels, and micro-regulating a wide range of
wholly standard commercial issues.
8.70 Sky argued that retail-minus price controls are not compatible with best practice
approaches to sectoral regulation. Sky urged that if Ofcom continued to believe that a
‘must-offer’ obligation is a necessary solution, it should reject the option of
accompanying that regulation with an ex ante extended retail-minus price control. In
Sky’s view, imposing an “extended retail-minus price control”:
“falls into the same category as structural break-up because it is
similarly disproportionate and it should therefore also be ruled out at
this stage”.
8.71 The view that we ought to set detailed terms, and prices in particular, was strongly
supported by some consultation respondents. The Four Parties put this view
particularly forcefully. BT for example expressed the belief that: “[Ofcom not setting
prices] would simply lead to delay and inevitable disputes to Ofcom, ultimately
requiring Ofcom to set the price in any case”. Tiscali also took a similar view.
8.72 Similarly, [ � ] believed that any licence condition or direction issued by Ofcom in
the form of a wholesale must-offer remedy should include ex ante pricing rule. It
suggested that in designing the remedy, Ofcom should give due consideration to
Harbord and Ottaviani 511 .
8.73 [ � ] noted that given the inherent difficulties in calculating the appropriate
wholesale price it is better to avoid ex post action wherever possible by setting a procompetitive
ex ante pricing rule.
8.74 We have considered this further, and now propose that we should indeed consult on
an option including a range of prices, rather than assuming at this stage that, if it is
appropriate to impose a wholesale must-offer remedy, prices should be left to
commercial negotiation based on a set of pricing principles. We consider that this is
511 Harbord and Ottaviani, Contracts and Competition in the Pay-TV Market, Economies Discussion
Paper No.45, Regulation Limitation Working Paper Series, London Business School (July 2001)
255