Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
regulated) and retail prices is an important aspect of the design of a wholesale mustoffer
and we address this issue in paragraphs 9.37 to 9.52 below.
Should a must-offer include enhanced versions of relevant channels – HD or
interactive?
8.88 Our Second Pay TV Consultation set out various enhancements to the standard SD
channels that Sky offers its own retail customers and that we proposed to include
within the scope of any wholesale must-offer obligation. These were:
� High definition versions of the channels.
� Interactive services providing access to primary content, typically via a ‘red
button’ on the TV screen. By primary content we mean footage which is directly
dependent on the licensing of rights from content owners. We distinguished this
from editorial content, or other additional services, which could be generated by
any retailer, and which we did not propose to include in the scope of the
obligation.
8.89 We apply the same principles here that we applied to our consideration of which
channels should be included within the scope of the obligation. The guiding principle
behind our application of a wholesale must-offer to Sky is that it should apply to those
channels and services which are the source of Sky’s market power, and where Sky’s
approach to wholesale supply does and will lead to a situation in which there is not,
and will not be, fair and effective competition.
8.90 The scope of any obligation should therefore cover all Core Premium channels
supplied by Sky. We note in this context that the markets for Core Premium channels
are defined by reference to the content contained within these channels, not the
resolution at which this content is viewed, or whether the content is delivered via the
main channel or the red button.
8.91 We would see it as potentially discriminatory for Sky to supply others with inferior
products to the ones it supplies its own retail arm – this could prevent other retailers
from being able to compete effectively in the retail market. Our level of concern would
depend on whether there is a risk to fair and effective competition. As the paragraphs
below indicate, we believe that the restricted supply of HD versions of the channels
and primary interactive content does create a risk to fair and effective competition.
On this basis our view is that these should be included within the scope of the
obligation.
HD
8.92 Sky objected to the idea of requiring it to license HD versions of its premium
channels to other platforms, especially since there is no ‘must-offer’ obligation on
PSBs in relation to HD versions of their main channels or any of their interactive
services.
8.93 Virgin Media agreed with Ofcom's observation that the obligation should extend to
HD versions of the content. In its response, Virgin Media further explained why it
considered HD content as important and why there are no technical or other issues
which prohibit the inclusion of HD services.
8.94 Our view is that, on the available evidence, the difference between SD and HD is
significant, both as a driver of platform innovation and for the consumer experience.
259