Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
8.95 HD capability sits at the heart of next generation TV platforms. Sky has recently
reduced the retail price of its HD set top box to £49. HD services from the PSBs are
planned to launch on DTT by the end of 2009. Sky, BT Vision and Virgin Media
already offer on-demand HD content.
8.96 HD is becoming increasingly important to consumers, and consumer adoption is
accelerating. Sky’s own research shows that 74% of consumers want HD quality and
demand for HD is accelerating 514 - this is mirrored in take-up of HD: 7% of Sky
customers took up HD as at September 2008. In its review of 2008 515 Sky states:
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“As high definition becomes increasingly established as the new
benchmark for video services, we expect the superior range and
quality of content offered by Sky+ HD to be a key driver of demand
from new and existing customers.”
8.97 Sky has also said on a number of occasions that HD has been the most rapidly
adopted service it has ever introduced. For example, it said in The Sky Story in 2007
that:
8.98 [ � ].
“We are now transforming the TV viewing experience yet again
through the launch of High Definition. We did so in the face of
predictions that HD was a needless luxury. It has since seen the
fastest take-up of any of our additional TV services to date” 516 .
8.99 We accept in principle that we should be cautious about deterring future investment
in innovation; innovative services in future which relate to the premium channels
covered by the wholesale must-offer would not automatically be included in the
obligation. However, based on the evidence set out above on availability of services,
and Sky’s own pronouncements, HD appears no longer to be a brand new
innovation, and more an integral part of the pay TV landscape. We therefore consider
we need to include HD versions of the channels within the scope of the remedy in
order to ensure fair and effective competition.
8.100 We acknowledge Sky’s argument that we should treat its HD channels and the HD
channels operated by the PSBs in a consistent manner. In particular we
acknowledge the importance of the UK originated content shown on PSB channels
(see paragraph 3.19 above), and we might well have competition concerns if the
PSBs were individually or collectively exploiting any market power associated with
this content by restricting its distribution. We do not however see evidence of this:
514 http://corporate.sky.com/documents/pdf/latest_results/a0822cb8409e4e25a959e61b2620730c
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515
http://corporate.sky.com/documents/pdf/1ffb247d89b6490c9cd3dc7a4f24f4eb/annual_review_2008.p
df page 21
516
http://corporate.sky.com/documents/pdf/1ffb247d89b6490c9cd3dc7a4f24f4eb/the_sky_story_2007.pd
f