Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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retail prices and costs to increase with inflation – and this is the assumption we have
incorporated into our calculations 526 .
9.50 However, we can anticipate situations where an increase in retail prices is not
primarily a response to consumer demand and preferences, but is prompted by an
incentive to increase the wholesale prices that Sky’s competitors face. For example,
for the reasons described above, we would be more cautious if the relativities in the
prices of Core Premium retail packages were revised significantly. To improve
transparency, a pragmatic addition would be to identify generic types of reasons for
legitimate increases in wholesale prices in response to increases in retail prices (in
addition to inflation).
9.51 We welcome suggestions from stakeholders in response to this proposal and the two
options on how wholesale prices should track retail prices.
Applicable prices for different platforms: technology neutrality
9.52 As discussed in section 8, our preferred approach is to require Sky to supply its Core
Premium channels at regulated prices to non-Sky platforms. In principle, the
obligation would apply to any non-Sky platforms (subject to security and quality
considerations, see paragraphs 9.209 to 9.245 below), regardless of the underlying
distribution technology, whether for example, DSat, cable, DTT, or IPTV.
9.53 This raises the question of whether all retailers should pay the same price, or
whether their use of different distribution technologies should be taken into account.
9.54 In its response to our Second Pay TV Consultation, Sky stated that Ofcom’s
proposals were “distinctly non-technology neutral . . . in that they place a great deal
of emphasis on seeking to support new operators who use DTT or IPTV
technology” 527 .
9.55 Virgin Media considered that there should not be different prices for different
retailers, but rather “a single wholesale rate-card should be set which would apply to
all existing retailers (across different platforms), as well as to new entrants seeking
access to Sky's premium content” 528 . In contrast, BT argued that the optimal
approach would be to determine a separate wholesale price for each rival pay TV
platform 529 .
9.56 In response to Sky’s characterisation of our position, we believe that technologyneutrality
is a key principle to take into account in determining our approach to
pricing. It is our objective that the market should determine which platforms are
successful, not the regulator, and not Sky. For the same wholesale product, it follows
that there should be one price for retailers across all distribution technologies.
526 In general, we assume future inflation of 2.5%. However, we also needed to adjust 2007/08 costs
and 2008/09 prices to 2009/10 levels. For 2007/08 to 2008/09, we have assumed inflation of 0.9%,
based on actual RPI inflation for the calendar year 2008. For 2008/09 to 2009/10, we have assumed
inflation of -1.5%, based on forecasts of RPI inflation for the calendar year 2009, published in the
Treasury’s comparison of independent forecasts from June 2009.
527 section 7 paragraph 6.16 of Sky’s response to our Second Pay TV Consultation
528 section 6 paragraph 6.1 of Virgin Media’s response to our Second Pay TV Consultation
529 BT’s response to our Second Pay TV Consultation