Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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However, both remain relatively small businesses, particularly taking into account the
scale of BT’s wider business 566 .
10.44 As noted in section 7, we are at a point in the development of the pay TV sector
when new platforms using new distribution technologies, such as IPTV, could start to
offer significant benefits to consumers. The types of innovation which these new
platforms might deliver to consumers are of course difficult to predict. Our general
expectation, however, is that they will offer consumers greater convenience and
enhanced service flexibility, e.g. by allowing them to access content on demand.
10.45 The dynamic, forward-looking benefits of platform innovation that would be likely to
result from a wholesale must-offer remedy are impossible to forecast with any degree
of certainty, and we have therefore not sought to do so. However, the platform
innovations that have emerged in recent years, e.g. VoD movie services on Virgin
Media’s cable network and Tiscali’s and BT’s IP networks, illustrate the kinds of
benefits that consumers might enjoy. Moreover, the remarkable success of
innovations such as the BBC’s iPlayer suggests that on-demand services are likely to
be increasingly popular with consumers in the future. Access to a wider range of
content, in particular Sky’s Core Premium channels, would potentially enable these
and other operators to innovate on the basis of that content, but also to build
sufficient scale to innovate more generally.
10.46 We consider that an increase in platform innovation by Sky’s retail competitors would
be likely to provide Sky with an even greater incentive to innovate itself.
Retail innovation
10.47 Wholesale access to Sky’s Core Premium channels on regulated terms would enable
Sky’s retail competitors to develop innovative ways of retailing those channels on
DTT, IPTV and possibly on cable. For example, pay TV operators might choose to
retail the channels on a stand-alone basis, as part of smaller, cheaper packages, or
in conjunction with other innovative products 567 .
10.48 The forward-looking benefits of retail innovation that would be likely to result from a
wholesale must-offer obligation are as difficult to quantify as the benefits of platform
innovation. By definition, we cannot predict the sorts of retail innovation that might
emerge. However, retail innovation that has emerged in recent years built around
access to Setanta’s Core Premium channel illustrates the kinds of benefits that
consumers might see following the implementation of a wholesale must-offer remedy.
Those examples include the availability of Setanta Sports 1 as part of smaller retail
packages from BT Vision and Top Up TV and Top Up TV’s “season ticket”, which
gave new customers a free season ticket to Setanta Sports 1 for the 2008/09 FAPL
season.
566 BT announced in May 2009 that it had an installed base of around 430,000 BT Vision customers,
not all of whom took a subscription package. Top Up TV had around [ � ] subscribers in October
2008.
567 At present, consumers are required by buy-through to take a basic package if they wish to
subscribe to Sky’s Core Premium channels on cable or satellite.