Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
Entrants on DTT would also incur fixed transmission costs relating to Core Premium
content, which we have estimated at £[ � ]m per videostream per annum 568 .
10.62 The number of new entrants which emerge following the implementation of the
remedy and, consequently, the total additional fixed costs to the industry, will depend
largely on the range of wholesale charges that we specify. As explained in section 9,
we have set out a range of prices based on either large or small competitors. Our
central case is one focused on a large competitor, achieving three million subscribers
over 10 years. However, there may well be more than one competitor in practice.
10.63 In light of the above, it seems credible that over the five year reference period, the
total additional fixed costs incurred by new entrants might fall within the range of £34
million to £52 million per annum. Note that these fixed costs are incurred over and
above those incurred in retailing basic packages.
10.64 As shown in Figure 71, the average cost per subscriber is greater for the new
entrants we envisage in our pricing modelling than for Sky. The area between the two
new entrant curves 569 and the Sky curve represents in each case the relative
importance of fixed costs implied in the proposed wholesale prices.
Figure 71 Graph showing average costs (£ per subscriber per month) excluding
subscriber acquisition costs and capital expenditure, incurred by each new entrant
under a wholesale must-offer remedy
Average cost per subscriber per month
10.65 In our quantitative analysis, we have derived the difference in producer surplus for
Sky’s retail competitors compared with the counterfactual. In our central case, the
568 [ � ].
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Sky
Single new entrant retailer - 3 million subscribers
Single new entrant retailer - 1 million subscribers
569 The two curves refer to the ‘large’ and ‘small’ competitors we referred to in section 9, which
achieve three million and one million subscribers respectively over 10 years.
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