Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
Conclusion
10.88 Our analysis of the effects of a wholesale must-offer remedy on consumers suggest
that compared with the counterfactual, there is potential for substantial (static) gains
in consumer welfare resulting from a greater ability to exercise a choice of platform.
We expect these gains to be augmented significantly by a range of dynamic benefits
from the participation in the retail market for core premium channels of a wider range
of firms. These dynamic benefits, though difficult to predict precisely, are likely to
relate to considerably more retail and platform innovation than under the
counterfactual.
10.89 The way we propose to set prices for Sky’s Core Premium channels creates
opportunities for rival firms to enter the market profitably. While our quantitative
analysis shows a negative impact on producer surplus for these firms, this reflects
the shorter time frame of that analysis. Our intention is to encourage efficient entry by
firms committed to significant investment in pay TV. By its nature that type of
investment requires a longer term commitment to the industry. We are not looking to
enable short term entry and exit by firms that are simply seeking to profit at Sky’s
expense.
10.90 We also consider – contrary to Sky’s claims – that our remedy is unlikely to have a
detrimental impact on Sky. Our quantitative analysis, while not definitive, suggests
that compared with the counterfactual, Sky would actually gain from the expansion in
the distribution of its content.
10.91 In light of the above, we consider that our impact assessment supports our view that
it would be appropriate to impose a wholesale must-offer obligation in the form
proposed in order to ensure fair and effective competition.
Consultation questions
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24. Do you agree that a wholesale must-offer remedy is unlikely to contribute
significantly to the administrative costs currently incurred by Sky?
25. Do you consider that our impact assessment above supports our view that it
would be appropriate to impose a wholesale must-offer obligation in the form
proposed in order to ensure fair and effective competition?