Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
12.7 Firstly, it might be possible to ensure that no one provider has market power by
placing specific restrictions on the aggregation of content. The current intervention
into the sale of live FAPL rights permits one wholesale channel provider to obtain five
of the six available packs. In order to eliminate market power, a more extreme form
of intervention would be required, for example:
� A behavioural rule which prevents FAPL selling more than two of its six packages
of rights to any one wholesale channel provider, and potentially similar rules with
respect to other rights; and / or
� A behavioural rule which prevents any one wholesale channel provider from
purchasing the rights to the output of more than two of the six Major Hollywood
Studios.
12.8 However, we also noted that content aggregation has positive effects. Any remedy
which prevents or restricts aggregation to the extent that would be necessary to
eliminate market power is also likely to risk sacrificing some of these benefits. This
might result in some consumers paying higher prices, due to a reduction in the
efficiencies associated with content bundling. It might also result in reduced
convenience for some consumers, who would potentially have to take multiple
subscriptions or purchase multiple set-top boxes to get the content they want.
12.9 The BBC believed that intervening to restrict aggregation could have negative effects
for rights holders and ultimately for consumers, and that it should be kept as a last
resort, as perhaps not the best option at this stage. BT, although it supported a
wholesale must-offer remedy, believed that Ofcom should take action to address the
structural features of the market that give rise to Sky’s market position, in order to
achieve fair and effective competition, by way of specific interventions including
wholesale mandated access to certain services.
12.10 Secondly, we suggested that it might be possible to reduce barriers to entry, and
thereby reduce market power, by placing specific restrictions on the way content
rights are sold to make them more contestable. This is one effect of the current
intervention into the sale of live FAPL rights, which seeks to make these rights more
contestable by limiting their duration, and ensuring that there is an open bidding
process for their renewal. We noted however that while there is merit in reducing
barriers to entry, the practical effect of such remedies may be limited.
12.11 Finally, we noted that in addition to these substantive arguments, there are also
specific practical reasons why a rights level intervention was not appropriate at that
point in time:
� In relation to live FAPL rights, there is already a remedy in place, imposed by the
European Commission. We suggested it would be most appropriate to review this
remedy towards the end of the current six-year period, at which point sufficient
evidence should be available to allow a proper assessment. We noted however
that an earlier review might be appropriate if there was a material change in
circumstances, such as a major shift in the competitive landscape following the
recent auction.
� In relation to the sale of other live sports rights, to the extent there is merit in
reviewing these, we said that such a review should take place at the same time
as any review of the existing FAPL remedy.
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