Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
channels, although this was partially offset by the loss of some key content.
There were also more basic tier channels and subscribers could obtain additional
services such as broadband, or Sky Anytime.
� The number of subscribers to packages containing Sky Sports on DSat had
increased in the period 2000-2006 and had since been relatively constant as can
be seen in Figure 18 below.
Figure 18 Subscribers to packages containing Sky Sports channels on DSat
[ � ]
Source: Sky response to information request of 29 th May 2008.
Note: Big basic includes either 5 or 6 mix basic tier packages, small basic includes 1, 2, 3 or 4 mix
basic tier packages. Sports Mix also refers Dual Sports.
4.153 We explained that it was difficult to identify directly the consumer response to price
changes as the quality of the product had changed over time. However, we also
noted that the number of retail subscribers to packages containing Sky Sports
channels on DSat had increased despite small price increases, which would point to
a relatively weak constraint.
Respondents’ comments on our evidence
4.154 Sky criticised our analysis of price changes for three reasons 144 . It argued that:
� We had misinterpreted the use of discounts.
� Our choice of start and end dates tended to exaggerate growth in prices. This is
because price rises tend to occur once a year, and our chosen start and end
point was just after a price rise. Sky stated we should instead use “directly
comparable” start and end points, for example from just after a price rise to just
before another price rise.
� It also said that the price deflator (GDP deflator) we had chosen was unusual
because it was not reflective of consumer price inflation and it was only available
on a quarterly basis whereas the Retail Prices Index (RPI) and Consumer Price
Index (CPI) were available on a monthly basis.
4.155 Sky further argued that the evidence suggests it has, for some time, been unwilling to
impose price rises for packages containing Core Premium Sports channels 145 . Sky
argues that, according to Ofcom’s test, this provides evidence that pricing is
constrained and markets are broad.
Our current view
4.156 We recognise the limitations of considering consumer switching in response to price
changes for an assessment of market power 146 . One reason for this is that we would
144 Sky response to Ofcom’s Second Pay TV consultation Annex 6, section 3
145 Sky Response of 1 June 2009 to Ofcom’s Second Pay TV Consultation “Additional comments on
Ofcom’s analysis of market definition and market power in the pay TV review” Annex 5 paragraph
2.15.
146 See paragraph 4.25 to 4.31 for a full discussion.
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