BSkyB forced to cut sports charges

Company may have to offer channels to rivals

LONDON — BSkyB, the dominant U.K. paybox, has been ordered to cut the wholesale prices it charges rivals for its premium sports channels.

Ofcom, the local regulator, also found the satcaster guilty of restricting the distribution of premium movies and video-on-demand movie rights.

But these issues have been referred to competition regulators because Ofcom lacks the powers to force BSkyB to drop its charges for these services.

The ruling, the result of a three-year Ofcom review, immediately provoked a furious reaction from the paybox, 39.1% owned by News Corp. Rivals, however, said it failed to go far enough.

BSkyB wasted no time in saying it would appeal against the “unprecedented and unwarranted intervention,” and claimed that U.K. consumers were “well served with high levels of choice and innovation.”

The satcaster must sell Sky Sports 1 and 2 for £10.63 ($16.10) a month each — 23.4% less than it charges at present.

If the two webs are sold together, Ofcom said the price must be £17.14 ($26) — a decrease of 10.5% on current fees.

Ofcom has given BSkyB six weeks to draw up a template contract it must offer to rivals, which include cable outfit Virgin Media and British Telecom’s Vision offering.

The regulator fears that legal action by the paybox will prevent deals being signed ahead of the new U.K. Premier League soccer season, which bows late summer.

Ofcom also greenlit a new pay service provided by BSkyB on digital terrestrial platform, Freeview, provided it complies with the ruling on the sports webs.

But BSkyB topper Jeremy Darroch had already dismissed this as “a sop” when news of this concession leaked several weeks ago.

Originally the satcaster attempted to bow the Freeview pay service, known as Picnic, two years ago, but Ofcom blocked it.

In its ruling, the regulator said that BSkyB’s market power “prevents fair and effective competition, reduces consumer choice and holds back innovation and investment by rivals.”

Ofcom estimated that lower prices for Sky Sports 1 and 2 could lead to between 1.5 and 2 million extra subscribers for these channels by 2015.

But Darroch rejected Ofcom’s view that the regulator’s action would benefit consumers.

He said: “This is a marketplace in which the levels of innovation are higher than they’ve ever been before, and I think consumers aren’t well served if the appetite to innovate and invest is removed.

“I also think it’s extraordinary that Ofcom are pushing ahead with their findings without any evidence of breach of competition law, without any evidence of excess profitability or prices, and without any evidence of consumer dissatisfaction — in fact quite the opposite — which is why we intend to appeal the ruling through the courts.”

Virgin Media’s chief executive officer Neil Berkett said the decision was “a step in the right direction and should be welcomed by sports fans.”

He added: “It’s disappointing, however, that some significant loopholes remain which provide an opportunity for Sky to further undermine competition.”

The local stock market was unconcerned by the news and at midday local time BSkyB’s stock price was up 2.84%.

Analysts believe Ofcom’s move could trigger a price war between rival U.K. payboxes, but one thing is certain — a long and costly legal fight between the two parties is inevitable.