James Murdoch, the chief executive of BSkyB, finds himself assailed by regulators on every side. Both Ofcom and the Office of Fair Trading are threatening to pack him off to the Competition Commission over Sky's acquisition of a 17.8 per cent stake in ITV. Now Ofcom has announced a separate investigation of the pay TV market.
Has Mr Murdoch overplayed his hand in inviting such a regulatory assault, and in so doing raised the prospect of an enforced breakup of his company, or is this just a lot of heat and noise about nothing that swells the pockets of competition lawyers to the disadvantage of everyone else.
The main thrust of the complaint about BSkyB is its continued dominance of the pay-TV market. Until recently, Sky had been happy to allow its channels to be retailed through the alternative distribution platform of cable. Yet over the past six months, that relationship has begun to break down. Newly invigorated under the Virgin Media brand, cable has found itself in an evermore confrontational relationship with Sky. This manifested itself first in the scrap over ITV, which Virgin was trying to buy for itself until Sky scuppered any such design by taking a blocking share stake. Sky then removed its non-premium TV channels from the cable TV platform after a manufactured row over carriage charges. The suspicion is that given the chance it would also remove its sports and movie channels, the main drivers of pay- TV subscriptions. A whole separate area of complaint has opened up over use of the Digital Terrestrial Television (DTT) platform operating under the Freeview name.
Sky wants to replace the three "free" channels it provides through Freeview with pay-TV content, including sports and movie channels. What's more, it has designed a completely separate set- top box to enable it to do this. Rival pay-TV operators such as BT, Setanta and Top Up TV, which also want to use the DTT platform to sell their wares, regard this as unfair and divisive.
Their complaint is that Sky is leveraging its monopoly of content to ensure that the company also dominates the distribution of pay- TV. There should be a single, conditional access box for DTT, they contend, which will enable all pay-TV distributors to compete alongside each other on a level playing field. …