Regulator’s report states that several factors have resulted in the broadcaster being too dominant in pay-TV market
The competition regulator has said that BSkyB has too much power over pay-TV rivals, raising the possibility that the satellite company could face another investigation.
On Thursday, the Competition Commission raised the issue of BSkyB’s “market power” as part of the publication of its final report into the pay-TV film market.
The report gave more detail of the process behind the competition regulator’s announcement in May that no action needs to be taken over BSkyB’s monopoly of UK pay-TV film rights.
As part of its investigation, the Competition Commission found that in the wider pay-TV market BSkyB enjoys an anti-competitive dominance. However, it is powerless to tackle the issue at this time.
Laura Carstensen, chairman of the inquiry group at the Competition Commission, said: “In our view, competition in the pay-TV retail market remains ineffective but we were asked by Ofcom to look specifically at the role of first pay-movie content and Sky’s position with regard to these rights.”
The 12-page summary of the final report found that there were “significant barriers to large scale entry and expansion for a traditional pay-TV retailer”.
The problems involved in taking on BSkyB’s dominant position include costs to set up a rival, huge marketing costs to overcome the view held by subscribers that changing providers is too much hassle, and fending off the inevitable competitive response, according to the regulator.
“Together with Sky’s large number of existing subscribers deriving from its historical position (Sky’s incumbency advantage) and the restricted geographical coverage of Sky’s main historical competitor, Virgin Media, it appeared to us that these factors resulted in Sky having too much market power in the pay-TV retail market,” the report said.
The report added that the arrival of US video-on-demand subscription service Netflix in the UK and expansion of LoveFilm’s VOD offering had increased competition, “but not sufficiently to affect our conclusion that Sky had market power”.
Ian Giles, senior associate at law firm Norton Rose, said the finding could pave the way for another investigation into the pay-TV market. “Sky will no doubt be pleased with the result, but concerned that the Competition Commission still highlights concerns in relation to the broader pay TV sector – another broader investigation cannot be ruled out,” he said.
BSkyB rejected that view, arguing that there is “overwhelming” evidence of competition in the market.
“Sky considers there to be overwhelming evidence that UK consumers are well served by strong competition between a growing number of TV providers, including those offering movies,” said a spokesman for the company.
“As this dynamic marketplace continues to evolve, we remain committed to innovating for customers so that UK consumers continue to benefit from choice, value and innovation.”
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