Ofcom may set Sky's wholesale prices

Ofcom has said that it will soon publish its latest consultation on the UK pay TV market, with firm measures expected on improving wholesale access to premium content.

This follows a row that has erupted this week between the major TV platform holders following the collapse of Setanta.

The Irish broadcaster went into administration on Tuesday after losing its TV rights to broadcast games in the English and Scottish Premier Leagues.

Sean Williams, BT Retail's director of strategy, told Digital Spy that Setanta's situation has exposed the "market failure" in the UK's pay TV market.

"It is also further evidence of the need for Ofcom to remedy the situation swiftly," he said. "Competition in pay TV in the UK is not working effectively. This gives rise to significant harm to consumers in the form of higher prices, restricted choice and diminished innovation."

Virgin Media's chief executive Neil Berkett added: "Setanta's difficulties are the symptom of a failed market.

"Ofcom has already acknowledged that there are significant issues to be addressed and they now need to act swiftly to prevent further harm to consumers."

However, Sky chief operating officer Mike Darcey said that Setanta ran into problems because it had "tried to grow to fast".

He added: "BT and Virgin Media are guilty of cheap opportunism. They are hooked on regulation as a substitute for competition and have done nothing to support UK sport. They prefer to try to get our channels on the cheap while showing no interest in bidding for rights themselves. We're proud of our track record in sport and will go on investing to bring our viewers the coverage they expect.

"There is nothing in Setanta's failure that can properly be used as a pretext to hand an advantage to BT or Virgin Media. The UK remains a nation of sports fans and the opportunity is there for a well-run business to come in and be successful."

BT head of retail media relations Mike Jarvis has since suggested to DS that Sky has been able to secure two million broadband subscribers over the past two years because of a competitive and open market that has allowed it to purchase the same wholesale broadband as BT Retail, while also installing its own equipment into BT's exchanges.

"Sky only wholesales its sports to cable and even then at such a high price that it is uneconomic for cable to push the product," he explained.

"How was Sky able to successfully enter the broadband and phones market? Through regulation that encouraged competition. We want the same level playing field for pay TV."

As a possible solution to this issue, Ofcom is now preparing to launch its latest consultation report on the pay-TV market.

Published in September 2008, the regulator's last document first proposed the idea of "intervening to change the way in which key content rights are bought and sold".

Clayton Hirst, spokesman for the media watchdog, explained: "Basically, that Sky should wholesale its premium content - so that's Hollywood films and top flight sport - to other television platforms on regulated terms; i.e. prices which Ofcom would set.

"And what we're due to publish in the next pay TV document is further details about how that potential remedy would work. We are due to publish that at the end of this month."