Ofcom 'to greenlight Sky's Picnic service'

Ofcom reportedly plans to give the greenlight to Sky's long-mooted Picnic service on Freeview as part of its new regulatory framework for the digital TV industry.

Under the approach, which could reportedly be approved within the next ten days, the media watchdog will also order Sky to cut the price of its premium sport and movie channels for rival operators.

Ofcom's new model, known as the 'wholesale must offer', will force Sky to charge its rivals £10.50 per subscriber for its main channels, representing around a 20% rate cut.

The media watchdog sees a clear dominance of Sky over the UK market for sports content and first-run Hollywood films. Should the approach go ahead, though, it would most likely lead to a price war as BT Vision and Virgin Media use the situation to grab subscribers.

Ofcom's new policy is the culmination of a three-year consultation into the pay-TV industry, but Sky has already signalled its intention to challenge the price cuts.

Last September, Sky chief executive Jeremy Darroch claimed that the approach would threaten the "virtuous circle of risk and reward" in the industry.

However, the firm could be placated by Ofcom offering it a foothold in the digital terrestrial television market by giving the go ahead to Picnic.

Sky first unveiled Picnic over three years ago, but subsequently suspended the service after it become bogged down in regulation.

The satellite broadcaster had originally planned to sell Picnic as a basic bundle of channels, including Sky Sports 1, to Freeview homes via next-generation set top boxes.

It's unclear whether Sky still wants to forge ahead with the Picnic plan, but the opportunity to cross-sell broadband and landline services could ultimately prove attractive.

However, Sky chief operative officer Mike Darcey told the Financial Times: "The world has moved on since 2006 and I think [Ofcom] should probably just accept that we will be appealing [against the price cuts], and that throwing us a Picnic-shaped bone isn't going to buy us off, if that is indeed the plan."

He added: "That was an idea that we first proposed to Ofcom three-and-a-half years ago and a lot has changed since then. Ofcom desperately wants to believe that this is something we might see as a sop. They have talked themselves into thinking that and I have to say I think that is a bit naïve."

Any greenlight for Picnic would also likely face opposition from public service broadcasters and viewers angry at the prospect of Sky holding a potentially dominant position over the UK's two biggest digital TV platforms. Freeview is now on the main set in 10m homes, compared to Sky's 9.7m.