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Sky's Darroch outlines Ofcom assault

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Sky chief executive Jeremy Darroch has claimed that the firm's multi-pronged legal appeal will expose the "flawed" analysis underpinning Ofcom's price cut to Sky's premium sports channels.

Last week, Sky agreed an interim settlement to allow Virgin Media, BT Vision and Top Up TV to offer Sky Sports 1 and 2 under Ofcom's new wholesale pricing model.

The satellite broadcaster agreed to drop its plan to get a temporary freeze on the pricing system at the Competition Appeal Tribunal as long as the wholesale regime only applied to the three operators rather than the open market.

Speaking to The Guardian, Darroch downplayed the deal's importance and instead claimed that the "main event" will be Sky's continued legal appeal against Ofcom's ruling.

Sky's legal team is currently preparing a multi-pronged action to get the pricing model overturned, with a fresh application to be lodged at the CAT in June and an appeal hearing expected for September.

Central to Sky's case will be that Ofcom does not have the power under the Communications Act to change broadcast licenses for pushing through pricing regulation. The firm further believes that general competition law does not permit such action either.

Sky will once more try to discredit the "deficient" three-year consultation process preceding Ofcom's ruling, which it claims was selective in the interpretation of facts and figures.

The satellite broadcaster will also attempt to highlight the regulator's "flawed" financial modelling as being "fanciful" in the predicted benefits of its ruling to Sky's business. Ofcom has estimated that Sky could earn as much as £600 million over the next five years from the new pricing regime.

"We do disagree [with the £600m figure], the analysis that Ofcom has conducted is flawed. That is one of the things that are going through in the CAT [appeal]," said Darroch.

"The CAT will have a full merits-based review. We have to file our documents by early June. The main event, so to speak, will happen later."

Sky's interim deal stipulates that BT, Top Up TV and Virgin Media will be able to offer Sky Sports 1 and 2 on digital terrestrial television and cable at Ofcom's agreed pricing.

However, as Sky continues its legal challenge against Ofcom, the three operators will have to place the difference between the new regulated price and Sky's original wholesale price in an "escrow" account.

If Sky wins its appeal, it will collect the monies owed and raise its prices back up to previous levels. But if Sky fails in its appeal, the operators will get their money back.

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