Virgin, Sky in stalemate over carriage deal

Sky and Virgin remained defiant today as the dispute over the carriage of the former's channels on cable rumbled on.

In an interview with The Telegraph today, Sky chief financial officer Jeremy Darroch said that the company had agreed to cut its monthly carriage fees from 95p a subscriber to 90p. With Virgin Media's subscriber base at around 3 million homes, such a deal equates to £32.4 million a year.

The current deal expires at midnight tomorrow (Wednesday) night. If new terms are not agreed before then, Virgin customers will lose access to channels including Sky One, Sky Two and Sky News.

Sky's asking price of 90p includes an estimated 16.2p for Sky News, Sky Sports News and Sky Three, the three Sky stations available on Freeview but that will be removed from the DTT platform this summer.

With this portion of the cost removed - Virgin will only be required to pay for these channels when they are removed from Freeview - Sky says that the new deal is an increase of just 20% on the existing one.

"The interests of customers should come first," said Darroch. "We have proposed a 20% increase in cost for channels where we have increased investment by two thirds."

Virgin claimed that Sky was "blatantly misrepresenting" its offer, arguing that the deal included a minimum guaranteed annual payment that is twice the current amount. "The 90p per subscriber figure they quote is simply not applicable because of the minimum guarantee," said Virgin in a statement.

While Virgin acknowledged that Sky had invested more in its channels, it pointed out that ratings for the portfolio had declined by an average of 7% every year for the last three years. "Like any good monopolist, Sky apparently wants to be rewarded for failure," Virgin added.

Meanwhile, Sky has now suggested that it would like direct access to the Virgin Media network in order to sell its channels direct to Virgin customers. "Should Virgin Media ultimately turn down this offer," said Darroch, "then we are prepared to continue to offer our channels on cable at no cost to Virgin Media by obtaining direct access to its cable network."