U.K. Politician Calls on BSkyB to Give up Broadcast Retransmission Fees

LONDON - A British government representative on Wednesday called on pay-TV giant BSkyB to give up on retransmission fees from U.K. broadcasters or face possible regulation to achieve that outcome.

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Speaking at the Oxford Media Convention, Culture Minister Ed Vaizey said BSkyB, in which Rupert Murdoch's News Corp. owns a 39 percent stake, should stop charging the BBC, ITV, Channel 4 and Channel 5 to carry their TV and radio channels. While broadcasters in the U.S. have been paid by pay-TV firms to carry their signals, in the U.K. that is not the case. And BSkyB actually gets paid for carrying broadcast networks.

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"Public-service broadcasters and license-fee payers have paid large amounts to satellite providers for the content to be carried," Vaizey said, according to a copy of his speech. "We recognize this situation has evolved over time in a way we never intended."

Citing the need for a "level playing field," he mentioned that cable operators like Virgin Media do not get carriage-fee payments from the broadcasters. "I welcome the steps Sky have taken so far to reduce retransmission fees to a much lower level," said Vaizey. "But I urge them to go further ... so that there is a level playing field – zero fees either way."

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BSkyB, however, highlighted that unlike cable operators, it is required to continue offering the broadcast networks to people even when they cancel their BSkyB pay-TV subscription.

"Public-service broadcasters benefit from the billions of pounds we’ve invested in our TV platform and the technical services we provide them," BSkyB said in a statement. "Thanks to Sky’s investment, they reach 40 percent of their audiences via our platform and use our technology to customize channels and services for the benefit of their viewers. The payments they make are no different to paying for electricity, studio facilities or any other operational costs. We simply aim to recover our costs on a fair and proportionate basis.”

The Guardian cited estimates that BSkyB currently gets about $16 million (£10 million) per year in retransmission fees from broadcasters, down from $40 million (£25 million) in the past. The Telegraph spoke of $11 million (£7 million) a year. 

The latter would represent less than 0.5 percent of BSkyB's estimated 2013 operating cash flow, according to UBS analyst Polo Tang. "Although the financial impact is likely to be relatively limited, intervention from the government is likely to be negative for sentiment," he said.

In 2010, then-BBC boss Mark Thompson suggested that BSkyB should start paying for broadcast networks -- similar to the U.S. retransmission model. He highlighted that a majority of viewing on the pay-TV platform is accounted for by free-to-air broadcasters.

Vaizey indicated that the industry would have 12-18 months to sort out the retransmission fees before the government would consider interfering, according to the Guardian.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai