U.K. Competition Tribunal Sides With BSkyB in Sports Channels Pricing Case

BSkyB Satellite - Sign - 2010
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The tribunal said media regulator Ofcom had jurisdiction, but misinterpreted some evidence - a decision that could free BSkyB from Ofcom's current pricing rules.

LONDON - A U.K. regulatory body focused on competition issues here on Wednesday sided with pay TV giant BSkyB - rather than media regulator Ofcom - in a case that could change current rules governing the availability and the pricing of sports channels owned by the company. 

The decision will affect not only BSkyB, in which Rupert Murdoch's News Corp. owns a 39 percent stake, but also telecom giant BT, cable operator Virgin Media and others.

The Competition Appeal Tribunal (CAT) ruling followed a 2010 decision by U.K. media regulator Ofcom to regulate wholesale pricing of BSkyB's Sky Sports to third parties like BT and Virgin Media. Ofcom had set rules for how the company makes two of BSkyB's sports channels available to competitors by cutting the price of a single sports channel by 23 percent and for both channels by 10.5 percent. That led to an appeal by BSkyB.

"The Tribunal has concluded that neither of Sky’s and [the English Premier League soccer league]’s two grounds of challenge to Ofcom’s jurisdiction to take action under section 316 in the present case succeeds," the tribunal said, basicaly confirming Ofcom's jurisdiction.

But it also argued that Ofcom wasn't right that BSkyB didn't "constructively" engage in negotiations about carriage of the sports channels by competitors. "Sky’s appeal must be allowed, but the Tribunal will hear the parties in due course on the appropriate ruling," the CAT said.

It added that it will hear the parties to determine "any action that Ofcom should be directed by the Tribunal to take" and "any other order(s) that should be made in respect of the appeals themselves."

Discussing the current terms of supply of the sports networks to Virgin Media, "and in particular the level of the rate card prices charged by Sky," the tribunal said that "the price level in question does not obstruct (or contribute to the obstruction of) fair and effective competition in the retail of these channels by Virgin Media."

BSkyB welcomed "CAT’s confirmation that Ofcom’s competition concerns in relation to the wholesale supply of Sky Sports are unfounded and that, contrary to Ofcom’s analysis, the evidence shows that Sky has engaged constructively with other distributors over the supply of its premium channels." It added: “We also welcome the CAT’s conclusion that the existing commercial terms of supply, particularly in relation to Sky’s wholesale rate card, do not obstruct fair and effective competition in the retailing of Sky Sports across platforms."
But it also said that it would have to see the full decision. “At present, Sky has access only to the CAT’s summary of its principal findings and conclusions," the company said. "Sky will give careful consideration to the full judgment when it is made available.”

Analysts have been awaiting the CAT decision. "The outcome could potentially have notable consequences for BSkyB," UBS analyst Polo Tang had said before Wednesday's decision.

In a worst case scenario for BSkyB, BT could have been ruled eligible to get more BSkyB content at a lower price, he had said. In a best case scenario, the CAT could overturn Ofcom's decision and leave BSkyB to determine its own wholesale pricing and what it makes available to rivals - something first interpretations of the ruling said now seemed possible.

“We are very surprised and disappointed with today’s decision," Ofcom said, calling it "contrary to the evidence and not in the interests of consumers." It also cited a recent Competition Commission comment that "competition in the pay TV market is not effective."

Said Ofcom: "We will therefore immediately consider what further steps we should take to ensure there is effective competition in the pay TV sector, in line with our duties.”

Late last week, the U.K. Competition Commission had handed BSkyB a key regulatory victory when it confirmed  provisional findings that the company has no material advantage in pay TV movies these days thanks to the emergence of Netflix and Amazon.com's LoveFilm.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai