Sky to challenge order to cut sports prices

Ofcom tells BSkyB: reduce wholesale price of Sky Sports 1, 2

LONDON -- U.K. satcaster BSkyB said it will go to court to challenge Ofcom's decision Wednesday to force the satellite operator to reduce the amount it charges rivals to offer Sky Sports by more than 20%.

The satcaster reacted strongly to the decision from the media regulator describing the move as representing "an unprecedented and unwarranted intervention."

Ofcom said BSkyB must reduce the wholesale price it sells Sky Sports 1 and Sky Sports 2 to rivals which include BT Vision and Virgin Media by 23.4% from the current £13.88 ($21) to £10.63 ($16.10) per subscriber per month.

Ofcom said the new wholesale pricing is effective immediately and BSkyB now has six weeks to make a "reference offer", effectively a template contract, to other pay TV providers.

Sky immediately fired off a statement stating its intention to challenge the decision through the Competition Appeal Tribunal.

"This is a marketplace where customers are well served with high levels of choice and innovation. Consumers will not benefit if regulators blunt incentives to invest and take risks," a Sky spokesperson said. "After three years of engagement with Ofcom, we now look forward to a judicial process which will apply impartial analysis and clear legal standards."

Ofcom also said Wednesday that BSkyB is restricting the distribution of premium movie rights, with a knock-on effect for the subscription video-on-demand market, and is proposing to refer the issue to the Competition Commission.

Early trading in BSkyB's shares on the back of the ruling showed a rise in value with the stock rising 3% from its overnight closing price. Virgin Media also rose 2% in early trading.

BT Retail CEO Gavin Patterson described Ofcom's decision as "disappointing but a step in the right direction."

Patterson welcomed the decision to allow his service BT Vision, to be allowed to sell two premium sports channels.

"We aim to offer Sky Sports 1 and 2 at lower prices than those which have been available. We hope to bring them to the market in time for the new Premiership football season but that will depend on Sky now complying with Ofcom's decision," Patterson said.

But he said Ofcom "should have gone much further than it did."

Patterson said the ruling should have included movie channels and should have included all Sky Sports channels, not just two.

He also noted Ofcom had fallen short of regulating prices for HD channels, still in their infancy here.

"Sky may appeal against this decision but Ofcom's remedy should be implemented without delay so that customers can benefit from lower prices," Patterson claimed.

Virgin Media CEO Neil Berkett said: "The Ofcom wholesale arrangements are a step in the right direction and should be welcomed by sports fans. It's disappointing, however, that some significant loopholes remain which provide an opportunity for Sky to further undermine competition. We look forward to working with both Ofcom and Sky to ensure our customers reap the benefits of increased competition as quickly as possible."
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