BSkyB Accuses Ofcom of Regulatory Mistakes

September 18, 2009 World Screen
LONDON: BSkyB has charged the U.K. media regulator Ofcom with exceeding its powers and making basic errors in an official review of the pay-TV market.
 
The criticism came in response to findings by Ofcom that BSkyB should allow rivals to buy its most valuable content, including Premier League football and first-run feature films, at prices set by the regulator, as reported by the Financial Times.
 
BSkyB will provide a detailed response to Ofcom’s pay-tv review, which was prompted by a complaint from four of BSkyB’s competitors, Top-Up TV, BT Vision, Virgin Mediaand the now defunct Setanta.
 
As the FT reports, BSkyB wholesales premium content only to Virgin Media and at a price, known as the cable rate card. Virgin claims this makes it impossible to make a reasonable profit.
Mike Darcey, chief operating officer of BSkyB, singled out Ofcom’s assessment of how profitable the pay-TV platform would be if it were to charge prices between 20 and 30 percent lower than the cable rate card. He told the FT, “Profitability is one of the critical factors in Ofcom’s proposals but its financial analysis is riddled with mistakes. While nothing seems to divert Ofcom from its chosen course, it’s difficult to see how even they could finalise the proposals without some radical surgery on their model.
“In the end, a judge may have to decide whether Ofcom has met the necessary thresholds of process and proof to justify an extreme intervention,” Darcey continues. “Regulators do not operate without constraints and this is a case that tests the outer limits of Ofcom’s powers. If it comes to it, we’ll look forward to getting an impartial hearing before a court.”

BSkyB says Ofcom had made basic errors in its model of profitability, including an assumption BSkyB would add 736,000 customers in 2008-09 when it added only 462,000, and an assumption the broadcaster’s revenue from advertising would rise at the rate of inflation, ignoring the fact that the industry was in the middle of an advertising slump.