OFT to Rule Against BSkyB; Digital Rivals Mull Legal Action

18 December 2001

Britain’s leading digital broadcaster BSkyB has issued a robust response to Monday’s announcement by the Office of Fair Trading that the satellite firm has “abused its dominant position” in the way it charges for its premium film and sports channels.

After a two-year inquiry, the OFT plans to rule against BSkyB, saying that the difference between the price charged to its own subscribers for the channels and that paid by rivals Telewest, NTL and ITV Digital to carry them “may not be wide enough to allow a normal profit to be made” by these competing services.

In addition, the OFT will rule that discounts offered by BSkyB to rivals carrying its sport and film offerings may hinder the entry into the market of rival services, such as ITV’s beleaguered sports channel.

BSkyB vowed to defend itself “against all the allegations”, adding: “The OFT is simultaneously alleging that BSkyB’s wholesale prices are both too high and too low. The OFT is alleging that the discounts in BSkyB’s rate card are anti-competitive, despite those discounts previously being approved by the OFT.”

The satellite broadcaster, of which NewsCorp owns 36.3%, has until March 29 to respond to the claims, with a final decision due in summer 2002. However, it is thought unlikely that BSkyB will sway the regulator. Said one unnamed informant at a rival pay-TV group: “The OFT took so long because it was aware of the political implications of a negative ruling [i.e. upsetting Rupert Murdoch]. It will make sure its argument is absolutely watertight.”

Companies found in breach of the Competition Act face fines of up to 10% of UK revenues, over £200 million in the case of BSkyB, though it is far from certain such a penalty will be imposed.

However, the satellite firm may face additional trouble in the form of legal action from angry rivals. NTL, Telewest and ITV Digital welcomed the OFT’s statement, with all three mulling whether to sue BSkyB if the ruling is confirmed over the summer. Said Telewest: “If the preliminary decision is upheld, we would consider whether it would be appropriate to seek damages.”

News sources: The Times (London); MediaGuardian.co.uk