Sky ordered to share sports channels at cut price

[March 31, 2010]  LONDON (AP) -- British Sky Broadcasting PLC was ordered Wednesday to make its premium sports channels available to rival broadcasters at reduced wholesale prices, foreshadowing a major shakeup of the sector.

The ruling from broadcasting regulator Ofcom follows a three-year investigation after complaints about Sky's dominance from BT, Virgin Media, TopUp TV and Setanta, which has since gone bust.

Sky, which is controlled by Rupert Murdoch's News Corp., said it would appeal against the "unprecedented and unwarranted intervention," while the country's football and cricket authorities warned they could lose vital funding if the broadcaster reduces the amount it is willing to pay for sports rights as a result.

Ofcom said that Sky should sell Sky Sports 1 and 2 to other cable, terrestrial and internet outlets for 23 percent less combined or 10 percent individually than the current wholesale price to give viewers more choice of Pay-TV services.

The regulator said that Sky was exploiting its market power and the new structure would "ensure fair and effective competition which should lead to greater investment, innovation and choice for consumers."

BT said it hoped to offer Sky Sports 1 and 2 cheaper than Sky in time for the start of the next football season.

However, Sky said that customers already had high levels of choice and innovation.

"Consumers will not benefit if regulators blunt incentives to invest and take risks," it added.

English football's Premier League said it was "very disappointed" and studying the findings carefully. Sky has the rights to air the majority of Premier League matches live in Britain.

The England & Wales Cricket Board, which has a deal with the broadcaster worth 300 million pounds ($450 million) over four years, said the changes will reduce the value of the rights.

"A decision like this could lead to less investment in sport," said Steve Elworthy, the ECB's director of marketing and communications. "It fails to consider the damage it could cause to sports from the grassroots upwards and that's our biggest concern."

Sky's rivals have raised concerns that Ofcom's decision would leave the broadcaster with room to shift important Premier League games on to other channels. But the regulator said it would take further action if Sky attempted such a move.

BT said it was disappointed that Ofcom has not gone further by requiring Sky to offer all of its sports channels at the discounted rate, rather than just two, and noted that the regulator increased the wholesale price from its original suggestion.

"Sky may appeal against this decision but Ofcom's remedy should be implemented without delay so that customers can benefit from lower prices," said Gavin Patterson, chief executive of BT Retail.

Signaling further changes to the Pay-TV sector, Ofcom gave Sky permission to offer its pay-TV services on Freeview, replacing Sky's current channels. However, it added that was conditional on Sky making its movie channels available to other terrestrial digital operators.

Competitors had hoped that Ofcom would also set lower wholesale prices for film channels.

But while the regulator found that Sky's dominance in the supply of premium movies was restricting viewer choice, it said it did not have the necessary powers to address these concerns. It proposed referring the matter to the Competition Commission.

Sky's shares rose 2.75 percent to 598 pence in morning trade on the London Stock Exchange, boosted by Ofcom's decision to raise the recommended wholesale price for the sports channels and its lack of action regarding the film channels.

[Associated Press; By JANE WARDELL]

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