BSkyB attacks regulator over TV plan

LONDON (Reuters) - Britain’s dominant pay-TV firm BSkyB attacked media regulator Ofcom for unprecedented interference on Friday, saying it would launch legal action if forced to open its channels to rivals at a set rate.

One of 35 Sky television cameras follows the action during the live broadcast of Tottenham Hotspur's match against Middlesbrough at White Hart Lane April 3, 2000. REUTERS/Ian Waldie

The company, part of Rupert Murdoch’s empire, was reacting after Ofcom said BSkyB could be forced to make its most sought-after content, including sports and movies, available to other broadcasters at a rate fixed by the regulator.

Proposals by Ofcom announced on Friday followed complaints from rivals such as BT Group and Virgin Media, which accused BSkyB of suppressing competition.

The Ofcom announcement also comes in the week that Irish broadcaster Setanta filed for administration, removing one rival that had broken BSkyB’s monopoly in showing live English Premier League football.

Analysts said the new rates paid by rival broadcasters for transmitting BSkyB channels could be set between 10 to 30 percent below the current ratecard that BSkyB charges. They said BSkyB shares had already priced in this possibility.

BSkyB stock was flat at 2:55 p.m., compared with a slightly lower FTSE 100 Index.

BSkyB, which has more than 9 million customers and where Rupert’s son James is non-executive chairman, said it disagreed fundamentally with the findings and said it would use all legal avenues to challenge the “unwarranted intervention.”

“We want our premium channels to be widely available on other platforms,” BSkyB Chief Executive Jeremy Darroch said in a statement. “But we deserve a fair return.

“Forcing Sky to sell its channels for less than their true value is a subsidy for companies that have shown no appetite for investment in programmes. It defies belief that Ofcom expects Sky to lower its wholesale prices to compensate for the higher costs of less efficient platforms.

“Ofcom is proposing an unprecedented level of interference in commercial markets.”

Ofcom said requiring Sky to make its premium channels available to other retailers on a wholesale basis was the most appropriate way of ensuring effective competition.

It will consult on proposals to put in place a wholesale must-offer obligation containing a range of regulated prices.

Ofcom said the proposed remedy would not have a disproportionate impact on Sky, since the proposed prices were above the level required to allow Sky a reasonable return, and said it could in fact increase its wholesale revenues.

BSkyB retorted by saying it knew best how to create value.

Analysts said the impact was likely to be manageable for a company of BSkyB’s scale, however they noted with concern the level of aggression between both sides.

“Regulatory risk is an ever present with BSkyB, but we do not view the third Pay TV consultation as worse than feared,” Numis analysts said in a note.

BT welcomed Ofcom’s findings and said the collapse of Setanta on Tuesday had exposed the failure in Britain’s pay-TV market. Virgin Media also welcomed the analysis and said it would work to bring the investigation to a quick conclusion.

“The proposal to force Sky to wholesale its content is welcome but we now need Ofcom to step up the pace and to enforce this rigorously,” said Gavin Patterson, chief executive of BT Retail.

“It is clear from the demise of Setanta that the market is structurally flawed, yet two and a half years have passed since this process began.”

Editing by David Holmes and Andrew Macdonald