The UK Office of Fair Trading has cleared the proposed acquisition by BSkyB of Easynet and the merger of NTL and Telewest.
Both cases relate to the emergence of digital subscriber line DSL telephone connections as an alternative means to provide a ‘triple-play’ of video, voice and data services. This is seen as an important new market for television.
The competition watchdog has ruled that the mergers do not need to be referred to the Competition Commission.
The OFT noted that consumers may be expected to benefit from the acquisition of broadband service provider Easynet by satellite broadcaster Sky to enable it to offer triple-play services.
Third parties have raised concerns about the potential for Sky to block the supply of pay-TV content to its emerging DSL rivals given its market power in premium content provision and its significant buyer power in non-premium content.
The OFT observed that Sky already has the potential to do this and the merger does not materially alter its incentives in this area.
NTL and Telewest are now the only two cable television operators in the UK, but their local networks do not overlap and outside their local cable networks they will still face a number of other significant competitors.
Concerns were expressed that the merged company could either cease to supply programming from Flextech, currently owned by Telewest, or block the supply of third party pay-TV content to rivals by seeking exclusive deals.
The OFT decided that that the competition concerns raised either do not result from the mergers or are not sufficiently significant to warrant reference to the Competition Commission.
NTL and Telewest have customers in around 5 million households between them, compared with 8 million for BSkyB. The merged cable company will also be second only to BT in providing residential telephone services in the UK. NTL has been in discussions with Richard Branson to use the Virgin brand and is also a potential acquisition target for private equity groups once the merger with Telewest is completed.