British Sky Broadcasting has sharply criticised the communications regulator Ofcom in response to its latest review of the pay television sector. Criticising the imposition of “highly interventionist regulation” the satellite broadcaster says “It is time for Ofcom to take a step back” and “avoid being led into a misadventure which threatens to push Ofcom far outside the bounds of mainstream regulatory thinking”.
Sky has successfully bid to retain the rights to the majority of Premier League football coverage through until 2013, regaining five of the six match packages on offer–the most it is now allowed–at the cost of over £1.6 billion.
For Sky the risk is that the regulator will require it to license exclusive sports and movie programming to other providers at controlled wholesale prices, which the satellite operator contends would effectively subsidise its competitors.
In a robust response to its investigations of the pay television market, Sky says Ofcom “is proposing the imposition of radical and highly interventionist regulation of a sort unseen in any developed market economy”.
Its rebuttal is uncompromisingly critical of the regulator. The executive summary alone covers eight pages. The full document runs to 140.
Sky contends that the market is both extremely competitive and functioning well, which the regulator has itself tended to argue in its regular reporting, as the pay-television operator observes.
“None of these positive outcomes happened by chance,” argues Sky. “They are the result of very significant levels of effort, innovation and risk taking on the part of many providers, including Sky.”
The remarkably response criticises the standard of regulation from Ofcom which it says is based on “vague” and “impressionistic” evidence.
Sky points out that it has supplied its premium channels to cable operators since their creation and has no incentive to restrict supply. It says the only reason that they are not broadcast terrestrially is primarily due to regulation from Ofcom, which prevented its proposed Picnic platform.
Arguing that there are serious flaws in its analysis that could have unintended consequences for consumers, Sky concludes that “Ofcom should now decide that no regulatory action is required”. It adds that “Any other approach will ultimately be to the detriment of those whose interests Ofcom is supposed to protect–not Sky’s competitors, but consumers.”
There must be some sympathy for the view that Sky is the subject of unnecessary scrutiny. Over the last twenty years, Sky has done much to push forward developments in British broadcasting, contributing to one of the most competitive markets in the world.
Ironically, for an economically focussed regulator that believes in the free market, Ofcom is seeking to constrain a commercial success story in order to protect the interests of less efficient competitors, while relaxing the regulatory regime that has for decades preserved the delicate balance of public service broadcasting across the public and commercial sector.