Sky has submitted a last-minute objection to Ofcom and the Office of Fair Trading about YouView, the television platform proposed by a consortium of British broadcasters and network operators. It will be difficult for the communications regulator to ignore the chorus of complaints from pay-television operators and advertisers about the joint venture, formerly known as Project Canvas. An investigation seems inevitable and structural intervention to ensure a competitive market may be required.
Sky has previously been highly critical of Project Canvas. The formal objection from Sky was filed as the Ofcom board met to discuss previous complaints, including one from cable television operator Virgin Media. It now appears inevitable that the regulator will investigate the YouView partnership and potentially refer the matter to the competition authorities.
The chief executive of YouView suggested that the joint venture, bringing together the main terrestrial broadcasters, broadband service providers and the national transmission network operator would promote rather than inhibit competition.
“YouView will create competition among TV platforms and increase the range and number of opportunities for content providers and device manufacturers. We encourage Ofcom to take this wider view as they continue their consideration,” said Richard Halton. “While we welcome justifiable scrutiny, the timing of this submission is clearly designed to extend the regulatory process in pursuit of commercial self interest rather than the public interest.”
YouView Ltd is a joint venture between the BBC, ITV, Channel Four, Five, BT, TalkTalk and Arqiva. Together they control the majority of the terrestrial television and broadband service market. The consortium has been working with three so-called innovation partners, Cisco, Humax and Technicolor. YouView proposes to licence the YouView trade mark to companies providing compatible receivers, subject to certain conditions which include mandating the look and feel of the user experience.
Other platform operators and a number of other consumer electronics companies argue that YouView will limit competition and innovation, restricting the ability of third parties to differentiate their products. The real concern is that the broadcasters will restrict the availability of their on-demand programming to favour the YouView platform.
Similar concerns were raised about a previous initiative involving the same broadcasters, known as Project Kangaroo, which was blocked by the competition authorities before it launched.
In the UK, anti-competitive behaviour is prohibited under Chapters I and II of the Competition Act 1998 and may be prohibited under Articles 81 and 82 of the EC Treaty. These laws prohibit anti-competitive agreements between businesses and the abuse of a dominant position by a business. Any undertaking that infringes competition law may face substantial financial penalties of up to ten per cent of their worldwide turnover.
The most serious forms of infringing behaviour includes cartels, which may involve informal agreements between parties not to compete with one another. Individuals that engage in cartels can face unlimited fines and be imprisoned for up to five years, while company directors who breach competition law can be disqualified for up to 15 years.
It must be assumed that those involved in YouView have received appropriate legal advice that suggests that the YouView consortium is not in breach of competition legislation. They might argue that YouView is an open partnership and an open platform that anyone can join.
One might ask why broadcasters and broadband service providers could not simply extend the existing Freeview platform to offer catch-up programming. The main terrestrial broadcasters seem to want to create a new partnership vehicle as Sky remains a shareholder in Freeview, the company that promotes free-to-air terrestrial television.
The key question is whether the YouView partnership and proposed platform will limit the provision of programming in a way that favours the consortium. There is some evidence that it might. The BBC and ITV are openly opposed to the disaggregation of their on-demand programming by other providers, like Sky.
Sky is on the verge of releasing its own Anytime+ service to Sky broadband subscribers with high-definition digital video recorders. It is not clear whether it will include programming from the BBC, as the corporation has preferred to promote its own iPlayer service.
No stranger to regulation, Sky has been forced to unbundle its own premium programming and make it available to competing service providers, so it would not be unreasonable for the same to apply to other broadcasters.
Ofcom, which tends to favour structural remedies, might insist that the partners in YouView make their on-demand programming on an unbundled basis to other service providers on fair, reasonable and non-discriminatory terms. That would go a long way to addressing potential competition issues.
Any investigation by Ofcom or the OFT would be a serious setback for the YouView venture. Meanwhile other platform operators and consumer electronics companies are rolling out their own network television strategies which could fulfil the demand that YouView was intended to address.