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Gorilla’s Absence Highlights Limitations of Pay TV Debate

by David Mercer | Nov 27, 2008

I attended the Westminster Media Forum Seminar in London this afternoon, entitled Pay TV – market prospects , competition and service to viewers. The conference took place somewhere deep in the bowels of the Local Government Association headquarters near the Houses of Parliament. The rising temperature reflected the growing intensity of the debate as the afternoon wore on, while the absence of a view through outside windows nicely reflected the fact that “Sky” was the only major player absent from the debate. The Forum assured us that the “gorilla” had been invited. My overall impression is that these sessions tend to veer too much towards the old “how do we reduce Sky’s power” debate, hence the reason for that company’s decision to decline invitations to speak. We were however treated to comments from expert participants from the regulatory and legal fields, as well as from Freeview, Freesat, BT Vision and Virgin Media Television. Kicking off the debate was Stephen Unger, Competition Policy Director at Ofcom, who summarised the current state of the two investigations currently relevant to pay TV in the UK market. These are 1. the submission from BT Vision, Setanta, Top Up TV and Virgin Media, and 2. the application from Arqiva and Sky to launch Picnic, a pay TV service on the DTT platform. Both investigations are still in progress, and after second consultations a number of preferred options are being considered. According to Unger, Ofcom “believes that Sky has an incentive to restrict supply to other retailers and other platforms, and there is evidence that Sky is acting on that incentive”. Ofcom’s preferred option is to propose a wholesale must offer obligation on Sky. In other words, Ofcom would regulate the prices at which Sky must offer its channels to other platforms. It would be necessary to determine how prices are set as well as certain non-price issues (for example, protecting against piracy). If this option is agreed, it will also be consulted upon, probably by Spring 2009. Later in the day, Jenine Hulsmann, a Partner at lawyers Clifford Chance, made one of the best contributions. She pointed out that competition law is not good at addressing pricing issues. In her opinion it would be “a very great challenge” for Ofcom to establish a pricing mechanism that is acceptable. She also made the point that there would inevitably be one, if not several, appeals once any decision was made, and that these appeals would lead to long delays in any implementation of Ofcom’s proposals. Hulsmann made one final recommendation for content owners who might have contracts with Sky: “Check your contracts for any clause that allows for Sky to renegotiate in case of a change in regulation.” Martin Coleman, a Partner at Norton Rose, observed another challenge facing Ofcom, concerning the definition of channels and their related content. If regulations are introduced relating to “sports” or “movies” “channels”, these must be very carefully defined in order to prevent changes that might circumvent regulations. In other words, a regulation that decides on the appropriate price for Sky Sports 1 showing Premiership football would be little use if Sky decided to remove that content from that channel and show it elsewhere. Ilse Howling, MD of Freeview, and Emma Scott of Freesat, each presented lots of research about the appeal of their respective “free-to-view” platforms. Maybe it was the constant repetition of the word “free” that got to me, but I couldn’t take my mind off the fact that no one had so far mentioned the fact that these “free” platforms would not have come into existence without the government-mandated annual licence fee, and would not be half as appealing without the BBC’s digital channels. So had any of this research addressed the issue of acceptance of or resistance to the licence fee? Apparently not… Emma Scott suggested that Freesat’s research had “never had any negative feedback about the licence fee”, which suggests to me that they had never asked the right questions. Howling at least admitted that the question of cost does come up in Freeview’s research, and consumers do raise the issue of the price of set-top boxes and/or aerial installations and upgrades. But there was no evidence that consumers related Freeview to the cost of the licence fee directly. These two debates – competition in pay TV, and the future of public service broadcasting – cannot be considered in isolation. Together they form one overriding question – “How should television be funded in the digital era?”. Any debate that focuses on a single funding issue is going to reach conclusions of limited value. Considering the bigger picture would achieve a more rounded perspective from all sides of the industry, and may even attract the attention of the absent gorilla. Client Reading: The Television and Movie Industry Explained: Where Does All the Money Go? Add to Technorati Favorites
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