Ofcom to investigate pay-for-TV market

Ofcom will begin an investigation into the pay-for-TV market after mounting concerns and pressure from companies involved in the industry and consumer groups.

The decision from the telecommunications regulator comes two weeks after basic Sky channels were withdrawn from Virgin Media's network following a highly public row over payment.

Virgin Media has already threatened to sue BSkyB for damages unless it cuts its proposed charges for the channels by the end of the month.

The study launched this morning will look at subscription TV and video-on-demand services on all platforms: cable, Freeview, satellite and TV streamed over broadband after pressure from BT, Setanta, Top Up TV and Virgin Media to examine the competition issues.

As well as examining the impact the recent row between Virgin and Sky has had on consumer choice; something that consumer groups such as the Ofcom Consumer Panel and the National Consumer Council have expressed, the study has a broader remit.

It will see if competition in the subscription TV market is being held back by other proposed moves. This means BSkyB's plans to replace its Sky News, Sky Sports News and Sky 3 channels with four pay-to-view stations on the Freeview digital TV platform will be closely examined.

If this move goes ahead it would place BSkyB in direct competition with Setanta, which announced a subscription sports channel on Freeview after it broke BSkyB's monopoly over Premiership football last year.

BSkyB's proposed move will require a change to the terms of its Freeview broadcast licence, and Ofcom today said it would start a "consultation process" once it receives an application from the satellite broadcaster.

To add to the confusion Ofcom and the Office of Fair Trading (OFT) are investigating the controversial purchase of a 17.9 per cent holding in ITV in November by BSkyB.

It was widely viewed that this move by the satellite broadcaster was an effort to block cable company NTL's - now part of Virgin Media - attempts to buy ITV.

Ofcom and the OFT are expected to report their conclusions to the Secretary of State for Trade and Industry by 27 April 2007.

If the study announced by Ofcom finds BSkyB has breached either UK enterprise or competition law, the regulator will then ask the Competition Commission to undertake a full investigation of the market.