26 February 2016

CAT to hear BT appeal against Ofcom pay-television decision in July 2016

On 18 February 2016, the UK Competition Appeal Tribunal (CAT) announced that it will hold an eight-day hearing between 4 July and 13 July 2016 in which BT Group will challenge the decision made by UK telecommunications regulator Ofcom to repeal a regulatory decision imposed on pay-television provider Sky in relation to its sports channels.

In March 2010, Ofcom implemented a regulatory obligation which required Sky to reduce the wholesale price at which it offered channels Sky Sports 1 and Sky Sports 2 by more than 20% after a lengthy investigation into the sports pay-television sector under a practice known as a “wholesale-must-offer.” However, Ofcom announced on 19 November 2015 that this decision would be reversed in view of recent market developments including:

  • Sky making Sky Sports available to rival pay-television providers such as BT, TalkTalk and Virgin Media through commercial wholesale arrangements;
  • Sky Sports channels being available on Sky's internet-based NOW TV service, which can be accessed on a range of online platforms and devices;
  • BT having invested over £2 billion into television sports content since 2012, including obtaining 25% of Premier League rights and exclusive rights to broadcast all Champions League matches live until the 2017/2018 season; and
  • new providers entering, or planning to enter, the market, such as EE and Vodafone.

Interestingly, Ofcom’s announcement came shortly before BT reached an agreement with Sky and the Premier League to end the five years of litigation that followed on from Ofcom’s 2010 decision. BT wasted little time by entering its application to appeal Ofcom’s November 2015 decision at the CAT in early January 2016.

BT claims that Ofcom acted “in breach of its statutory obligations” under the Communications Act 2003 by adopting a “wait and see approach based on an assessment of Sky’s current supply arrangements” with its competitors. Specifically, it is argued that Ofcom erred by: (i) not concluding that there is a risk of Sky engaging in future wholesale distribution practices detrimental to competition in the sports pay-television market, and (ii) focusing its analysis on key sports content rather than the packages purchased by consumers.

The preliminary hearing also discussed who will have sight of the confidential version of Ofcom's November 2015 decision and the redacted version of this document, especially given that BT requested the comments submitted by the Premier League, Sky, TalkTalk and Virgin Media  to the UK gas and electricity market regulator Ofgem on wholesale-must-offer regulation. With the scope of confidentiality still being ironed out, commentators will look on with interest as to how this case unfolds.

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