Ofcom announced on 19 November 2015 that it is removing the Wholesale Must Offer (WMO) obligation which requires Sky to offer Sky Sports 1 and 2 on a wholesale basis.
What has Ofcom said?
In its statement, made following consultation, Ofcom states that:
- There have been a number of developments in the pay TV market since the WMO obligation was imposed on Sky in 2010, including the growth of existing providers and a number of new entrants, which have increased competition in pay TV. Ofcom also considers that there is now a wider availability of sports content.
- Live Premier League (FAPL) matches remain the most important content for consumers when making subscription decisions.
- Sky continues to hold the majority of the rights to broadcast FAPL matches. Due to the importance of Sky’s content to a significant proportion of consumers, the way in which the content is distributed could still impact pay TV competition.
- Although BT’s position has been strengthened by acquiring FAPL rights, evidence suggests that BT Sport is unlikely to impact competition and is not important enough to a significant number of pay TV subscribers.
Given the above, Ofcom concluded that if Sky were not to supply its content to competing pay TV providers, it would “prejudice fair and effective competition” in the market for pay TV services. However, and importantly, Ofcom has found that Sky is currently supplying its sports channels on commercial terms outside of the WMO obligation, giving examples of agreements between Sky and TalkTalk, Virgin Media and EE. Ofcom notes that only Sky’s agreement with YouView is caught by the WMO obligation.
Ofcom therefore considers that it would not be appropriate going forward to impose regulation requiring Sky to supply Sky Sports 1 and 2 and it will remove the WMO condition from Sky’s broadcast licences.
Why this matters to your business
Previously, a pay TV provider could apply to the Competition Appeals Tribunal (CAT) to be added to the interim WMO order. While Ofcom is not saying that the original imposition of WMO was wrong, it is clear that Ofcom now considers that obligation to be inappropriate and unjustified going forward. Although the CAT process is separate to Ofcom’s statement, the forward-looking aspects of that case can be expected to fall away, now that the WMO obligation is being removed.
However, given the content of the regulator’s statement, Ofcom still clearly considers that Sky has a strong market position for key sports content. The only saving grace for Sky is that it currently supplies its channels on “commercial terms“.
Therefore, it would appear that if Sky were to change its approach following the removal of the WMO and not supply on commercial terms, Ofcom could reassess its conclusions. Ofcom acknowledges that it would be concerned if there was evidence of Sky withholding its key content from competing retailers or introducing unreasonable terms in its supply contracts. There could be also scope for customers bringing a standalone legal action on competition grounds and so this decision does not mean that there are no options if Sky refuses to supply on commercial terms.