Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence


Further supplementary memorandum submitted by ITV Digital

  I was present for the oral evidence given by Tony Ball, Sheila Cassells and Ray Gallagher of BSkyB on Tuesday 29 January 2002. I have also read a copy of BSkyB's written evidence to the Committee. BSkyB raised a number of points about the regulation of pay television which I would like to respond to in order to correct any misapprehension that may have been created.

  Annex 1 sets out a more detailed response to these points. However, our main comments are as follows:


  The Select Committee raised concerns about BSkyB's vertical integration from content through to distribution activities. BSkyB's response was that the Committee need not be concerned by its market power because of the existence of the current OFT and Oftel regulatory regimes.

  We strongly disagree. Neither the OFT nor Oftel have regulated the level of prices BSkyB charges either rival platforms for premium content or other broadcasters for access to its platform. Instead, the current regimes rely on time-consuming and cumbersome "after the event" analysis by the regulators. In ITV's experience this does not sufficiently temper BSkyB's pricing and attitude.


  Mr Ball claimed that a deal had been reached between BSkyB and ITV for the carriage of the ITV Sport Channel on satellite, only for ITV to change its mind at the last minute. Again, this is not the case. Mr Ball was correct, however, in stating that ITV has sought a minimum financial guarantee from BSkyB for inclusion of the channel within its retail package. BSkyB would have much to gain from the failure of ITV Sport and we believe that its viability on satellite depends on BSkyB being sufficiently incentivised to sell ITV Sport against its own premium sports channels—this can only be achieved by a minimum guarantee.


  Mr Ball suggested that ITV Digital's shareholders had taken the strategic decision to "pepper" its platform with their own channels rather than acquire more attractive channels at a greater cost. This is also inaccurate. Rather, BSkyB ensured that many of the more attractive channel providers entered into restrictive agreements which explicitly prevented them offering their channels to DTT. In July 2001 ITV Digital formally complained to the European Commission that BSkyB had entered into such an agreement with the Discovery Channel. Following a preliminary investigation, BSkyB agreed with the European Commission unconditionally to renegotiate its arrangement with Discovery and, we understand, 20-30 other channels for which similar "holdbacks" had been put in place. As a result, in November 2001 the Discovery Channel finally launched on ITV Digital. The European Commission's investigation is on-going.


  ITV maintains that the principal beneficiary of carriage of ITV1 on satellite is BSkyB and, therefore, that no payment would be due to BSkyB in a competitive market. Yet under Oftel's current regulatory regime, BSkyB was able to demand some £17 million per annum from ITV, of which we estimate only £100,000 relates to the direct cost of making ITV1 available to satellite viewers. The remainder represents pure profit for BSkyB.

  This effectively means that ITV, and all other public service broadcasters (PSBs), are being asked to subsidise BSkyB's set top box give-away to subscribers. The other platforms receive no such subsidy from the PSBs.

  This is why we refused for so long to pay the charges demanded by BSkyB and have now asked Oftel to settle this disagreement. This is also why we believe extending the current "must carry" regime to the satellite platform is the only way of delivering the Government's public policy objective of universal access to PSBs in a platform neutral way.


  Mr Ball claimed that DTT had "got off to a pretty bad start everywhere". If the viability of DTT in the UK is in jeopardy, then this is largely due to the anti-competitive practices of Mr Ball's own dominant satellite platform. Despite this, in the UK, DTT has grown from scratch faster than any multi-channel platform in the world and this has prompted the rest of Europe to follow our lead. Every EU country bar Luxembourg has launched, or is about to launch, DTT.

  One of the key advantages DTT has over other platforms is cost. Independent research from November 2001 estimates that using DTT to deliver the Government's objective of universal coverage of digital television would cost less than one quarter what it would cost to meet this objective using cable and satellite alone.

  I hope this information is of assistance to the Committee and, as mentioned above, all of these points are elaborated upon in the enclosed Annex. Please do not hesitate to call me if you need any clarification.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 1 May 2002