Joint Committee on The Draft Communications Bill Minutes of Evidence


Examination of Witnesses (Questions 620-639)

MR TONY BALL, MR RAY GALLAGHER AND MS SHEILA CASSELLS

MONDAY 24 JUNE 2002

Lord Pilkington of Oxenford

  620. Which is the independent company?
  (Mr Ball) Astra own most of the transponders we use to broadcast our channels. We also use Eutelsat.

Mr Lansley

  621. As far as you are concerned, in so far as the legislation encourages the use of competition powers rather than section-specific powers, if, in using competition to seek consumer benefits, OFCOM were effectively to see vertically integrated operations as undesirable, would you see that as a reasonable basis on which OFCOM should work?
  (Mr Ball) I do not see why they would conclude that. What is the problem we are trying to fix here?

  622. The problem would be whether it was in relation to the British Telecom argument, as has been presented to us in various contexts, namely BT's ability to control not only the exchanges but also the vertically integrated company, wholesale, retail, and so on, gives an opportunity for them, even with conditional access regulations, to dominate the market and to make access more difficult to competitors. By implication, with a broadcast digital platform, if it is not institutionally separate, the channel providers would have the same opportunity.
  (Mr Ball) It is interesting, because it goes right to the heart of this whole thing of convergence. BT has enormous market power. It is a monopoly and was state-controlled. In television, there is not a privatised former national monopoly. In television, the BBC, the last time I looked, had not been privatised. To apply any bad practices in telecoms to television where there is no problem—there is no problem in television, certainly in relation to the satellite platform. Sky has 185 different conditional access agreements, and we have had one complaint in four years, and that was from ITV, which spent three years withholding its public service channel from us. To take the BT example, with access to exchanges and so on, those problems have not happened with the satellite platform. As far as I am aware, nobody has been prevented from getting on to the satellite platform to broadcast their channels speedily if they have been prepared even to come to a retail arrangement with Sky, or to accept the Oftel regulated rate card that we offer access under. As I say, there are 185 different entities that have done just that since we launched digital at this back in October 1998. I do not think there is a problem in television that needs fixing as far as vertical integration is concerned. It may be different in telecoms, but I am not an expert in telecoms. It would be terrible to bring the worst things in regulation on the telecoms side and apply them to television unnecessarily.

  623. In a sense, the competition principles would be the same, whether applied to the telecommunications industry or broadcasting; and the market for these purposes would, presumably, be similarly defined. It might be concluded that digital television was a sufficiently defined market in itself.
  (Mr Ball) I do not disagree with the way you are going, but if you look from where we all started and where BT was started from, Sky was built on private capital; it did not inherit a fantastic position in the market like BT did when it was privatised.

  624. In a sense, the history is neither here nor there because however one arrives one arrives at a situation of dominance, whether it is because it was previously state-owned or otherwise, is neither here nor there. The question is: what is the best way of dealing with a situation of dominance? Sometimes, as you say, it is by the Oftel regulations; and sometimes it is to deal with the structure of the dominant operator. You, as the dominant operator in relation to digital television, in institutional terms still have one company, which is both a platform provider and a channel provider.
  (Mr Ball) I would argue that the system we have now for access works perfectly well. I cannot comment on how well it works in telecoms, but in television it works very well, and we have had one complaint in four years.

  625. I suppose the question I am asking is a bit like the question previously to mobile telephone operators is this. It is sometimes put to us, "we want competition to be the basis for regulation", and you said you want there to be a light-touch regulator. I just want to be sure that in telling us you want competition to be the mechanism, and competition powers to be the means of regulation, you are aware that it is not necessarily light-touch.
  (Mr Ball) By definition, it cannot be light touch.

  626. It is as heavy as it needs to be.
  (Mr Ball) Yes, I understand that.

  627. If it means that you come in hard with a market investigation and measures are proposed that are structural, it could be a lot heavier than some of the regulations in the past.
  (Mr Ball) I agree with that, and here you see a confidence on this side in a system that presently works so we would not fear that.

Lord Pilkington of Oxenford

  628. Are the radio people happy? I am asking about the humbler, smaller people. I gather you will not give them evidence of audience and things like that?
  (Mr Ball) As far as I am aware, the radio channels we either retail or give CA to have not made any complaints.
  (Ms Cassells) We are not aware of any.

  Chairman: The history of regulation in telecoms, which is essentially what has been coming across, is not brilliant. It does not seem to have moved quickly enough or robustly enough in dealing with a dominant supplier. Where we are seeking support from you is in how we can make sure the system works better in future.

Mr Grogan

  629. In relation to "due prominence" and "must carry", what do you think about due prominence on EPGs? Do you think that is a good idea?
  (Mr Ball) Due prominence for what?

  630. Public service channels.
  (Mr Ball) They currently have it.

  631. Would you be happy if that was extended to public service radio channels?
  (Mr Ball) I think the BBC channels have due prominence, looking at the top of their EPG page.

  632. I do not think that is enshrined—but you would be happy with that, would you?
  (Ms Cassells) It is not enshrined but we have the 5 BBC national channels listed at top and regional channels shortly thereafter, and since we have done that we fail to see why need regulation in the context of a deregulatory Bill.
  (Mr Ball) It does not really fit with "light touch".

  633. What about "must carry"?
  (Mr Ball) We have "must carry".

  634. If you would let me get a word in edgeways! There is no need to be so defensive! You are a successful company and should not be so defensive. On "must carry", having read the evidence carefully, is it that you would not accept it in a digital world, or that you just do not want it now, or you do not see any need for it at all?
  (Mr Ball) We have "must carry".
  (Mr Gallagher) It exists through European legislation as well through the Access and Interconnection Directive and the Advanced Television Standards Directive. Sky must provide fair, reasonable and non-discriminatory access to all comers, which means conditional access and EPG services.

  635. It is the interpretation of "fair, reasonable and non-discriminatory access", is it not, that is the problem? You complain elsewhere that it takes a long while for the OFT to interpret this provision. If it was clearer in the new legislation, presumably you would welcome that, would you?
  (Mr Ball) It is not OFT, it is Oftel.
  (Ms Cassells) We are talking about CA regulation. We have to charge fair, reasonable and non-discriminatory prices to any channel that comes on the platform, for our CA services, access to the application to programme interface or the electronic programme guide. The concept of "fair, reasonable and non-discriminatory" is not a difficult concept and is familiar to most economists, and certainly the economists of Oftel.

  636. Let me have a go—I have half an economics degree, and with a marginal seat I am always looking for new ideas! You spoke about the subscription channels and mentioned 185 access agreements. Is it not true that it is quite difficult for a subscription channel, because despite the European law, you have that subscriber base of 6 million, and most of them end up doing deals with you in the end, do they not, because of your dominant position? It would be quite difficult for me to launch my cricket channel, let us say, because of your dominant position, would it not?
  (Ms Cassells) The vast number of channels on digital satellite are not retailed by Sky.

  637. The pornographic channels are not, and there are —
  (Ms Cassells) The BBC, Channel 4, Channel 5, S4C are —

  638. But not of the subscription channels—there are very few.
  (Ms Cassells) There are few of the subscription channels.

Lord Crickhowell

  639. You have already referred to the European Television Without Frontiers Directive, but under the draft Bill OFCOM is going to assume responsibility for meeting the requirements of that Directive, including the quotas for European-originated content. Do you welcome that development and do you look forward to the requirements of the Directive being applied more stringently in future?
  (Mr Gallagher) The European Television Without Frontiers Directive requires a majority of European content on channels, "where practicable". The practicability of that will depend upon the nature of the channel, its economics, and a whole range of factors. We find that channels that have been given government privileges in the form of subsidies, universal frequencies and a whole range of special privileges, are easily able to fulfil that. Channels with more thematic and niche audiences cannot necessarily follow the same economic model, but by and large Sky has provided hundreds of millions of pounds of funding for original content and provided tens of thousands of hours of that content. Bizarrely, under the European definitions, a lot of that is not even allowed to be considered European content because areas such as news bulletins and sporting events are not considered to be official European programming.


 
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