Examination of Witnesses (Questions 620-639)|
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.
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
problemthere 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
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
(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
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
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 enshrinedbut
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
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
(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 goI 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
(Ms Cassells) The BBC, Channel 4, Channel 5, S4C are
638. But not of the subscription channelsthere
are very few.
(Ms Cassells) There are few of the subscription channels.
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
(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