Oftel turns its fire on BSkyB cable terms

Don Cruickshank, the telecoms regulator, is gunning for Rupert Murdoch, in a bid to break the media baron's near monopoly on pay-TV programming.

In a 60-page submission to the Office of Fair Trading, which is investigating Mr Murdoch's BSkyB, Mr Cruickshank's Oftel has lashed out at the terms on which the satellite broadcaster makes its pay-TV programmes - including the popular Sky sport and film channels - available to cable companies.

The intervention by Oftel, the telecommunications regulator, will increase tension with the Independent Television Commission, the television watchdog. But Oftel argues that it has a right to be concerned over the future of the cable industry, which is the major competitor to BT in local telephone services.

BSkyB currently dictates the terms on which it makes its channels available to the cable industry. Specifically, operators can only receive significant discounts on programming if they accept "bundles" of channels. The price is fixed as a percentage of the retail price which BSkyB charges its direct- to-home satellite subscribers.

Oftel regards both practices as unacceptable and anti-competitive. Mr Cruickshank is thought to be adamant that all BSKyB programming be unbundled, giving cable operators freedom to pick and choose among them.

Oftel also calls for non-discriminatory pricing, based on clear, separate accounts for the various parts of BSkyB's businesses. This reflects the approach used by Mr Cruickshank in his dealings with BT. The Oftel submission says that accounting separation is a key safeguard against abuse, and should be a central part of any undertakings.

"There are good grounds for considering that [BSkyB's] pricing and other practices are tending to hold back the development of the cable companies and therefore are threatening the prospects for competition in pay-TV in both the short and the long term."

Oftel's chief concern is that this will in turn hold back the cable industry's ability to market its cable services and thereby reduce its attractiveness to potential telephone customers.

Cable operators could find themselves "between a rock and a hard place", with Sky on one side and BT on the other.

The ITC is believed to be wary of Oftel's intervention, and sees the submission as an attempt to poach its territory. Under the current regime, the ITC and Oftel are meant co-operate in key areas, including conditional access, the technical term for the scrambling and unscrambling of TV signals used by pay-TV broadcasters.

But it is increasingly obvious that the ITC regards Oftel as a rival rather than a partner in overseeing a rapidly evolving industry, where the old distinctions between broadcasting and telephony are becoming blurred.

Oftel's submission is one of 30 received by the OFT, whose director-general, John Bridgeman, launched the inquiry earlier this year. Its conclusions are expected by the end of June. It may recommendation a reference to the Monopolies and Mergers Commission, but the ultimate decision lies with ministers. It is not yet clear whether the OFT views the pay-TV market as separate from the overall broadcasting market, a distinction that could dictate the outcome of the inquiry.

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