Page last updated at 11:36 GMT, Wednesday, 31 March 2010 12:36 UK

Sky ruling: What it means for you

Sky TV box
It could be some months before there are changes to prices or services

The media regulator Ofcom has announced a shake-up of the way Sky offers premium channels to rival broadcasters.

It has told the broadcaster it must cut the amount it charges cable, terrestrial and internet TV operators for Sky's main sports channels, Sky Sports 1 and 2.

It has also said Sky can offer pay-TV services on Freeview for the first time. At the moment, it is only allowed to show its free channels Sky News, Sky 3 and Sky Sports News.

However, Sky has said it will appeal against Ofcom's proposals, calling them an "unwarranted intervention".

What are the main changes that have been announced?

Ofcom has been concerned that viewers have been missing out, arguing that Sky's dominant position in the pay-TV market has led to higher prices and has squashed choice and innovation.

In order to try to improve matters, it has ordered Sky to provide its flagship sports channels, Sky Sports 1 and Sky Sports 2, to rivals for much less than it currently charges.

It must sell them to rivals at a wholesale price of £10.63 each - 23% less than it currently charges cable operators - or £17.14 for two, a discount of about 10%.

Assuming it does this, Sky will be able to offer its pay-TV channels on Freeview for the first time.

What changes will viewers see?

The key things are choice and price.

Cheaper wholesale costs should mean rivals such as Virgin Media will be able to offer Sky channels cheaper than they currently can.

Manchester United's Wayne Rooney celebrates scoring a goal
Some fear it could mean less money going into Premier League football

BT Vision, for example, says it intends to be cheaper than Sky, but has not yet said by how much. Earlier this year, it said it would aim to charge about £15 a month for Sky Sports 1 - about £10 less than the cheapest Sky package that includes it.

But that was before the wholesale prices were announced - and BT says the charges Ofcom set were £2 or £3 more than they had been expecting.

Sports fans should also have a better choice of how to watch premium sports channels.

Top Up TV, which offers pay channels to Freeview customers through digital terrestrial, should be able to offer Sky Sports 1 and 2 for the first time as a result of the ruling.

This change could give customers the option of just buying one or two premium sports channels, rather than having to get them as part of a bundle of channels, as is currently the case with Sky and Virgin Media. But again, no details have yet been finalised.

There should also be a much wider range of packages on offer including pay-TV, broadband and phone services through the likes of BT Vision.

I am a Sky subscriber - what will it mean for me?

The changes focus on how Sky sells its channels to rivals, so the immediate impact for Sky customers will be less obvious.

sky remote control
Ofcom has not made major changes to the supply of premium movie channels

However, as Ofcom hopes to increase competition in the market, if there is a price war, Sky may choose to respond by making its prices and packages more attractive.

There is a fear, however, that the decisions could hit the quality of the sports content, which critics argue would affect all customers.

Football, cricket and rugby are very concerned about the long-term impact on their sports.

They fear that Sky will have less money to spend on sports rights, meaning there is less cash to spend on the best players and staging big events.

It could also mean there is less competition for sports rights, again driving down the amount of money going into sport, as rival broadcasters may not bother bidding if they know they will be able to buy the premium sports channels for a set price.

However, it is worth pointing out, as the BBC's sports editor David Bond does, that Sky was the only bidder last time for Premier League rights and instead of the price going down, Sky paid more for the rights.

When will the changes come into effect?

Ofcom's decisions are effective immediately, it says. But in practice, it could be some months before there are any changes in prices or services.

It has given Sky six weeks to come up with what it calls a template contract that it will offer rival pay-TV providers.

The regulator hopes that changes will be introduced in time for the start of the new football season in late August.

The timing - and indeed whether any of these changes come into effect - will depend on the appeal Sky is going to launch against the decisions.

What about film channels?

Rival broadcasters had hoped that Ofcom would compel Sky to sell its premium movie channels, and set a wholesale price for them, as it has done with sports.

But the regulator didn't go that far. Instead, Ofcom said that if Sky decides to offer any of its premium film channels on Freeview, then it must also offer to sell them to other digital terrestrial operators such as BT Vision, too.

That is not to say Ofcom is unconcerned about the market for first-run Hollywood movies.

It says that Sky's dominance in the ownership of rights to new blockbuster films has particularly affected the development of alternative subscription video-on-demand services.

So it has proposed referring the matter to the Competition Commission for it to investigate further. Given the long timescales of these inquiries, it could be some considerable time before any changes are decided, if at all.



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