Editorial - Pay-TV remedy lies in technology and viewer behaviour

With the screens set to go blank on some 30 million of the UK's TV sets in 2012 and one in five homes still having no digital TV service, the competition for new digital viewers is growing in intensity, as this week's feature illustrates (page 22).

Freeview, now the most popular digital TV platform, can expect to cream off the lion's share of digital refuseniks who have remained steadfastly happy with the five channels on their analogue sets. The theory being that they are unlikely to want to pay for greater TV choice.

However, there is optimism that once introduced to the joys of multichannel via their Freeview box, they can be lured into a "pay-lite" service, where they pay only for what they really want to watch, at a cheaper price than the average cable or satellite subscription.

Top Up TV, Setanta and BT Vision aim to exploit this opportunity, while Sky wants to, but is currently prevented from doing so by Ofcom. The problem for the opportunists, and that includes Virgin Media in its quest to grow its cable franchise, is that much of the content that viewers would be prepared to pay for Sky has exclusive rights to.

This, they say, is unfair and Ofcom has been induced to investigate whether Sky's behaviour in the pay-TV market infringes the Enterprise Act. What they want is for Sky to make its premium content - Sky Sports and Movies - available to other pay-TV operators at a "fair" price.

Sky might say that its only crime is to be successful, by being bold and visionary enough to bid for and win these rights in an open marketplace. Its rivals argue that they are unable to match Sky's power in the market because of its pay-TV dominance. Should Ofcom agree, Sky might have to break its subscription model where premium content is bundled with "basic" channels.

However, the judicial process could take until 2010, by which time the TV market could have a very different shape. BT Vision should, by then, have 3 million customers, the same as cable now, and, if broadband TV takes off as expected, then Sky's satellite platform will not be so dominant.

The solution to an uncompetitive pay-TV market may lie as much in technology and changing viewer behaviour, from subscription to on-demand, as in competition law.

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