9.118 Retailers of pay TV services need to be able to gain access not only to content, but also to the viewers who are willing to pay to watch that content. This issue requires gaining access to platforms and devices.
9.119 In principle, platforms may have the ability to act as a ‘gatekeeper’ setting the terms on which broadcasters and content providers can access viewers. Platform access concerns have previously arisen in the case of linear channel providers looking to secure access to Sky’s satellite platform: the Technical Platform Services regime165 enables channel broadcasters to provide their services direct to subscribers if they are unable to or do not want to become part of Sky’s retail package. In the context of a shift from linear channels towards VOD services, we are currently considering the question of access to VOD services on TV platforms.166
9.120 Over recent years, as a result of technological developments and convergence, there are now a greater number of platforms and devices than ever before to access content services. This ability for content providers to access homes in multiple ways is therefore likely to be pro-competitive. However, we are mindful that it may also raise the potential for new online platform gatekeepers to emerge in the future. 9.121 Investment in content typically involves large fixed costs and so access to platforms
and viewers is important in order to recover those content costs across a large customer base. In our Pay TV Investigation in 2010, we observed that the incumbent (Sky) had an unmatched record in successfully bidding for key rights, as a result of its established large base of subscribers willing to pay for premium sports, which translated into an advantage in bidding for rights over new entrant rivals (sometimes referred to as the 'virtuous circle').
9.122 BT's entry into wholesale channel provision with the launch of BT Sport has relied on upselling to a related subscriber base (broadband subscribers) over which some of the costs of sports rights investment can be recovered. Similar entry strategies might be possible using other related subscriber bases, for example mobile subscribers; we observe that it is reported that Vodafone is planning to launch its pay TV offering before the end of this calendar year.167 However, there is greater uncertainty and hence risk associated with the willingness to pay for premium sports amongst broadband or mobile subscribers, in contrast to a pay TV subscriber base which has an established and predictable willingness to pay.
165
The regime provides regulated access to electronic programming guide (EPG) services and conditional access (CA) services.
166
Access to on-demand services on TV platforms: Terms of Reference, March 2015: http://stakeholders.ofcom.org.uk/binaries/consultations/sky-access- control/statement/Terms_of_Reference.pdf 167 http://www.theguardian.com/business/2015/may/19/vodafone-launch-home-broadband-pay-tv- service
Implications
9.123 Convergence, and in particular retail bundling, brings traditional telecoms services together with content provision. Any potential competition problems in content provision could have implications for the wider bundle including the provision of telecoms services.
9.124 To some degree, the telecoms and content elements of the retail bundle are subject to different regulatory frameworks, with the EU Framework for telecoms principally dealing with transmission services and distribution, rather than content provision. This distinction has caused some to question whether there should be greater alignment of the regulatory frameworks to ensure consistency.
9.125 It is important to start by understanding the likely nature of any potential competition problems in relation to content that could create concerns in relation to telecoms services. There are differences between content and telecoms services: for example, the characteristics of any enduring economic bottlenecks in content are likely to differ from those in telecoms which typically focus on control of infrastructure which is uneconomic to replicate. In content, the concepts of replicability and enduring economic bottlenecks are also relevant. As noted above, in deciding whether particular content constitutes key content the question is whether such content can be replicated. This does not require identical content to be available but content that sufficient consumers regard as a good alternative. There is a further dimension to replicability in the case of content because even where key content rights do exist they are in principle contestable, generally on a regular basis. However, the control of an established retail subscriber base may deliver bidding advantages which means they may not be replicable in practice.
9.126 In identifying enduring economic bottlenecks in the provision of content, relevant questions include:
• Are there types of key content which are effectively unreplicable?
• Is market power likely to persist despite the contestability of content rights?
• Is vertical integration likely to raise concerns, such as discriminatory behaviour?
• Do competition problems arise that affect the ability of any retail providers to compete effectively for bundled consumers?
9.127 Having established a clearer understanding of the potential competition problems that might arise, we can consider whether our various existing regulatory tools are appropriate to enable us to address any competition concerns across the services which make up the retail bundle. That does not necessarily mean that we need identical regulatory tools for all elements of the bundle, but rather sufficient tools to be able to address any competitive distortions on a consistent basis, in the interests of consumers.
Q10: Does the bundling of a range of digital communications services, including some which may demonstrate enduring competition problems individually, present new competition challenges? If so, how might these issues be resolved through regulation, and does Ofcom have the necessary tools available?
Questions for discussion
Overarching issue Specific questions What model of
competition should future regulatory strategy focus on: full end to end networks; passive access to support end to end networks; or active wholesale remedies to deliver downstream competition?
Q6: What do you think is the scope for sustainable end-to-end competition in the provision of fixed communications services? Do you think that the potential for competition to vary by geography will change? What might this imply in terms of available regulatory approaches to deliver effective and sustainable competition in future?
Q7: Do you think that some form of access regulation is likely to continue to be needed in the future? If so, do you think we should continue to assess the appropriate form on a case by case basis or is it possible to set out a clear strategic preference for a particular approach (for example, a focus on passive remedies)?
Q8: Do you agree that full end to end infrastructure competition in mobile, where viable, is the best means to secure good consumer outcomes? Would alternatives to our current strategy improve end user outcomes, and if so, how?
Are there new or unresolved competition issues in digital communications services?
Q9: In future, might new mobile competition issues arise that could affect consumer outcomes? If so, what are these concerns, and what might give rise to them?
Q10: Does the bundling of a range of digital communications services, including some which may demonstrate enduring competition problems individually, present new competition challenges? If so, how might these issues be resolved through regulation, and does Ofcom have the necessary tools available?