Sky to be thrown out of Freeview?

Buried in Ofcom’s Sept 30 110-page report on Sky is an explosive comment on Freeview, the UK’s free-to-air digital terrestrial TV service. Ofcom’s comments cover Sky’s planned Picnic pay-DTT MPEG4 service.

The problem lies in the ownership of Freeview (formally DTV Services Ltd). Currently Freeview’s owners are the BBC, Arqiva-NGW, BSkyB, ITV and Channel 4, each with an equal share. Freeview is a not-for-profit company.

It seems that if BSkyB is permitted to set up its Picnic service, some of the other stakeholders in Freeview would object – big time. "A number of organisations, such as the BBC, for example, raised serious concerns about Sky’s continued membership of DTVSL if Picnic is allowed to launch," Ofcom stated.

"They told us that as certain Freeview decisions require the unanimous agreement of its members, Sky is well positioned to delay or prevent certain developments. They said that in such circumstances a conflict of interest will arise for Sky in connection with its ownership interest in DTVSL since it will no longer have any FTA channels on Freeview, but would instead be promoting a pay DTT proposition. Accordingly, they said that if we were to consent to the Proposal, such consent would need to be subject to a condition that Sky should terminate its involvement in DTVSL as a shareholder."

There is worse. Ofcom’s report said: “We understand that there have already been some difficulties regarding the governance of Freeview. For example, we were told that earlier this year it was not possible to agree a collective increase in the budget for Freeview."

Sky has already expressed reservations about proceeding with Picnic. BSkyB, two weeks ago, and responding to reports that it was laying off staff hired to work on Picnic, said “The blunt truth is that Ofcom has spent 18 months looking at our proposals and there is no end in sight. There is nothing left to be achieved until Ofcom makes its mind up. While regulation works at its own pace, no business can go like this indefinitely so we had to make some pragmatic decisions.”

Ofcom issued an immediate rebuff, arguing that having announced Picnic in a press statement in February 2007, “BSkyB took two months to submit the necessary application and a further two months to provide sufficient information to enable Ofcom to publish a consultation document on the matter. When Ofcom consulted on both the Picnic proposal and the PayTV Market Investigation, several stakeholders, including BSkyB, responded late to these submissions. BSkyB submitted its response on the PayTV Market Investigation over six weeks after the 26 February 2008 deadline. We have received a number of supplementary submissions from stakeholders after deadline dates which we are bound to consider. The most recent one from BSkyB arrived as late as 13 August 2008. BSkyB has raised a series of procedural points throughout this period, including a repeated concern that we are spending insufficient time considering its arguments.”