Watching the latest episode of Lost last night (via Daily Motion) I realised that I had yet to say anything about the latest developments in the carriage agreement battle between Virgin Media and BSkyB. Last week, Virgin decided to ignore the potential olive branch offered by BSkyB to return to the negotiating table, and followed through with their threat to resort to the Courts to win their battle, hoping that competition law can come to their rescue.
Given that it will likely be 2008 before the High Court would get around to the case, it was hard to take at all seriously claims from Virgin that “Litigation is obviously a serious step and a last resort but we are determined to have these issues resolved as quickly and fairly as possible.” Additionally, I presume Virgin here are hoping for some help from Ofcom’s investigation into the Pay TV market and into the dispute itself, as I don’t know many people who think Virgin have any hope of winning a Court case in this matter.
Of course, we do not know how much BskyB wanted to continue supplying the package containing Sky One and Sky News: Virgin claimed it was double the previous deal price, BSkyB said it was just a rise of 20%. Either way, considering the popularity of the channels had dropped during the course of the last deal you could say that any rise would be hard to justify, even if you accept Sky’s “for a cost of just 3p per customer per day, Virgin Media could offer a bigger and better choice of Sky channels than ever before” argument.
Of course what vexed Virgin even more (aside from BskyB scuppering their ITV bid of course) was that Virgin/NTL had recently agreed a carriage agreement for Virgin/NTL owned channels such as Living and Bravo (held by Flextech) with Sky at a lower rate that BskyB had previously been paying. Under Virgin’s logic this combined with Sky wanting charge more for Sky One et al amounts to abuse of its dominant position.
The question, of course, is going to be whether BSkyB is dominant in the market (and what the market is, and how narrowly it is drawn could be of key importance), and then even if it is, whether it can actually be shown to be abusing that dominance. Thus far, BskyB have been hard to pin down on the latter. In 2002/03 the office of Fair Trading found BskyB was dominant in markets for the wholesale supply of pay channels (in relation to premium sports – premier league football – and film content) but found there were “insufficient grounds to find that BSkyB has abused its dominant position”.