Way Cleared for Major Digital Mergers
| Published on 30 December 2005 - 3:48pm. | Internet | NTL | Radio and Television | Sky | Telewest |
The Office of Fair Trading (OFT) today announced that it will not refer the proposed mergers of Sky and Easynet, and Telewest and NTL to the Competition Commission. The announcement removes any regulatory barrier to the mergers proceeding.
Sky is looking to break into the DSL market with its proposed acquisition of Easynet. This would enable the satellite broadcaster to extend its reach and provide its programming through standard broadband connections, removing the need for subscribers to install a satellite dish.
"Triple Play" Services
Much of Sky's interest in Easynet will be in developing triple play services. A triple play service, which is common in some European countries, provides customers with one connection for television, telephone and internet. Typically the provider installs a set top box for TV which also has connections for telephone and internet.
The first UK provider to offer a triple play service is Homechoice, although coverage is currently limited to Greater London and Stevenage.
By acquiring Easynet, Sky will have the potential to quickly break into this market. Easynet claim to have around a 90% share of lines previously owned by BT and now opened up to competition.
Two Cable Companies to One
The merger of NTL and Telewest will create just one cable company in the UK. The two companies do not generally compete for the broadband market in the same geographical area.
By combining resources, the companies will hope to develop their programming offerings including a TV "on demand" service.
Pay TV Competition
The OFT considered whether the proposed moves would cause problems with competition in the Pay TV market. In particular, the watchdog considered whether Sky would be able to exercise an advantage by refusing to supply its premium content to other providers.
By allowing the acquisition to continue, the OFT indicated that Sky already had the potential to restrict the companies it supplies content to if it so chooses. It has ruled that the move does not materially affect its incentives in this area.
Good News for Consumers?
The moves may be good news for consumers in the UK. Homechoice bundles phone, broadband and TV from £17.99 per month which includes phone line rental, 1Mb broadband and a basic offering of TV channels, similar to that of Freeview. Accessing Sky is possible too, with Sky Sports and Sky Movies available for £29.50 per month.
The greatest risk to consumers is that any of the content providers is able to exercise too much control over the market. That's a balance that the likes of Sky, NTL and Telewest need to strike carefully, and one that the OFT is likely to be watching keenly.
