The Competition Commission is poised to order British Sky Broadcasting to change the way it operates its Sky Movies business to allow rivals to compete on a more equal footing, according to two lawyers who have studied the regulator’s publications, writes Ben Fenton.

In working papers published without fanfare on its website, the commission has said that the deals that BSkyB has signed with the six Hollywood studios on a continuing basis present significant barriers to entry by potential competitors. Virgin Media and BT Vision are seen as the companies most likely to want to enter the market.

The commission’s papers also say that the prices charged by BSkyB to Virgin to take the Sky Movies channel on its cable platform are too high to allow Virgin to make money from customers.

The regulator notes that any other company trying to outbid BSkyB for movie rights to what is called the “first subscription pay television window” would face “significant uncertainty” as to whether BSkyB would run those movies on its satellite platform, or how much they would charge and how much promotion they would give to them.

“We believe that the risks associated with reaching a commercially attractive wholesale agreement with Sky are likely to limit the extent to which the potential rival is willing to bid for FSPTW rights,” the commission says in one of its most recent working papers.

The wholesale rates BSkyB charges “have the effect of limiting the extent to which Sky’s rivals compete effectively with Sky [in relation to those products] in the pay-TV retail market”, the regulator said in an earlier paper.

A competition lawyer, who asked not to be named, said: “The overall message from these working papers is that the CC is going to force Sky to change the way it operates and lower its prices.

“Having said that, you can never predict what the CC will finally decide to do.”

Sky said: “Sky has invested to bring choice and innovation to UK consumers. We’ll respond to the Competition Commission’s provisional findings as the process continues.”

The commission is expected to publish its initial findings within four weeks.

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