Ofcom/Sky win at the CAT against BT’s appeal regarding wholesale price controls

The Competition Appeal Tribunal (CAT) has rejected BT’s appeal against Ofcom’s 2015 decision to remove the “Wholesale Must-offer Obligation” (WMO), introduced by Ofcom in 2010, whereby Sky was to offer wholesale access to certain sports channels at regulated prices and conditions.  BT had appealed Ofcom’s decision and Sky was an intervenor in the proceedings in support of Ofcom.

The CAT rejected the appeal on grounds that Ofcom was not bound to impose ex-ante regulatory obligations on an operator with market power merely because it identified “a risk of conduct prejudicial to fair and effective competition”, and that a “wait and see” approach was reasonable. The CAT dismissed BT’s two key arguments for the need of regulatory intervention. First, it determined that BT overstated the quantitative significance of its “vicious circle theory” (a long-standing BT theory whereby an initial advantage in pay TV customers/subscriber numbers would give increased incentives to bid (and win) premium sports content, which in turn would strengthen the initial advantage). Second, the CAT rejected as merely “assumption-driven” BT’s arguments and BT’s experts’ economic modelling characterising Sky’s request for reciprocal access to BT’s sports’ channels during the negotiations between the parties as Sky imposing a “grant-back” condition, knowing full well this would be unacceptable to BT and would lead to a full break down of negotiations.

A CRA team led by Cristina Caffarra and including Pierre Régibeau, Valter Sorana and Helen Weeds advised Sky on the economic merit of the grant-back modelling put forward by BT’s experts. Dr Caffarra gave evidence in the relatively novel format of a “hot tub” session whereby she and BT’s expert witness were questioned together by the Tribunal. The Tribunal found this “concurrent expert session” very helpful and we can expect it to play a growing role in future cases.

Further information on the case is available on the CAT website here.