Clouds gather on BSkyB’s horizon

UK cable companies have found an ally in the most unexpected quarter. Last week, ITV and Channel 4 joined their campaign against BSkyB, whose recent programme supply deals with two of the cable industry’s largest operators, Nynex and TeleWest, are being investigated by the Office of Fair Trading.

The terrestrial broadcasters’ concern is clear – Rupert Murdoch is tightening his grip on British broadcasting and should be stopped. But opinion is split with-in the cable business about ITV and Channel 4’s other motives.

It all began last month when BSkyB struck a deal to supply its channels to Nynex and TeleWest at a discount. In return, both operators signed a non-competition clause, the details of which remain under wraps. Sources, however, suggest that both cable companies have agreed not to compete directly against BSkyB, particularly in the acquisition of things such as TV rights to sports and other major events.

Small and medium-sized cable companies were angered by the move. CableTel chief operating officer Steve Wagner says: “Companies operating without a fixed contract are facing large increases” in the amount they must pay BSkyB for its channels. CabelTel’s costs could rise by 20 per cent, which would have to be passed on to consumers, he adds.

BSkyB’s rates and programming packages for cable companies were the subject of an informal undertaking from BSkyB earlier this year after complaints by the cable industry. The OFT and BSkyB agreed that cable firms could buy Sky services la carte and a standard rate card would be established. And BSkyB offered to provide programming at a discount for those companies willing to sign fixed-price agreements. So Nynex and TeleWest did the deed.

“What we did was right for Nynex,” says Nynex executive director of corporate communications Allen Saunders . He insists: “We will continue to work with other cable companies to encourage the development of cable-exclusive programming”.

This is not a view shared by some other cable companies. Through a consortium known as CPP-1, they – along with Nynex and Telewest – were instrumental in encouraging the launch of Associated Newspapers’ Channel One, Live TV and SelecTV, the general entertainment channel which launches last week (MW last week). Now CPP-1 is on the verge of collapse, they claim.

“There are those who regard Sky as the great enemy and others who believe Nynex and TeleWest have done the right thing,” says one source. It is hardly surprising others are considering similar deals, he adds. More intriguing is the entry of ITV and Channel 4 into the fray. Another cable company source says: “Much of this is simply jostling for position. With further relaxation of the rules, ITV would be mad not to set up ITV Gold on cable. Already, Channel 4 suffers in cable homes. And both are keen to be at the front of the queue when the digital licences are handed out, and to ensure Murdoch is at the back.”