Ofcom says the pay-TV broadcaster must cut the wholesale price at which it sells individual channels Sky Sports 1 and 2 to rivals such as Virgin Media from the current £13.88 to £10.63 per subscriber per month, a 23.4% reduction.
The price of a bundle of the two channels must also be reduced from £19.15 to £17.14, a 10.5% drop, the watchdog adds.
Ofcom says action must be taken to offer lower prices and greater choice to customers. It follows a three-year review into the pay-TV market prompted by complaints from rivals including Virgin Media and BT that Sky was stifling competition.
In a statement, Sky says it will challenge the watchdog’s ruling before the Competition Appeals Tribunal.
It adds: “There should be no doubt that Ofcom’s actions represent an unprecedented and unwarranted intervention.
“This is a marketplace where customers are well served with high levels of choice and innovation. Consumers will not benefit if regulators blunt incentives to invest and take risks”.
Ofcom did clear the way for Sky to launch a paid-for TV service on the digital terrestrial platform Freeview.
Gavin Patterson, chief executive of rival BT Retail, says it is “disappointing” that Ofcom did not order Sky to reduce the wholesale prices for Sky Sports 1 and 2 by more. He says that prices should be cut for all Sky’s sports channels and its movie channels, adding that “pubs and clubs should also have been offered some help as they have no option but to pay sky high prices”.
“Today’s decision from Ofcom is disappointing but a step in the right direction,” he says.
Philip Cullum, deputy chief executive of customer protection body Consumer Focus, says Ofcom deserves “much praise” for its ruling.
“We welcome Ofcom’s moves to ensure fair and effective competition, which we hope will lead to more choice, further innovation and lower prices,” he says.
The regulator says the new pricing arrangement is effective immediately and that Sky has six weeks to make contract arrangements with rival pay-TV firms.