Undercutting Sky

Fair and effective competition?

What is fair about the other service providers leaving Sky to put in all the initial investment and then expecting cheaper wholesale prices so that they can undercut them?

Sky aren't perfect but without their investment HD would be a lot further behind than it is and a lot of the better channels such as Sky Arts would be floundering. They also have by far the best recording system on the market in Sky+ (although better quality manufacturing would make them much more reliable).

I dunno. I agree with Sky's point about rivals benefiting without investing, but at the same time, I'm uncomfortable about the fact that there is a real lack of competition in this sector. Sometimes, I do get the feeling that we're at mercy of Sky who can charge anything they want without worrying about losing out sizable customers.

Yes, the solution is for BT & Virgin to get off their backsides & make some serious investment to improve their infrastructure to have any impact on Sky's sales.

OFCOM have told sky to cut the prices to bt and virgin read todays paper sky will have to drop the price now surely?

What goes around comes around.

 Who put all those wires round the country for sky to plud their boxes into? 

 BT (well probaly the GPO but you get my point!)

Superted1974:

What goes around comes around.

 Who put all those wires round the country for sky to plud their boxes into? 

 BT (well probaly the GPO but you get my point!)

Hmmm, no, not really, because we still have to pay BT 11 quid a month to use the phone line. Sorry, £11.50 now to allow BT to roll out "super" broadband across the country.

I agree, much as I don't like paying Sky as much as I do they HAVE made all the investments in the marketplace. It's like a farmer having to sell his crop to his neighbour for less than the supermarket is willing to pay him, so that he can watch his neighbour undercut him and lose business to him.

It is nonsense.

Superted1974:

 Who put all those wires round the country for sky to plud their boxes into? 

Surely that is only for the broadband and phone? Sky use BT infrastructure for their phone and BB services for which they pay BT a fee. BT set this fee at a level where they can make a profit. Sky must price their product and service so they make more than this fee and other costs. As mentioned BT also charge a line rental.

Sky have developed their range of channels and satellites at their own expense so why should they not charge an appropriate fee to other companies? It's almost as if BT have decided to challenge Sky they must price their TV range at ten pounds less than Sky therefore Sky must sell the channels to them for this amount. And if Sky refuse, well that's just unfair!

Doesn't BT have to sell its broadband bandwidth (which it has set up) at a lower price to other companies including Sky who are then undercutting BT by offering broadband at lower prices? Then why shouldn't it expect something similar from Sky?

bigboss:

Doesn't BT have to sell its broadband bandwidth (which it has set up) at a lower price to other companies including Sky who are then undercutting BT by offering broadband at lower prices? Then why shouldn't it expect something similar from Sky?

Absolutely correct BB. Ofcom set the price BT are allow to charge for wholesale broadband products and last mile of copper. I know a fair amount of that copper has been in the ground since GPO days but none of the broadband infrastructure provided by BT Plc has been paid for by the taxpayer yet is still tightly regulated. As Sky making all the investment, BT was banned from entering the tv market by ofcom as they were worried BT would end up with another monopoly at the time. 

Sky are not regulated at all on what they can charge for sports packages. Virgin actually loose money on selling sky sports to customers. Sky can also pick and choose whom they sell the services to.   

Sky have a monopoly on sports in the uk at the moment. This is never good for consumers. One product one supplier always leads to artificially high prices. Not only would regulation allow Virgin and BT to offer far more attractively priced packages it would also force sky into reducing their prices to be competitive. 

No matter what Sky says, it definitely won't be making any loss. Sky is one of the few companies who can't make a loss in the absence of any strong competition. The only reason it's making a hue & cry about it, is because the Ofcom decision will inject some competition, forcing the prices down. Look what happened to broadband. If companies today can afford to offer broadband for a fiver & still make a profit, what can we say about Sky who has not brought its prices down at all & has enjoyed a huge growth in the number of customers from the stupendous success of Sky HD?

http://www.marketingweek.co.uk/news/sky-profits-up-as-hd-takes-off/30058...

Just to add to my point above. BT were forced to sell their products to other providers a lot cheaper than they were allowed to sell their products to consumers at, to allow competition into the market place. Ofcom are not asking Sky to do this as far as I am aware. Only to sell at a fixed rate and to sell to any supplier which asks to purchase their product at a wholesale rate. 

1, I don't think Sky paid for the satellites, merely rent time / bandwidth on them like any other commercial entity could do in principle.

2, The Sky channels investment was minimal.  A high-band U-matic to play endless Simpsons tapes on Sky 1 and a converted warehouse for a TV Studio.  Not exactly mega-bucks, really.

3, Most of the channels in the Sky package are not Sky channels at all - they are channels put together by independent businesses or by the mega-media players like Disney, CBS, NBC, etc.

4, Sky get a heck of a lot of revenue, directly or indirectly, from advertising sales.

5, The "Plus One" cost (i.e the cost of adding a new subscriber) to Sky's customer base is the cost (cost - not selling price) of the dish and box under the TV, which they probably recoup from under a year's worth of subscriptions.

6, Sky have a virtual monopoly of satellite TV supply in the UK.  A lot of pubs are broadcasting using subscription cards from European satellite companies because of the exhorbitant rates Sky charge pubs, and I believe a court case is going on right now to settle whether this is legal under EU competition rules.

7, Let's face it, Sky recovered its start-up costs well over a decade ago, and it's about time the marketplace was opened up to proper competition.

And 8:

In the USA I would have the choice between two satellite providers (Dish and DirecTV), and, assuming that like something like 90% of the people in the USA, I live in some kind of urban connurbation, at least one cable company.

The competition between the two satellite providers and between the satellite providers and the cable companies HAS driven up quaility of service, programming choice, roll-out of HDTV (and not just for pay-per-view movies, sports and porn BTW) and driven down, or at least kept a lid on, prices.  Also, the local terrestrial channels (ABC, NBC and CBS affiliates) have rolled out free terrestrial HDTV in most major cities, further extending customer choice.

Up here on the edge of Aberdeen, I have the choice between Freeview/Freesat, with its limited number of "extra" channels (history, science, natural history, etc,) and Sky.  No cable. And let's face it, there's precious little cable anywhere outside selected major cities right now.  Internet?  You must be joking!  my DSL bandwidth (officially 10 megabits per second) drops as low as 16 kbps when the kiddies get out of school and start logging on.

Darren Heal:

2, The Sky channels investment was minimal.  A high-band U-matic to play endless Simpsons tapes on Sky 1 and a converted warehouse for a TV Studio.  Not exactly mega-bucks, really.

Don't be so ridiculous, in terms of technology and choice, Sky have done more for sports broadcasting in this country than anybody in the last 50 years (the BBC included) and the amount of money they've spent to do it is NOT insignificant.

I've never read anything quite so ludicrous.

Darren Heal:

And 8:

Is anyone stopping a rival satellite service competing with Sky?

There's Freesat, of course, and there was BSB, with its famous 'squarial'. Backed by Granada TV, Anglia TV, Virgin and Amstrad, among others, it failed after eventually only broadcasting for nine months, and was acquired by Sky in a merger to form British Sky Broadcasting.

I actually still have one of those puppies in the attic.
It lives up there alongside my Philips CDi player, Sony ElCassette (yikes!) and my first HeathKit valve amplifier.

The BSB system actually worked great for the two weeks I had it working before they went bust.
Seem to remember they had a great film channel called "Premiere".