Sky TV appeals Ofcom’s end-of-contract notification decision
In a long-running dispute, Sky is appealing Ofcom’s ruling that the provider should send end-of-contract notices to its pay-TV customers.
Ofcom published its non-confidential decision this week, which explains why Sky is obliged to send end-of-contract notices to its pay-TV customers.
While Ofcom officially ruled that was the case in August 2022, Sky has since filed an appeal with the Competition Appeal Tribunal, again trying to challenge Ofcom’s decision.
BT, TalkTalk and Virgin Media are subject to Ofcom rules as their television services are tied to their broadband. However, Sky believes its TV service should be exempted on the grounds that Sky TV is a unified service and transmission is purely ancillary.
Ofcom is investigating Sky’s compliance with end-of-contract notices since December 2020, almost a year after regulation came into force.
Although Sky adheres to regulations when it comes to their broadband contracts, they have yet to inform pay-TV subscribers of the end of their contracts and what options are available to them.
Ofcom’s regulations on end of contract notices apply specifically to Electronic Communications Services (ECS), the definition of which is set out in the Communications Act 2003, and cover:
- Internet access service (e.g. broadband)
- Number-based interpersonal communication service (e.g. telephones)
- Any other service consisting of, or having as its main characteristic, the routing of signals, such as a transmission service used for […] broadcast (e.g. via satellite)
However, Section 32(7) of the Communications Act 2003, actually begins “A CSE […] is not a content service (i.e. a service which involves the provision of material or involves the exercise of control over content)”.
Additionally, Ofcom own orientation states that “services are not SCEs unless they consist wholly or principally of the conveyance of signals”.
It is these definitions above where Sky and Ofcom seem to disagree on whether Sky’s use of a satellite dish service to provide Sky TV is sufficient to classify them as ECS or not.
But in August 2022, Ofcom concluded that:
- Sky provides an electronic communications service as they provide pay television services which are transmitted through a satellite network
- Sky must therefore send end-of-contract notifications to its pay-TV customers
The call of the sky
Sky’s main arguments against Ofcom’s decision are based on the way their Sky TV services are applied to benchmarking in a disintegrated way, rather than seeing the service as a unified proposition, thereby watering down the ‘whole and mainly” from the definition.
For example, Sky considers that its TV services should be enjoyed as a whole, i.e. by combining Sky+, Sky Q, sky glass, sky stream, NOWSky Go and their creation of unique content, such as Sky Originals programming, into one ‘Sky TV’ service.
However, while Ofcom already accepts Sky Glass, NOW and Sky Go are “over-the-top” (OTT) services, which depend on a separate ECS to be provided (such as a third-party broadband connection), the regulator chooses to separate the Sky+ and Sky Q services and to apply the obligation test to these individual parts of Sky TV separately.
As Sky+ and Sky Q rely on Sky’s digital satellite transmission service to be delivered to consumers, Ofcom concluded that Sky TV falls within the definition of an Electronic Communications Service (ECS) in this case, and is therefore obliged to implement the end of contract notifications.
Sky’s court appeal will seek to argue that Sky TV is not a public ECS because it does not “wholly or principally” consist of the transmission of signals. Ultimately, Sky does not believe that their satellite dish broadcast is a big enough part of their Sky TV service for the regulation to apply to them.
Sky’s argument also takes into account their own unique content offering, which is of course a very large part of Sky TV, and is resold by providers such as Virgin Media, BT and TalkTalk via NOW subscriptions. Considering this aspect as well, it is easy to see how highly Sky can perceive the satellite broadcast of its Sky TV service.
Overall, Sky’s appeal to the Competition Appeal Tribunal will seek to highlight how Ofcom incorrectly broke down Sky TV’s services for the purpose of using the ‘fully or mainly” to classify an ECS.
from the sky call answer states that Ofcom has:
- improperly disaggregating Sky’s unified service into constituent parts for the purpose of applying the “wholly or primarily” test to just one of them rather than the whole service;
- take an inappropriate policy argument that undermines exemptions from the scope of the ECS Regulation granted to services that do not consist wholly or primarily of transmission or that do so but are content services;
- introduce a distortion of competition between Sky and other competing content services;
- failing to address the obvious inconsistency in the decision between Ofcom’s conclusion that the transmission element is a separately regulated service and Ofcom’s remedy which applies to Sky TV as a whole; and
- relying on an irrelevant or incorrect characterization of Sky’s case by claiming that Sky’s approach requires that a service involving an ECS can never be subject to content regulation.
If Sky’s appeal is successful, they are aiming to overturn Ofcom’s ruling that their pay-TV service is obliged to send out end-of-contract notices.
From a consumer perspective, although the argument from both sides is extensive and probably touches on the gray areas of interpretations of the definitions, it is arguable that Ofcom’s decision for Sky to implement an end-of-contract fee may not be entirely unreasonable.
For example, when Virgin Media, BT and TalkTalk are forced to send end-of-contract notices to both their broadband and pay-TV subscribers, it can get a little confusing as to why the pay-TV service of Sky could get around that.
Also, while Sky Glass, NOW, Sky Go and most likely Sky’s new Stream TV servicewill anyway be omitted on the basis that Ofcom has already agreed that these services are “over-the-top”, they are also all generally flexible services anyway, with either rolling monthly terms or at least the choice of monthly terms in the case of SkyStream.
Given that, you can see how sending an end-of-contract notification on an 18-month minimum term subscription for Sky TV, where the out-of-contract price is going to go up, would actually put them in line with services similar from Virgin Media, BT, and TalkTalk.
Potentially, by not doing so, it could even encourage people to sign up for Virgin Media on Sky if they had more insurance, they would be reminded to renew their contract at a lower price at the end of their minimum term.
Yet on the other hand, as an actual content producer, Sky is probably more concerned about the competition they face from other content products like Netflix, Prime Video, Paramount+ and Disney+, among others. all of which are considered “over-the-“. top’ and not subject to end-of-contract regulations.
However, all of these services offer subscriptions on a monthly basis, so from a consumer perspective it’s really Sky TV’s minimum 18-month term and out-of-contract price increases that Ofcom seems to be looking for.
Additionally, in May 2022, Ofcom actually found that end-of-contract notifications actually increased the number of customers renewing a contract with the same provider. While contract renewals often provide lower prices for customers, it also gives suppliers certainty about customer retention.