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The U.K.'s competition regulator said Friday it was looking to make British Sky Broadcasting Group PLC (BSY.LN), the nation's biggest pay-television operator, change the way it operates its Sky Movies business to allow rivals such as Virgin Media Inc. (VMED) and BT Vision to compete on a more equal footing.
In its preliminary findings, the Competition Commission said would-be rivals are unable to bid successfully against Sky for the rights to show movies from all six major Hollywood studios in the first subscription pay-TV window because of Sky's large base of subscribers.
"We have found that, as a result of this lack of effective competition, subscribers to Sky Movies are paying more than they otherwise would, and there is less innovation and choice than we would expect in a market with more effective competition," said Laura Carstensen, chairman of the investigation.
The Competition Commission said it would consult on potential remedies, including restricting the number of major studios from which Sky may license exclusive rights; restricting the nature of the exclusive rights which Sky can license; and measures requiring Sky to acquire on a wholesale basis rivals' channels containing first subscription pay-TV window movie content.
The Competition Commission has been investigating the subscription premium pay-TV movie market for a year following a referral by the nation's communications regulator Ofcom after its three-year study into the industry. The commission's investigation focused on the way in which movies are sold and distributed amid concerns BSkyB (BSY.LN) has the incentive and ability to distort competition in the pay-TV sector.
Ofcom began its investigation into the pay-TV market in March 2007 after receiving a submission from BT Group PLC (BT.A.LN), the now defunct Setanta, Top Up TV and Virgin Media.
BSkyB has around 10.2 million customers due in large part to its sports offering, particularly the English Premier League, and vast movie library. That compares with rival, Virgin Media, which has around 4.8 million cable customers. BT's pay-TV offering, BT Vision, has around 600,000 customers.
News Corp., which holds a 39.1% stake in BSkyB, recently abandoned its bid to take full control of the pay-TV group in the wake of a phone hacking scandal at its now-closed U.K. tabloid News of the World.
News Corp. also owns Dow Jones & Co, the publisher of this newswire and The Wall Street Journal.
-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; firstname.lastname@example.org