BSkyB, the UK’s biggest pay TV operator, with over 10 million subs, has locked horns over carriage fees with the UK government, which is attempting to stop it charging broadcasters including the BBC £10 million ($16 million) a year to carry their programming. Sky has rebuffed the move, arguing that the BBC and others are benefiting from the investment it has made in its TV platform and should contribute towards it.
“Public service broadcasters benefit from the billions of pounds we’ve invested in our TV platform, and the technical services we provide them,” said a Sky spokesman. “The payments they make are no different to paying for electricity, studio facilities or any other operational costs.”
The BBC on the other hand has argued that the transaction should be reversed and that Sky should pay it for the privilege of carrying its content, which enriches its overall content offering. Sky has recently incorporated iPlayer, the BBC catch up service, into its package, which adds fuel to both sides of the argument. iPlayer has generated extra traffic for Sky, which consumes its bandwidth but also helps retain eyeballs that might otherwise wander off to the web to Watch the content, or worse defect to rival Virgin Media, which has included iPlayer in its package for three years.
There are precedents for both sides in other countries. In Germany, broadcasters have been paying carriage fees to cable TV operators but not satellite providers, although this has led to conflict there too. Kabel Deutschland, Germany's largest cable TV operator, recently upped the ante by dropping regional channels operated by the public networks ARD and ZDF. This was is in direct retaliation for the recent move by ARD and ZDF to stop paying around $35 million annually in carriage fees to Kabel Deutschland. The cable giant has been locked in legal battle with the country's public broadcasters since mid-2012, when ARD, ZDF and Franco-German broadcaster ARTE cancelled carriage contracts with Germany's three major cable operators.
In the U.S., on the other hand, cable operators pay carriage fees to the leading networks for the right to carry their channels. This partly reflects the different balance of power there, with operators dependent on the networks for much of their premium content. Meanwhile, the UK government is arguing that the pros and cons cancel each other out so that no money should change hands for carriage of broadcast channels. Ed Vaizey, the country’s Culture Minister, has said the fees should be dropped and hinted that the government might legislate to remove them if Sky insisted on continuing to charge them. “We’re not going to rush into a regulatory solution because I believe there’s no reason the market should not be able to work out a fair, equitable solution. But if the industry cannot find a way to stop imposing this cost on license fee payers and public service broadcasters, we will look at our options for intervention,” he said.
Vaizey said he would give Sky 12 to 18 months to agree to drop the fees before he would consider intervening. He did though reject the BBC’s call for Sky to pay for its channels. No doubt the BBC would love to emulate the move taken by Germany’s broadcasters and cancel its carriage contract with Sky. But given its delicate position as a noncommercial broadcaster relying mostly on public license fee income, such a move would be impossible politically and alienate a large swathe of the population, unless it could pin the blame on Sky.