BBC ups ante in carriage war with Sky

The BBC has taken its battle with satellite operator BSkyB to a new level by threatening to charge for its popular channels such as BBC1 if Sky does not drop carriage fees.

Currently, the BBC pays £5 million ($8 million) a year for channels to be included in Sky’s pay-TV packages, with the UK’s other four public service broadcasters, including ITV, contributing a further £5 million between them. The BBC has so far merely lobbied for Sky to drop the charges but is now taking a more aggressive stance by proposing to introduce a charge that would presumably cancel out the carriage fee.

While the BBC’s channels are already available free of charge over satellite via the Freesat service, used by only a few of BSkyB’s 11 million customers, for which the platform is effectively the only means of viewing all linear content on the big screen. For this reason, the UK’s culture minister, Ed Vaizey, has added the government’s weight behind calls for Sky to scrap the charges.

As in other countries, the argument revolves around which of the parties benefits the most from the carriage arrangement. The BBC contends that availability of its channels adds to Sky’s appeal, with its director of policy and strategy, John Tate, saying: "Sky should do the decent thing and stop charging license fee payers to carry BBC services that, in reality, underpin their ability to generate enormous profits. This free ride needs to stop."

But Sky’s view is that the BBC is getting a cheap ride over its expensive and state of the art infrastructure. A Sky spokesman said: "The BBC directly benefits from the billions of pounds we've invested in our TV platform and the technical services that support the 49 channels they run over the Sky platform. These payments are no different to paying for electricity, studio facilities or any other operational costs."

Sky has, though, halved the BBC’s carriage fees over the last two years, and analysts believe it is unlikely they will be sustained. The BBC is in the throes of implementing a £700 million cost-cutting plan with elimination of carriage fees high on the agenda. It has now called Sky’s bluff with the threat to levy a counter charge and the operator is unlikely to risk alienating customers by dropping the BBC channels.

Views over carriage rights vary between countries. In Germany, broadcasters have traditionally paid carriage rights as well, but there, too, they are attempting to have them cancelled. However, in Belgium, as in the U.S., cable operators pay leading networks for the right to carry their channels.