The logic is that if it wasn't on the Sky platform, Sky One would lose virtually all of its viewers, whereas the BBC would only lose a few, even most Sky viewers would still watch it via other means.
On the other hand, I've never understood quite the reason why they can levy such a charge - it's not related to their costs.
...Probably something like that... yet the cynic in me reckons the huge "charge" on Sky One hides the equally obscene (but not quite as bad) hit on the BBC... which is REAL cash into the Murdoch empire. The published accounts will net out all the Sky channel "contributions" as a cost, so their 'profit' from the EPG looks modest.
And very much the point of Henry's letter to Broadcast is that they CAN'T - legally - adopt such an approach at all.
the equally obscene (but not quite as bad) hit on the BBC... which is REAL cash into the Murdoch empire.
£3.9m per year is a Mickey Mouse amount of money to both the BBC and Sky.
I'll ask the question again - how much money in total does Sky receive for EPG charges?
Obviously Sky would prefer to receive this money than not. But looking at Sky's accounts it does not appear to represent a significant amount of Sky's income.
"However, one example where Oftel would have serious concerns is where the granting of subsidy was tied to a requirement to subscribe to a retail service of a vertically integrated supplier."
£3.9m per year is a Mickey Mouse amount of money to both the BBC and Sky.
I'll ask the question again - how much money in total does Sky receive for EPG charges?
Obviously Sky would prefer to receive this money than not. But looking at Sky's accounts it does not appear to represent a significant amount of Sky's income.
I'd like to know too... but I suspect it's impossible to extract it from Sky's published figures. The public info as available (on the Sky corp website) does give numbers for individual channels, but only tells a small part of the picture.
As relevant as "how much do they get?" is "How much does it cost them?" . For any business, product margin is typically more important than absolute revenues. Scaling up a 70% monopoly margin business is much more attractive than scaling up a 5% margin business where you have a lot of competition.
The EPG and EPG-associated elements of Sky's income are, I'm pretty certain, very significant - and the margin is huge. Which is partly why the numbers are not available. If they were, the Rapture complaint against Sky would be trivially proved as valid.
The EPG and EPG-associated elements of Sky's income are, I'm pretty certain, very significant - and the margin is huge. Which is partly why the numbers are not available. If they were, the Rapture complaint against Sky would be trivially proved as valid.
I agree the margin may be huge. But the revenue as a proportion of Sky's revenues is not. Sky's revenues for the 3 months to September 2007 (£m):
Retail subscription 898
Wholesale subscription 43
Advertising 78
Installation, hardware & service 73
Other 82
Total 1,185
EPG revenues will be in the "Other" category. But there are various other things also within "Other". For example Sky Active revenues (not separately disclosed but were £22m in the same quarter of 2006).
We simply don't know but even if EPG revenues were half of "Other" that would be £41m out of £1,185m (for the 3 months) - ie 3.5% of total revenues. If they are a quarter of "Other" that would be 1.7% of total revenues.
Another way of looking at it is that Sky's total revenues for the year to June 2007 were £4,551m. So the BBC1 fee of £3.9m (which is one of the very highest and there are very few in that order of magnitude) is under 0.1% of Sky's total revenues.
My guess is that the actual total figure is likely to be around 1.5% to 2% of Sky's revenues. Nice money of course but not actually fundamental to Sky's business.
Finally, surely the Competition Commission Appeal Tribunal could ask for the actual figure when considering the evidence?
At the Rapture hearing, it was evident that there had indeed been a pile of "confidential" submissions (which will not be made public) - so, yes, the Commission could (and should) have received them, but they won't be available for public scrutiny, and challenge.
One of the things that Henry uncovered (again, not all for public scrutiny) was that Sky has a tortuous corporate structure, involving all sorts of onshore/offshore entities through which elements are cross-charged within the Group. Corporate lawyers and accountants make a fortune from setting these arrangements up (Sky isn't unique) to minimise tax liabilities. I think we always have to take the presentation of financials for any multinational with a large pinch of salt, cos they don't necessarily reflect the reality.
At the Rapture hearing, it was evident that there had indeed been a pile of "confidential" submissions (which will not be made public) - so, yes, the Commission could (and should) have received them, but they won't be available for public scrutiny, and challenge.
One of the things that Henry uncovered (again, not all for public scrutiny) was that Sky has a tortuous corporate structure, involving all sorts of onshore/offshore entities through which elements are cross-charged within the Group. Corporate lawyers and accountants make a fortune from setting these arrangements up (Sky isn't unique) to minimise tax liabilities. I think we always have to take the presentation of financials for any multinational with a large pinch of salt, cos they don't necessarily reflect the reality.
But any transactions between Sky group companies will be eliminated on consolidation. Revenues for EPG (from 3rd parties) must be within "Other" revenues in Sky's accounts.
The only possible twist would be if EPG fees were paid to a company outside the Sky group. But that appears impossible as if that was the case, Rapture's case would not be against Sky?
But any transactions between Sky group companies will be eliminated on consolidation. Revenues for EPG (from 3rd parties) must be within "Other" revenues in Sky's accounts.
The only possible twist would be if EPG fees were paid to a company outside the Sky group. But that appears impossible as if that was the case, Rapture's case would not be against Sky?
You underestimate the ability of accountants....
As a simple example:
Company A in the UK reduces its taxable profit by virtue of charges from a Group company B Offshore.
Company B's Offshore domicile is a country with scant regulation or reporting requirements. It is charged by Company C (somewhere else in the Group) some sort of licence fee...little more than a contrivance to repatriate real profits to a country completely outside sight of UK authorities.
The Group as a whole moves profits around, bamboozling tax authorities, and invisibly... and as far as UK authorities ar concerned, yes, profits HAVE been transferred out of the Group (as far as the Uk is aware).
Company A in the UK reduces its taxable profit by virtue of charges from a Group company B Offshore.
Company B's Offshore domicile is a country with scant regulation or reporting requirements. It is charged by Company C (somewhere else in the Group) some sort of licence fee...little more than a contrivance to repatriate real profits to a country completely outside sight of UK authorities.
The Group as a whole moves profits around, bamboozling tax authorities, and invisibly... and as far as UK authorities ar concerned, yes, profits HAVE been transferred out of the Group (as far as the Uk is aware).
In the scenario you are describing above, the last part of the last paragraph is not correct.
If a group makes charges from one group company to another so as to get profits into a low tax country then yes, the group has "moved profits around, bamboozling tax authorities" and yes, the group may save tax but profits have NOT been "transferred out of the Group". The Group's Profit before tax will remain the same (and Group Profit after tax will rise if tax is reduced).
Example - say a group contains 2 companies A and B in countries X (tax rate 30%) and Y (tax rate 0%).
Say the companies have profits before tax as follows: A 80, B 20. Total Group profit before tax = 100, Total Group tax = 24. Total Group profit after tax = 76
Then say a "licence fee" is made from B to A of 60. Now profits are A 20, B 80. Total Group profit before tax = 100. But now Total Group tax = 6. Now Group profit after tax = 94.
So intercompany charges do NOT change Group profit BEFORE tax. The key point about a UK company's GROUP ACCOUNTS is that they consolidate the results of ALL companies in the group, WHATEVER COUNTRY THEY ARE LOCATED IN. So if a UK company has subsidiaries in Tonga and Timbuktu, ALL those companies ARE consolidated in the UK group accounts. The profits made in Tonga and Timbuktu may NOT be subject to UK tax, but the profits made in Tonga and Timbuktu ARE included in the UK group accounts.
The UK corporation tax rate is 30% (for large companies). If a UK multinational company is saving tax by transferring profits to low tax countries, the thing to look for is a low tax charge in the group accounts - ie a tax charge of much lower than 30%.
Of course none of this has any relevance whatsoever to our debate about Sky. Sky's group revenues are as stated in post 56 above. Any intercompany charges made between Sky group companires have NO effect on Sky's group revenues or Sky's group profit BEFORE tax.
Again it is of no relevance but for the record, all companies in the Sky group are registered in the UK, except 2 registered in Luxembourg which is not a particularly low tax country. And the actual tax charge in the Sky group accounts is almost exactly 30%.
The full case transcripts are now online. I've only skimmed through them so far but it's a very interesting read. Rapture gets off to a bad start but things start to turn around when David Henry takes the stand...
I reckon there's a good chance that the Rapture appeal will be upheld, and Ofcom will then have to re-do their examination of Rapture's original complaint....
Rapture really seem to want to prove that Satellite = Sky, something many people on these forums have been trying to disprove for years.
How so? In the transcripts a number of attempts are made to show that Sky doesn't = satellite, including discussion of a non Sky £59 FTA box by Rapture. I think the point they're making is, while there are alternatives, to have any hope of reaching a decent sized audience in the UK you need to be on the Sky EPG.
An interesting point I think is this non-discriminatory access to the EPG. Yes, anyone can have it (well, not any longer, but that's another story...) but not for the same price. The price charged depends on whether the broadcaster buys encryption too. Therefore FTA channels are charged more for an entry on the EPG than encrypted channels. Is that discriminatory or is it legitimate use of the so-called "rate card"?
Isn't this a similar situation to the Sky Mag?? You get a discount for buying more services, but the end cost is the same. Therefore I think it's obvious that, either one service is overpriced or the other is underpriced. Considering the company exists to make profits, I wonder which one it is??
In other words, I believe it's a case of the one service being overpriced, to those who don't take both services. That is discriminatory, surely?
However, with Freesat on the horizon, FTA channels can now indeed get a satellite EPG listing for much cheaper than via Sky. That's competition for you, and in that case I don't think Rapture have a case. They have the choice of whether to pay more for being visible on a platform with more viewers. At least initially. If a whole load of channels are brave enough to bite the bullet and move off Sky and go on Freesat, this could be the start of something big. But who's going to be first???
There was a point about ITV2 paying the same EPG fee as Rapture (whether it does or doesn't... I'm not on about). Arguably, ITV2 has more general appeal than a niche channel such as this, so likely always more viewers. Plus ITV2 was I guess in a higher place in the guide to wherever Rapture was, which I guess is a better thing for channels. So, should they be paying the same fee?
I guess that boils down to the "value" of the EPG,and not relate to the popularity of the channel itself. A higher positioning should attract a higher fee, regardless of who it is (and yes, I understand that includes the BBC, but I'm not sure if there would be provision made for channels that have to be there by law), it's reasonable for the fee to be higher if the platform reaches more viewers than any other competitor platform, and the fee shouldn't be dependent on how many other services are taken as that is discriminatory against broadcasters who don't want other services, if the EPG is listed as a separate, indentifiable product.
Sky could get round that last point though by providing "packages" of "inclusive" services, e.g. say:
£70,000 for EPG
£70,000 for encryption
£120,000 for EPG + Encryption
The full case transcripts are now online. I've only skimmed through them so far but it's a very interesting read. Rapture gets off to a bad start but things start to turn around when David Henry takes the stand...
It was amusing to see them going round in circles about defining what exactly the EPG is. But necessary, as this is crucial to the case. An EPG listing is vital for being visible on the platform and while it doesn't preclude access to the channel for the viewer, it would greatly hinder accessibility for the viewer if the channel is not on the EPG. The EU directive about all FTA channels having to be displayable by all receivers - the Sky box is clearly in compliance with that however it doesn't provide equal accessibility to those channels that choose not to be on the EPG. Whether or not that would fall foul of the EU ruling is something they've got to decide!
But I think they also got confused about the term "access" and it gets complex when talking about Conditional Access. Accessibility of a channel from the box is something different from the CA facility and certainly, as Rapture are arguing I think, should have nothing to do with the EPG charge.
The Rapture Appeal has been brought because Ofcom failed to investigate the central issue of the costs of Sky Set Top Boxes but allowed Sky to include fees not connected with the supply of the EPG in the EPG fee.
As many have pointed out the STB has nothing to do with the cost of providing or operating the Sky EPG. This additional cost is being added to channels EPG fees by Sky. There are many bits of law that cover this issue including EU Directives, Oftel Guidelines and Competition Law and not forgetting the Communications Act 2003.
1. Its starts with the EU Directives that require all Digital Television receivers to pass clear signals and display them. Sky has designed a Set Top Box that does not display them without a EPG listing and only then if they are in a selection of Symbol Rates of either 27.5 or 22. There are other rates available so the Sky Box will not display other Rates. This makes all Sky Boxes in breach of the EU 2002/22 Universal Access Directive (Artical 24 and Annex VI).
2. Then there was a lengthly EU Decision published on the 15th of September 1999. The then New British Interactive Broadcasting was about to launch a new Digital Interactive TV service known as Sky Digital. BiB wanted to have negitive clearance from EU Antitrust action as BiB was going to subsidies the Set Top Boxes (STB). BiB agreed to a list of undertakings including the important fact that the sudsidy would not be charged to FTA (Free To Air) channels.
3. After a couple of years BSkyB Group bought the remaining shareholders out of BiB and merged the BiB companies into BSkyB. This was completed in June 2001.
4. Oftel published a set of guidelines for the supply of CA (Conditional Access) and AC (Access Control) services. Sky owned SSSL had been found to be in a dominant position in the relevant market back in 1999. As a result BSkyB Group is a regulated supplier and must supply Technical Platform Services which include CA, AC and EPG services to all on Fair Reasonable and Non-Discriminatory basis. The 2002 Oftel Guidelines say that broadcaster will only pay for services they use. Rapture and other channels do not use CA or AC services but only wish to purchase a EPG listing service.
It also details what it believes will be reasonable which include the timelyness of the supply. In other words Sky should not delay the supply of the service. So no 5, 7 or 8 month delays in supplying a EPG listing!
All charges will be the result of negotiation and that any published ratecard will be a starting point for negotiation. Sky during the Appeal admitted that there was only 4 channels that paid less than the published ratecard out of 400. So not much sign of negotiation going on.
Probably most importantly is the fact that while in the Rapture Appeal all parties accepted that it was the Oftel 2002 Guidelines that regulate the supply of the EPG it is clear that any STB subsidy is only linked to the supply of CA and AC. Infact this makes even more sence when you consider how the STB subsidy is supplied. The viewer has to agree to have the STB connected to a phoneline to benifit from the subsidy. The STB has a modem built into it to allow this function.
Therefore the subsidy is linked to a phoneline and modem and not the supply of an EPG listing. Which if you remember the STB is required under the EU Universal Access Directive to display all clear broadcasts. A Sky STB will only do this if there is a EPG listing.
5. Now BSkyB has announced that it is refusing to add any new channels to the EPG. This is the clearest violation of all the regulations. Ofcom is meant to be incharge of regulating this industry but has so far failed to take any action to stop Competition Law violations or EU Directive violations.
During the Appeal it was clear that Sky was claiming that it was required to supply the EPG to all on FRND basis. However Sky is not supplying the EPG on FRND basis as they are including 'Platform Cost Contributions' and according to a Top Secret 'Sky Platform Model' that only the QC's, Judges, Sky and Ofcom have seen but it confirms that the biggest costs to the Sky Platform according to Ofcom is the STB subsidy.
For all the above reasons the STB Subsidy is nothing to do with the supply of the EPG. This is why Rapture has Appealed as no other small channel should have to be treated by BSkyB in the same manner.
Just for the record Rapture TV was increasing is revenue and its BARB measured audience and had lowered costs which also in talks with new investors. So Rapture was very viable and was getting very close to a operational breakeven. If only Sky hadn't delayed Rapture's EPG listing by 5 months then a further 3 months before the prper EPG number of 193 then Rapture would have been even better off. Then theres the plain fact that dispite the fact the the senior Sky management was fully aware that Rapture would and was preparing an Appeal against Ofcom. Sky went a head and terminated the Rapture EPG.
You should all ask yourself this question the next time you are watch your 'Free Sky Box and Minidish'. Why is it that you have had to pay an average £388 per year to watch your 'Free' box?
It doesn't look so 'Free' now does it? A really 'Free' box would come with so many strings. Just imagine if your Supermaket offered you a years 'Free' shopping, then you findout that your parents were being charged for your 'Free' shopping. While you might be happy I doubt your parents would be happy and then neither would you when someelses 'Free' shopping started to be charged to you.
It appears that the Sky STB is the most expensive 'Free' STB on the planet.
Why is it that you have had to pay an average £388 per year to watch your 'Free' box?
Absolutely - I've always been astounded by the number of people who are attracted by cheap one-off costs but expensive ongoing costs! You only have to look at the regular posts on these forums looking for deals to shave £50 off the cost of a Sky+ or HD box.
We expect the judgement around Feb'08. However the case is much larger than was expected. Ofcom while claiming 'Proportionality' and that 'this case is only about a small amount of £76,000' was submitting a 2 A4 ring folders full of defence annexes.
Then in the appeal they claim 'this is a very important case for all parties'. Really! If only Ofcom had done their job either before Rapture was forced to lodge a offical dispute or during the dispute investigation then there would not have been a need for Rapture to Appeal.
The strange thing is that if Sky hadn't treated me and Rapture is this way I would not now be a expert on the workings of EU Directives, Oftel Guidelines, Communication Act and have had several meetings with my MP and others all raising complaints that Ofcom and Sky are in breach.
At the beginning of all of this I had no idea that Ofcom was so utterly useless or that questions that I raised in a Ofcom meeting on the 20th of Feb'07 would not be answered and somehow not appear in the Ofcom submitted defence document that was claiming to be a record of the meeting.
I have a 4th meeting with my MP over this in the near future. After being based in London for close to 4 years I came back to Edinburgh to find that my MP had changed he was then the Secretary Of State For Trade and Industry. He's been promoted since then. I'm talking about Rt Honorable Alistair Darling MP.
I have to say he's been quite helpful and intersted in the case.
I'm now off to submit a document to the Competition Commission to object to Sky's lawyers attempt to get a delay in the ITV Share issue. Since Rapture responded to the CC findings Sky hqd to write to all respondents. It came as a bit of a supprise.
I feel that Rapture will win the Appeal and then Ofcom will be exposed. A new Determination will show that the EPG fee is too high for all broadcasters not just Rapture. I will be writing to all Ofcom License holders to prepare them for the likely outcome and discuss a legal action against both Ofcom and Sky.
The Rapture Appeal has been brought because Ofcom failed to investigate the central issue of the costs of Sky Set Top Boxes but allowed Sky to include fees not connected with the supply of the EPG in the EPG fee.
<large snip!>
Thanks for this fascinating insight into your case. It does seem like Sky has a lot to answer for, and even more importantly Ofcom, who if the above is all correct have turned a blind eye to several important issues.
I look forward to the outcome and hope the tribunal find in your favour.
Comments
...Probably something like that... yet the cynic in me reckons the huge "charge" on Sky One hides the equally obscene (but not quite as bad) hit on the BBC... which is REAL cash into the Murdoch empire. The published accounts will net out all the Sky channel "contributions" as a cost, so their 'profit' from the EPG looks modest.
And very much the point of Henry's letter to Broadcast is that they CAN'T - legally - adopt such an approach at all.
£3.9m per year is a Mickey Mouse amount of money to both the BBC and Sky.
I'll ask the question again - how much money in total does Sky receive for EPG charges?
Obviously Sky would prefer to receive this money than not. But looking at Sky's accounts it does not appear to represent a significant amount of Sky's income.
"However, one example where Oftel would have serious concerns is where the granting of subsidy was tied to a requirement to subscribe to a retail service of a vertically integrated supplier."
Isn't that exactly what Sky are doing?
I'd like to know too... but I suspect it's impossible to extract it from Sky's published figures. The public info as available (on the Sky corp website) does give numbers for individual channels, but only tells a small part of the picture.
As relevant as "how much do they get?" is "How much does it cost them?" . For any business, product margin is typically more important than absolute revenues. Scaling up a 70% monopoly margin business is much more attractive than scaling up a 5% margin business where you have a lot of competition.
The EPG and EPG-associated elements of Sky's income are, I'm pretty certain, very significant - and the margin is huge. Which is partly why the numbers are not available. If they were, the Rapture complaint against Sky would be trivially proved as valid.
I agree the margin may be huge. But the revenue as a proportion of Sky's revenues is not. Sky's revenues for the 3 months to September 2007 (£m):
Retail subscription 898
Wholesale subscription 43
Advertising 78
Installation, hardware & service 73
Other 82
Total 1,185
EPG revenues will be in the "Other" category. But there are various other things also within "Other". For example Sky Active revenues (not separately disclosed but were £22m in the same quarter of 2006).
We simply don't know but even if EPG revenues were half of "Other" that would be £41m out of £1,185m (for the 3 months) - ie 3.5% of total revenues. If they are a quarter of "Other" that would be 1.7% of total revenues.
Another way of looking at it is that Sky's total revenues for the year to June 2007 were £4,551m. So the BBC1 fee of £3.9m (which is one of the very highest and there are very few in that order of magnitude) is under 0.1% of Sky's total revenues.
My guess is that the actual total figure is likely to be around 1.5% to 2% of Sky's revenues. Nice money of course but not actually fundamental to Sky's business.
Finally, surely the Competition Commission Appeal Tribunal could ask for the actual figure when considering the evidence?
One of the things that Henry uncovered (again, not all for public scrutiny) was that Sky has a tortuous corporate structure, involving all sorts of onshore/offshore entities through which elements are cross-charged within the Group. Corporate lawyers and accountants make a fortune from setting these arrangements up (Sky isn't unique) to minimise tax liabilities. I think we always have to take the presentation of financials for any multinational with a large pinch of salt, cos they don't necessarily reflect the reality.
But any transactions between Sky group companies will be eliminated on consolidation. Revenues for EPG (from 3rd parties) must be within "Other" revenues in Sky's accounts.
The only possible twist would be if EPG fees were paid to a company outside the Sky group. But that appears impossible as if that was the case, Rapture's case would not be against Sky?
You underestimate the ability of accountants....
As a simple example:
Company A in the UK reduces its taxable profit by virtue of charges from a Group company B Offshore.
Company B's Offshore domicile is a country with scant regulation or reporting requirements. It is charged by Company C (somewhere else in the Group) some sort of licence fee...little more than a contrivance to repatriate real profits to a country completely outside sight of UK authorities.
The Group as a whole moves profits around, bamboozling tax authorities, and invisibly... and as far as UK authorities ar concerned, yes, profits HAVE been transferred out of the Group (as far as the Uk is aware).
These ran for several months with viewers sending in money for the service which never launches and didn't refund viewers.
This David Henry lived in Edinburgh and his mum used to answer the 'phone for him.
The company behind it was Phonovision (David Henry's) and had a go at doing laserdiscs as well.
I don't think the channel was meant to be a scam - just run by somebody who had no real idea what to do.
I would never do that - I am a Chartered Accountant!
In the scenario you are describing above, the last part of the last paragraph is not correct.
If a group makes charges from one group company to another so as to get profits into a low tax country then yes, the group has "moved profits around, bamboozling tax authorities" and yes, the group may save tax but profits have NOT been "transferred out of the Group". The Group's Profit before tax will remain the same (and Group Profit after tax will rise if tax is reduced).
Example - say a group contains 2 companies A and B in countries X (tax rate 30%) and Y (tax rate 0%).
Say the companies have profits before tax as follows: A 80, B 20. Total Group profit before tax = 100, Total Group tax = 24. Total Group profit after tax = 76
Then say a "licence fee" is made from B to A of 60. Now profits are A 20, B 80. Total Group profit before tax = 100. But now Total Group tax = 6. Now Group profit after tax = 94.
So intercompany charges do NOT change Group profit BEFORE tax. The key point about a UK company's GROUP ACCOUNTS is that they consolidate the results of ALL companies in the group, WHATEVER COUNTRY THEY ARE LOCATED IN. So if a UK company has subsidiaries in Tonga and Timbuktu, ALL those companies ARE consolidated in the UK group accounts. The profits made in Tonga and Timbuktu may NOT be subject to UK tax, but the profits made in Tonga and Timbuktu ARE included in the UK group accounts.
The UK corporation tax rate is 30% (for large companies). If a UK multinational company is saving tax by transferring profits to low tax countries, the thing to look for is a low tax charge in the group accounts - ie a tax charge of much lower than 30%.
Of course none of this has any relevance whatsoever to our debate about Sky. Sky's group revenues are as stated in post 56 above. Any intercompany charges made between Sky group companires have NO effect on Sky's group revenues or Sky's group profit BEFORE tax.
Again it is of no relevance but for the record, all companies in the Sky group are registered in the UK, except 2 registered in Luxembourg which is not a particularly low tax country. And the actual tax charge in the Sky group accounts is almost exactly 30%.
http://www.rapturetv.com/news_article.php?News=14
http://www.rapturetv.com/news_article.php?News=15
How so? In the transcripts a number of attempts are made to show that Sky doesn't = satellite, including discussion of a non Sky £59 FTA box by Rapture. I think the point they're making is, while there are alternatives, to have any hope of reaching a decent sized audience in the UK you need to be on the Sky EPG.
Isn't this a similar situation to the Sky Mag?? You get a discount for buying more services, but the end cost is the same. Therefore I think it's obvious that, either one service is overpriced or the other is underpriced. Considering the company exists to make profits, I wonder which one it is??
In other words, I believe it's a case of the one service being overpriced, to those who don't take both services. That is discriminatory, surely?
However, with Freesat on the horizon, FTA channels can now indeed get a satellite EPG listing for much cheaper than via Sky. That's competition for you, and in that case I don't think Rapture have a case. They have the choice of whether to pay more for being visible on a platform with more viewers. At least initially. If a whole load of channels are brave enough to bite the bullet and move off Sky and go on Freesat, this could be the start of something big. But who's going to be first???
...and when do we get a result on this thing?
Sky could get round that last point though by providing "packages" of "inclusive" services, e.g. say:
£70,000 for EPG
£70,000 for encryption
£120,000 for EPG + Encryption
But I think they also got confused about the term "access" and it gets complex when talking about Conditional Access. Accessibility of a channel from the box is something different from the CA facility and certainly, as Rapture are arguing I think, should have nothing to do with the EPG charge.
As many have pointed out the STB has nothing to do with the cost of providing or operating the Sky EPG. This additional cost is being added to channels EPG fees by Sky. There are many bits of law that cover this issue including EU Directives, Oftel Guidelines and Competition Law and not forgetting the Communications Act 2003.
1. Its starts with the EU Directives that require all Digital Television receivers to pass clear signals and display them. Sky has designed a Set Top Box that does not display them without a EPG listing and only then if they are in a selection of Symbol Rates of either 27.5 or 22. There are other rates available so the Sky Box will not display other Rates. This makes all Sky Boxes in breach of the EU 2002/22 Universal Access Directive (Artical 24 and Annex VI).
2. Then there was a lengthly EU Decision published on the 15th of September 1999. The then New British Interactive Broadcasting was about to launch a new Digital Interactive TV service known as Sky Digital. BiB wanted to have negitive clearance from EU Antitrust action as BiB was going to subsidies the Set Top Boxes (STB). BiB agreed to a list of undertakings including the important fact that the sudsidy would not be charged to FTA (Free To Air) channels.
3. After a couple of years BSkyB Group bought the remaining shareholders out of BiB and merged the BiB companies into BSkyB. This was completed in June 2001.
4. Oftel published a set of guidelines for the supply of CA (Conditional Access) and AC (Access Control) services. Sky owned SSSL had been found to be in a dominant position in the relevant market back in 1999. As a result BSkyB Group is a regulated supplier and must supply Technical Platform Services which include CA, AC and EPG services to all on Fair Reasonable and Non-Discriminatory basis. The 2002 Oftel Guidelines say that broadcaster will only pay for services they use. Rapture and other channels do not use CA or AC services but only wish to purchase a EPG listing service.
It also details what it believes will be reasonable which include the timelyness of the supply. In other words Sky should not delay the supply of the service. So no 5, 7 or 8 month delays in supplying a EPG listing!
All charges will be the result of negotiation and that any published ratecard will be a starting point for negotiation. Sky during the Appeal admitted that there was only 4 channels that paid less than the published ratecard out of 400. So not much sign of negotiation going on.
Probably most importantly is the fact that while in the Rapture Appeal all parties accepted that it was the Oftel 2002 Guidelines that regulate the supply of the EPG it is clear that any STB subsidy is only linked to the supply of CA and AC. Infact this makes even more sence when you consider how the STB subsidy is supplied. The viewer has to agree to have the STB connected to a phoneline to benifit from the subsidy. The STB has a modem built into it to allow this function.
Therefore the subsidy is linked to a phoneline and modem and not the supply of an EPG listing. Which if you remember the STB is required under the EU Universal Access Directive to display all clear broadcasts. A Sky STB will only do this if there is a EPG listing.
5. Now BSkyB has announced that it is refusing to add any new channels to the EPG. This is the clearest violation of all the regulations. Ofcom is meant to be incharge of regulating this industry but has so far failed to take any action to stop Competition Law violations or EU Directive violations.
During the Appeal it was clear that Sky was claiming that it was required to supply the EPG to all on FRND basis. However Sky is not supplying the EPG on FRND basis as they are including 'Platform Cost Contributions' and according to a Top Secret 'Sky Platform Model' that only the QC's, Judges, Sky and Ofcom have seen but it confirms that the biggest costs to the Sky Platform according to Ofcom is the STB subsidy.
For all the above reasons the STB Subsidy is nothing to do with the supply of the EPG. This is why Rapture has Appealed as no other small channel should have to be treated by BSkyB in the same manner.
Just for the record Rapture TV was increasing is revenue and its BARB measured audience and had lowered costs which also in talks with new investors. So Rapture was very viable and was getting very close to a operational breakeven. If only Sky hadn't delayed Rapture's EPG listing by 5 months then a further 3 months before the prper EPG number of 193 then Rapture would have been even better off. Then theres the plain fact that dispite the fact the the senior Sky management was fully aware that Rapture would and was preparing an Appeal against Ofcom. Sky went a head and terminated the Rapture EPG.
You should all ask yourself this question the next time you are watch your 'Free Sky Box and Minidish'. Why is it that you have had to pay an average £388 per year to watch your 'Free' box?
It doesn't look so 'Free' now does it? A really 'Free' box would come with so many strings. Just imagine if your Supermaket offered you a years 'Free' shopping, then you findout that your parents were being charged for your 'Free' shopping. While you might be happy I doubt your parents would be happy and then neither would you when someelses 'Free' shopping started to be charged to you.
It appears that the Sky STB is the most expensive 'Free' STB on the planet.
Anyway, we all wait with great anticip.....
...ation for the outcome of this case.
Then in the appeal they claim 'this is a very important case for all parties'. Really! If only Ofcom had done their job either before Rapture was forced to lodge a offical dispute or during the dispute investigation then there would not have been a need for Rapture to Appeal.
The strange thing is that if Sky hadn't treated me and Rapture is this way I would not now be a expert on the workings of EU Directives, Oftel Guidelines, Communication Act and have had several meetings with my MP and others all raising complaints that Ofcom and Sky are in breach.
At the beginning of all of this I had no idea that Ofcom was so utterly useless or that questions that I raised in a Ofcom meeting on the 20th of Feb'07 would not be answered and somehow not appear in the Ofcom submitted defence document that was claiming to be a record of the meeting.
I have a 4th meeting with my MP over this in the near future. After being based in London for close to 4 years I came back to Edinburgh to find that my MP had changed he was then the Secretary Of State For Trade and Industry. He's been promoted since then. I'm talking about Rt Honorable Alistair Darling MP.
I have to say he's been quite helpful and intersted in the case.
I'm now off to submit a document to the Competition Commission to object to Sky's lawyers attempt to get a delay in the ITV Share issue. Since Rapture responded to the CC findings Sky hqd to write to all respondents. It came as a bit of a supprise.
I feel that Rapture will win the Appeal and then Ofcom will be exposed. A new Determination will show that the EPG fee is too high for all broadcasters not just Rapture. I will be writing to all Ofcom License holders to prepare them for the likely outcome and discuss a legal action against both Ofcom and Sky.
Thanks for this fascinating insight into your case. It does seem like Sky has a lot to answer for, and even more importantly Ofcom, who if the above is all correct have turned a blind eye to several important issues.
I look forward to the outcome and hope the tribunal find in your favour.