Sky TV appeals Ofcom's end of contract notification decision

Ofcom has released its non-confidential decision this week, which sets out their reasoning as to why Sky is obligated to send end of contract notifications to its pay TV customers.

While Ofcom officially ruled this to be the case in August 2022, Sky has since filed an appeal with the Competition Appeal Tribunal, to once again try and challenge Ofcom's decision.

BT, TalkTalk and Virgin Media are subject to Ofcom's rules due to their TV services being tied to their broadband. However, Sky believe their TV service should be exempt on the basis Sky TV is a unified service and transmission is purely an ancillary element.

Source: Ofcom

Ofcom's decision

Ofcom have been investigating Sky's compliance with end of contract notifications since December 2020, almost a year after the regulation came into force.

While Sky adhere to the regulation in regards to their broadband contracts, they have yet to notify any pay TV subscribers their contracts are ending and the options available to them.

Ofcom's regulation of end of contract notifications specifically applies to Electronic Communications Services (ECS), the definition of which is set out under the Communications Act 2003, and covers:

• Internet access service (e.g. broadband)
• Number-based interpersonal communications service (e.g. telephones)
• Any other service consisting, or having as its principle feature, the conveyance of signals, such as a transmission service used for [...] broadcasting (e.g. satellite)

However, Section 32(7) of the Communications Act 2003, actually begins "An ECS [...] is not a content service (that is, a service that involves supplying material or involves exercising control over content)".

In addition, Ofcom's own guidance states that, "services are not ECSs unless they consist wholly or mainly in the conveyance of signals."

It's these above definitions where Sky and Ofcom seem to be disagreeing over whether or not Sky's use of a satellite dish service to deliver Sky TV is enough to classify them as an ECS or not.

But in August 2022, Ofcom concluded that:

• Sky provides an electronic communications service because they provide pay TV services that are transmitted by a satellite network
• Sky must therefore send end of contract notifications to their pay TV customers

Sky's appeal

Sky's main arguments against Ofcom's decision is based on how their Sky TV services are being applied to appraisal tests in a disintegrated fashion, rather than considering the service as a unified proposition, thus watering down the 'wholly and mainly' part of the definition.

For example, Sky believes its TV services should be appraised in their entirety, i.e. combining Sky+, Sky Q, Sky Glass, Sky Stream, NOW, Sky Go, and their unique content creation such as Sky Originals programming, as one 'Sky TV' service.

However, while Ofcom already agrees Sky Glass, NOW and Sky Go are 'over-the-top' (OTT) services, which are reliant on a separate ECS to be delivered (like a third-party broadband connection), the regulator is choosing to segregate Sky+ and Sky Q services and apply the obligation test to these individual parts of Sky TV separately.

Because Sky+ and Sky Q rely on Sky's digital satellite transmission service to be delivered to consumers, Ofcom has concluded that Sky TV falls under the definition of an Electronic Communications Service (ECS) in this instance, and is therefore is obligated to implement the end of contract notifications.

Sky's tribunal appeal will seek to contend that Sky TV is not a public ECS because it does not consist 'wholly or mainly' in the conveyance of signals. Ultimately, Sky doesn't believe their satellite dish broadcasting forms a large enough part of their Sky TV service for the regulation to apply to them.

Sky's argument also considers their own unique content provision, which is of course a very large part of Sky TV, and is resold by providers including Virgin Media, BT, and TalkTalk through NOW subscriptions. Considering this aspect as well, it's easy to see how minimally Sky may perceive their satellite-based broadcasting to be to their Sky TV service.

Overall, Sky's appeal to the Competition Appeal Tribunal will seek to highlight how Ofcom have incorrectly broken down Sky TV's services in a bid to utilise the 'wholly or mainly' stipulation for classifying an ECS.

Sky's appeal response sets out that Ofcom has:

1. inappropriately disaggregating Sky's unified service into constituent elements for the purpose of applying the 'wholly or mainly' test to just one of them rather than to the whole service;
2. taking an inappropriate policy argument which undermines the exemptions from the scope of ECS regulation granted to services which do not wholly or mainly consist in transmission or do so but are content services;
3. introducing a competitive distortion between Sky and other competing content services;
4. failing to answer the obvious contradiction in the Decision between Ofcom's finding that the transmission element is a separately regulable service and Ofcom's remedy which applies to Sky TV as a whole; and
5. relying on either irrelevant or incorrect characterisation 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 aim to clear the decision by Ofcom that their pay TV service is obligated to send end of contract notifications.

Consumer perspective

From a consumer perspective, while the argument from both sides is in-depth and likely touches on grey areas of definition interpretations, it is arguable that Ofcom's decision for Sky to implement end of contract charges may not be entirely unreasonable.

For example, where Virgin Media, BT, and TalkTalk are obligated to send end of contract notifications to both their broadband and pay TV subscribers, it could seem somewhat confusing as to why Sky's pay TV service would be able to sidestep that.

In addition, while Sky Glass, NOW, Sky Go, and most likely Sky's new Stream TV service, will be omitted anyway on the basis Ofcom has already agreed these services are 'over-the-top', they're also all generally flexible services anyway, with either monthly rolling terms, or at least the choice of monthly terms in the case of Sky Stream.

Considering this, 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 rise, would actually put them in line with similar services from Virgin Media, BT, and TalkTalk.

Potentially, in not doing so, it could even sway people to sign up for Virgin Media over Sky if they had more assurance they'd be reminded to re-contract to a lower price at the end of their minimum term.

Yet, on the flip side, as an actual content producer, Sky are likely more concerned with the competition they face from other content producers like Netflix, Prime Video, Paramount+, and Disney+, among others, which are all considered 'over-the-top' services and not subject to the end of contract regulation.

However, all of these services offer subscriptions on a monthly rolling basis, so from a consumer perspective, it's really Sky TV's 18-month minimum term and out of contract price increases Ofcom seem to be going after.

In addition, in May 2022, Ofcom actually found end of contract notifications actually boosted the number of customers re-contracting with the same provider. While re-contracting often achieves lower pricing for customers, it also gives providers certainty on customer retentions.