A Curious Regulatory Decision in Britain

Everybody loves to hate Rupert.

Britain's antitrust regulator recently released its preliminary finding that British Sky Broadcasting's 17.9 percent stake in broadcaster ITV restricts competition, and is against the public interest.

As a result BSkyB, which is 39 percent owned by Rupert Murdoch's News Corp., could be forced to sell part or all of its stake in the broadcaster.

It's tempting to jump on the anti-Murdoch bandwagon whenever the opportunity presents itself, but the latest cause célèbre does raise the question: How exactly does the public stand to suffer from BskyB's influence at ITV?

ITV and BSkyB run very different businesses. ITV is one of four primary free-to-air broadcasters that are roughly equivalent, in the British TV landscape, to American networks like NBC, ABC, and CBS.

BSkyB owns television channels, but earns most of its revenue from its subscription satellite service—the British equivalent of DirecTV, but serving about half of Britain's households.

Advertisers aren't likely to be affected by BSkyB's influence at ITV. Britain is in the midst of a steady siphoning of audiences away from the four major broadcasters (BBC, ITV, Channel 4, and Five) as more and more households opt for multichannel satellite and cable packages.

Freeview and Freesat, two free-of-charge services that provide access to 44 and 120 channels, respectively, serve roughly one-third of all British households. Audience share is gradually decentralizing, and advertisers are becoming less dependent on the broadcasters and increasingly keen on the targeting opportunities offered by niche TV channels.

News integrity, the Competition Commission conceded, would remain intact even with a BSkyB takeover of ITV. Britain has historically been eager to safeguard a diversity of opinions on television—it is essential to the charter behind the public broadcaster BBC. That was a valid concern decades ago, when transmission frequencies were limited, but is less so now that there's a virtually limitless capacity for TV channels.

The Competition Commission argues that using its stake in the company, BSkyB could sabotage ITV through influence on its strategy, to drive BSkyB satellite subscriptions by making the free-to-air TV offering less compelling,

Possible, in theory ... but where's the public interest angle?

The Competition Commission's job is to prompt intervention into mergers they deem to be against public interest, and BSkyB's potential to weaken ITV's strategy is more a problem for the company's board than for the public.

If it's competition regulators are so worried about, they might question the impact of a fatly funded public broadcaster like the BBC, which between its two broadcast channels still accounts for nearly 40 percent of audience share remains a formidable obstacle for the rest of the commercial TV industry.

Or, cable provider NTL's 2006 acquisition of rival Telewest, creating a merged company recently acquired by Richard Branson's Virgin brand with a monopoly on the UK's cable TV industry.

ITV is the UK's oldest commercial broadcaster and a familiar staple of the British media; BSkyB is just another jewel in Murdoch's corporate crown, an upstart and disruptor to the order of things. BSkyB has touched on a soft spot for television regulators, and it's paying the price.

by Liz Gunnison