Virgin Media 2012 Annual Report Download - page 17

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To that end, we have recently lodged a formal challenge against the European Commission's decision to approve a
project involving the deployment of a State subsidised broadband network in the city of Birmingham. This project may
otherwise have resulted in the over-build of parts of our and other operators' infrastructure. BT has lodged a similar
challenge. We continue to work with the U.K. Government to find constructive ways to progress Birmingham and other
cities' digital objectives.
REGULATION OF TELEVISION AND VIDEO ON-DEMAND SERVICES
We are required to hold individual licenses under the Broadcasting Acts 1990 and 1996 for any television channels
(including barker channels) which we own or operate and for the provision of certain other services on our cable TV
platform, such as electronic program guides. These television licensable content service, or TLCS, licenses are granted
and administered by Ofcom. Under these licenses, each covered service must comply with a number of Ofcom codes,
including the Broadcasting Code, and with all directions issued by Ofcom. Breach of any of the terms of a TLCS license
may result in the imposition of fines on the license holder and, ultimately, to the license being revoked.
ATVOD is the independent co-regulator for the editorial content of U.K. video on-demand services that fall within the
statutory definition under the Communications Act of an “On-Demand Programme Service”, or ODPS.
As a provider of an ODPS, we must comply with a number of statutory obligations in relation to 'editorial content' and
notify ATVOD of our intention to provide an ODPS. Failure to notify ATVOD or comply with the relevant statutory
obligations may result in the imposition of fines or, ultimately, the prohibition on providing an ODPS.
In March 2007, following receipt of a request from us, in conjunction with other affected operators, Ofcom initiated an
investigation into the U.K. pay television, or pay-TV, market. Our joint submission outlined certain features of the U.K.
pay-TV market which, we believe, distort effective competition within this market and, in particular, favor BSkyB. In
its final statement on the pay-TV market, issued in March 2010, Ofcom found that BSkyB has market power in the
wholesale supply of certain premium sports and premium movie channels and acts on that market power to restrict
supply and prevent fair and effective competition.
To remedy the concerns around premium sports channels, Ofcom imposed a wholesale must offer, or WMO, regime
for regulating the terms of supply of Sky Sports 1 and 2 SD and HD. This decision was appealed by a number of
parties (including ourselves).
These appeals were heard by the Competition Appeal Tribunal between May 9, 2011 and July 15, 2011. On August
8, 2012, the Competition Appeal Tribunal issued its judgment, overturning Ofcom's decision. The Competition Appeal
Tribunal found that, whilst Ofcom had the powers to take action, the core competition concerns on which Ofcom based
its decision were unfounded. BT has asked for permission to appeal this judgment and at the time of writing, BT's
application is still being considered.
In relation to movies, Ofcom decided in August 2010 to refer the linear and VOD movie markets to the U.K. Competition
Commission for a 2-year market investigation. In August 2012, the Competition Commission concluded that Sky Movies,
which currently offers the first availability on a PPV basis to the U.K. market of movies from all the big Hollywood
studios, is not a sufficient driver of subscribers' choice of pay-TV provider to give Sky such an advantage over its rivals
when competing for pay-TV subscribers as to harm competition. No remedies have therefore been adopted. Despite
this, the Competition Commission found that competition in the pay-TV retail market overall remains ineffective.
In 2006 Ofcom also initiated a review of the terms under which operators of DTV platforms in the U.K., such as us,
allow access to their platforms for third-party television channels and content providers. However, this review has not
progressed beyond its initial stages. We are therefore unable to assess the likely outcome of this review and resulting
impact on our activities in this sector at this time.
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