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Ofcom Submission - Bullet Points

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Ofcom Submission - Bullet Points Powered By Docstoc
					Ofcom
Mr. Anthony Szynkaruk
Riverside House
2a Southwark Bridge Road
London SE1 9HA
                                                            23rd February 2007

Ref: Dispute with BSkyB


Dear Anthony,

As promised please find further information and attachments that proves Rapture
TV’s case and shows BSkyB did not comply with FRND requirements.

   1. Contribution to the Set Top Box Not Fair, Reasonable and Non-
      Discriminatory

      (a). Rapture is a free to air channel and is not on the same platform as
      BSkyB, but merely shares the same air space. Therefore when BSkyB are
      promoting their platform they are actually promoting the Pay TV Platform
      and not the Free to Air Platform or Rapture TV.

      Ofcom have stated in the ‘Draft Determination’ dated 12/02/2007 that
      Rapture and all other channels receive a benefit from being on the BSkyB
      platform. However the Sky Platform is a Pay TV platform and Rapture is
      not a Pay TV channel so does not receive any Pay TV subscription revenue
      or benefit from any Pay TV features or services. It is a ‘Free to Air’
      channel and can only generate revenues from selling advertising or
      sponsorship linked directly to viewing levels. There is no benefit from
      being on a Pay TV platform.

      (b). Rapture is in fact a ‘Free to Air’ communication network and is
      separate to the BSkyB Pay TV network. Rapture cannot be expected to
      pay fees to BSkyB for a network that Rapture does not use. Rapture has
      already established that the end user is the legal owner of the satellite
      system and that Rapture delivers its data packages through its own
      communications network. Therefore only the actual cost of supplying the
      EPG service to Rapture is justifiable.

      Rapture only requires a signal path as shown on the left of the graphic on
      page 2. This clearly shows a simple delivery means that requires no other
      services fees relating to other CA and AC services are not incurred.

      (c). Marketing Contributions Limited a wholly own subsidiary of BSkyB
      Group PLC and uses an Interactive Discount Sales Agreement
      (Samples of which have been supplied to Ofcom) to sell the satellite
      equipment detailed as a Minidish, LNB (Low Noise Block), Digibox and a
      authorised fitting charge for the satellite system.




                                                                              1
 (d). The end user has to sign and agree to pay either a reduced fitting fee
 of £40 if the end user is also entering a Sky Pay TV subscription or a
 higher amount of about £100 for the fitting if the end user is not entering
 a Pay subscription.

 It is important to note that the term ‘Free’ as promoted in the Sky
 promotional material cannot be taken up without paying any monies to the
 BSkyB Group of companies and therefore the equipment is not without
 charge. Ofcom has confirmed to Rapture that the end user owns the
 satellite equipment from the day it is installed.




Rapture
Needs
Only
EPG
Service




                                                                          2
   Rapture has identified that the above transaction is a sale and purchase
   transaction that falls within the meaning of the definition of the ‘Sales Of
   Goods Act 1979’.

   Rapture believes that the Sky TV agreement including the discount
   agreement is a simple transfer of all rights of use and profit in the goods
   from the seller in this case BSkyB Group to the End User and therefore
   BSkyB Group has no claim on the goods and cannot then charge fees to
   third parties for any potential benefit a third party may or may not receive
   as it does not own the goods.

   (e). Rapture believes that BSkyB Groups new published price list on the
   20th of December 2006 for an EPG service supply shows that the true cost
   according to BSkyB Group is £14,000 per annum. Additional ‘Platform
   Cost Contributions’ for Rapture would be an additional £65,000 per
   annum minimum these additional costs are not for the cost of supplying
   the EPG service but are related to other no essential services that
   channels like Rapture do not require and do not benefit from.

   BSkyB owned SSSL (Sky Subscriber Services Limited) has been found to
   be a dominant service provider for EPG, CA and AC technical services by
   Oftel in the year 2000. Further more the OFT found BSkyB to be a
   dominant provider of premium sport and film channels and had restrictions
   place on BSkyB for the supply of these services to cable companies.
   Despite these findings BSkyB has continued to sell and market the satellite
   equipment at below market value in order to build its Pay TV platform.
   This is a clear case of predatory pricing and is anti competitive as it
   restricts the ability of others to compete.

2. No Effective Negotiations Not Fair, Reasonable and Non-
   Discriminatory

   Rapture TV had attempted to enter meaningful negotiations with BSkyB
   Group but BSkyB Group first delayed responding to the launch process and
   then issued a draft agreement when a very short period of time was left
   before the planned launch date. BSkyB had stated that if Rapture missed
   any of the technical deadlines imposed by BSkyB then Rapture would have
   to go to the end of a launch list, which BSkyB had claimed was 8 months
   long. This was not an environment conducive with reasonableness and
   fairness.

   Ofcom has in its draft determination claimed that Rapture failed to give
   sufficient information or enter it to negotiation with BSkyB to allow BSkyB
   to make a decision on whether Rapture should pay a lesser fee for the EPG
   listing service.

   What does negotiation mean?

   The Cambridge Dictionary describes ‘Negotiation’:

   the process of discussing something with someone in order to reach an
   agreement with them, or the discussions themselves:




                                                                             3
     Dictionary.com describes ‘Negotiation’:

1.   mutual discussion and arrangement of the terms of a transaction or
     agreement: the negotiation of a treaty.
2.   the act or process of negotiating.
3.   an instance or the result of negotiating.

     Rapture has already submitted written evidence that BSkyB did not
     engage in meaningful negotiation.

     To underline this point further Rapture has included a chain of emailed
     correspondence between BSkyB and Rapture.

     Annex (1) On the 10th of November 2005 Rapture’s David Henry wrote to
     BSkyB’s Emma McCormack highlighting several concerns.

     Paragraph 8 on page 3 of 12 states ‘We also do not believe the EPG
     fee that is being charged is at a fair level or reflects the true cost
     of a EPG channel listing and unless this is negotiatable we are
     looking for a official review of the EPG charges to ascertain a fair
     level of fee.’    This is clearly attempting to engage BSkyB in to
     negotiation.

     BSkyB’s Emma McCormack responded on November the 11 th 2005 and
     stated ‘As we have previously said, we will not reduce the EPG
     charge for Rapture.’

     This clearly shows that BSkyB was not prepared to negotiate the terms as
     required by Ofcom’s rules. This was discriminatory and in breach of the
     Fair, Reasonable and Non-Discriminatory principles.

     Ofcom has contended that if Rapture had disclosed its 2004 Business Plan
     to BSkyB it would not have been able to convince them that they should
     have been charged a reduced fee for the provision of EPG services. The
     commercial confidential nature of the Rapture plans which included
     programming plans and schedules would not have been disclosed to a
     competitive channel operator like BSkyB. Ofcom cannot seriously expect
     such a requirement from Rapture, as to disclose highly sensitive
     confidential information to a competitor would be an irresponsible course
     of action. It would also leave Rapture venerable to a copycat channel or
     programming being launched by BSkyB.

     The 2004 business plan was purely for investment where you have to
     show an up side to investment, and that all costs would have been met.
     This was only 1 set of assumptions and not the actual real internal plan
     that Rapture was working to, nor would this have been the plan that
     Rapture would have disclosed to BSkyB had it been requested which it was
     not, as this was a speculative plan, not an actual plan. The plan also did
     not include the damaging affects by BSkyB delaying the launch of Rapture.

     Previous attempted negotiations with BSkyB between Power TV Limited
     and BSkyB had similarly been frustrated by BSkyB. (See Annex 2-10)
     Power TV Limited had a original EPG agreement for £28,000 per year but
     BSkyB refused to honour the terms and forced Power TV Limited to enter a
     2nd agreement at a higher level of £75,000 per year.



                                                                             4
On the 30th of April 2002 Power TV Limited wrote to Mr. Tom Eyton-Jones
at BSkyB concerning the allocation of an EPG channel number for a soon
to re-launch Rapture TV. Channel number 115 was requested as it was
empty and always had been. A compelling argument was put forward as
the new Rapture TV was to invest in original programming of a high
quality and it was important that the widest possible audience should be
able to find it. See Annex 2.

BSkyB replied via Susan Morris on the 15th of May 2002 BSkyB turned
down the allocation of number 115 to Power TV Limited. See Annex 3.

Power TV Limited entered an EPG agreement with BSkyB Limited on or
around the 26th of June 2002. However within 2 weeks of the EPG channel
being launched Power TV Limited who then had a deal to playout content
from a BT server had a technical fault that meant only 1 programme would
playout repeatedly.

A conversation took place between David Henry and BSkyB’s Amanda
Sheppard and it was agreed to remove the Power TV Limited operated
Rapture channel until the problem was resolved on the basis that it would
be put back as soon as the problem was solved. A notice was received
from BSkyB dated 11th of July 2002 by way of a fax. See Annex 4.

The original agreement from BSkyB had required all notices to be posted
via Recorded Delivery. Faxes were not a proper form of delivery according
to the BSkyB agreement. BSkyB was in breach of its own agreement.

After several attempts to engage Amanda Sheppard via phone to
recommence the EPG listing to no avail. An email dated 31st October
2002 see Annex 5 followed it up. It appeared that despite Power TV
Limited having posted the signed copies of the original agreement of which
a photocopy is retained, BskyB had not received the agreements back.
Only the signature page had been faxed to BSkyB as instructed by BSkyB
before the EPG listing.

Further copies of the EPG agreement were sent for signing but as before
Power TV Limited removed a couple of contentious clauses that gave
BskyB the right to edit and dictate what programming Power TV Limited
could include on its channel. Just prior to this email letter dated 31 st of
October an invoice for a large amount was received from BSkyB. This had
been the first and only invoice, which was billing for over 3 months of EPG
service. This was disputed and Amanda Sheppard demanded that unless
all fees were paid she would not re-launch the EPG service. She went on
to claim that BSkyB was entitled to continue to charge whether or not the
EPG service was being supplied.

Even at this stage Power TV Limited offered to pay for the pro rata rate for
the time that the EPG service had been supplied. Power TV Limited also
requested that since BSkyB was now claiming it would take 4 months
before the EPG listing could be supplied Power TV Limited requested to be
compensated.

A letter from BSkyB Esther Johnson was received dated 22 nd of January
2003. See Annex 6.




                                                                          5
   BSkyB gave Power TV Limited an ultimatum to either accept all the terms
   in the original agreement despite the fact that it included BSkyB’s ability
   to interfere with both the editorial control of Power TV Limited EPG listings
   which was not acceptable as this could leave Power TV Limited open to
   prosecution for offensive EPG content that had not been put there by
   Power TV Limited and without Power TV Limited agreement. However it
   would have been Power TV Limited who would be broadcasting the
   potential offensive content. The other option was BSkyB was terminating
   the EPG agreement and only when Power TV Limited paid all the invoices
   that BSkyB had been issuing would BskyB enter a new agreement. Clearly
   this was not Fair Reasonable and Non-Discriminatory.

   Power TV Limited refused to pay for a service, which had been removed
   under a notice, which was in breach of the terms and conditions and then
   had not be re-supplied and continued to be withheld.           This was
   discrimination and typical of BSkyB bullying.

   On the 14th of February 2003 Power TV Limited wrote to BSkyB Amanda
   Sheppard. See Annex 7.

   Other letters were exchanged. See Annex 8-9.

   BSkyB wrote again this time from Lesley Mackenzie Director of Channels
   and Operation, which demanded all monies that had been invoiced, or
   they would not re-launch the EPG service and instead were terminating
   the EPG agreement. See Annex 10.

   As Ofcom can see BSkyB did not act in a fair and reasonable manner and
   instead they had breached their own terms by issuing a notice in a form
   not recognised under the terms of the BSkyB agreement but had removed
   the EPG channel listing within 2 hours then refused to restore the channel
   listing but continued to invoice for the missing listing. BSkyB forced Power
   TV Limited into signing a new agreement at the new higher price of
   £75,000 per year. Not Fair, Reasonable and Non-Discriminatory.

3. BSkyB is Restricting Trade Which is Not Fair, Reasonable and Non-
   Discriminatory

   (a). BSkyB Group is attempting to restrict the trade of services to the End
   Users property/set top box by claiming fees that are not actually incurred
   in the supply of the service that Rapture wishes to purchase namely an
   EPG listing service. Ofcom have in the draft determination stated that the
   cost of supplying the EPG service to Rapture is likely to be no more than
   £10,000 in initial set up costs and no more than £15,000 per annum and
   this may be considerably less than £15,000.

   The EU decision dated 15 th of September 1999 case IV/36.539
   investigated the creation of the Joint Venture called British Interactive
   Broadcasting Holdings Limited. This is the same corporate body that
   was merged into the BSkyB Group in 2001. Marketing Contribution
   Limited is the same company that supplies the ‘Interactive Discount’
   linked to the supply of the satellite equipment system as detailed before.

   The OFT (Office of Fair Trading) investigated the merger of the BIB
   companies into the BSkyB Group and accepted 1 undertaking from BSkyB
   Group. The earlier EU Decision had made 10 requirements. The BSkyB
   Group would have to deliver to other cable distributors a clean feed



                                                                              6
   without any interactive red button overlays. However BIB operated in
   Ireland as well as the UK so the OFT decision does not remove the
   requirements by the EU.

   (b). Rapture believes it is not un-reasonable to expect that the original
   requirements that the EU Decision of the 15 th of September 1999 should
   still apply to a merged business group that continued to operate in the
   same way as before the merger and still operate through the same
   corporate bodies owing to its market dominance.           The same anti
   competitive concerns still apply to the merged BSkyB Group as before the
   merger. This included in the EU Decision that BSkyB would not charge
   ‘Free to Air’ channels any of the costs associated with the red
   button/interactive technology, Control Access Services or the Set Top Box
   subsidy.

   (c). The OFT decision and review did not include a market assessment to
   other EU member states. There are and were channels operating from
   other EU member states that have been affected by BSkyB Groups
   additional charges that all channels have been charged.

4. BSkyB in Breach of Electronic Programme Guide Services License
   (‘the License’)

   (a). BSkyB Group is prohibited under its Conditional Access Class License
   from bundling services and charges together.

   The EU Decision dated 15/09/99 states:

   (134) The Conditional Access Class License prevents providers
   of digital conditional access services from bundling the
   various services which constitute the conditional access
   services. It is unclear whether the British regulatory
   regime requires providers of such services to supply
   verification (digital signature) services separately.

   (b). It is clear that Ofcom by using its 2002 guidelines is in fact allowing a
   form of bundling to take place. As the Conditional Access Class License
   prohibits any form of bundling, then Ofcom cannot allow BSkyB to make
   charges for an EPG listing service that also includes fees for other
   services/costs that are not required or contracted for by Rapture.
   Therefore the fees associated with other services are not permissible.

   On the 25th of July 2003 the Director General of Telecommunications
   issued a Continuation Notice to BSkyB.

   Paragraph 3. b) states: ‘to ensure that a requirement of the Original
   License must continue to be met for so long as this notice remains in
   force.’




                                                                               7
  Below are details of BSkyB’s requirements under its obligation for
  providing the EPG service. It clearly states that each service must be
  provided. Not one service bundled with costs relating to other services.

  Condition 6 – Publication Of Charges, Terms And Conditions

  6.1 The Provider shall except in so far as the Director may otherwise consent in
  writing:

  (a) publish in the manner and at all times specified in paragraph 6.2(a) a notice
  specifying, or specifying the method that is to be adopted for determining, the
  charges and other terms and condition on which it offers:

  (i) to provide each Conditional Access Service, or package of such Services;

  Rapture believes that the requirement for BSkyB as a licensed EPG service
  provider requires it to offer the EPG service, which is detailed and
  identified as different from CA and AC services as a standalone service and
  not linked to fees for other services and costs or development costs for
  other services.

  To charge a fee that includes costs relating to other technical services
  would in fact be a form of bundling. BSkyB in discriminating against
  Rapture as a ‘Free to Air’ channel. BSkyB charges more for an EPG to
  ‘Free to Air’ channels than channels that take other services from BSkyB.
  That is discrimination.

  BSkyB operates Pay TV channels that require many services including an
  EPG, Smart card, Conditional Access and Access Control. Rapture is being
  charged a fee for just an EPG that includes a bundled cost for other
  services, which Rapture does not use. This is not fair and reasonable.

  (c). It is unreasonable for Rapture to have to pay a contribution to
  BSkyB’s Pay TV Platform costs, which includes the interactive technology
  and or the Set Top Box subsidy.         Furthermore the demanded for
  contribution costs for BSkyB’s Platform Costs is the same amount as
  charged to other channels like ITV2 during the same period only ITV2 has
  substantially larger audiences and many £millions of advertising revenue,
  when Rapture does not have a equal amount of revenue as ITV2 it is
  therefore discriminatory towards Rapture.

5. First Community Requirement Being Infringed

  Rapture is a small communications network and new entrant to the UK
  market place, which requires the BSkyB EPG service to complete the
  Rapture network. BSkyB does not operate a ‘Free to Air’ platform but
  instead charges the end user to receive its own Pay TV service this is the
  BSkyB business model BSkyB receives a benefit from the extra ‘Free to
  Air’ channels being receivable on the satellite equipment. Furthermore
  BSkyB Group makes charges to third parties who wish to use the BSkyB
  Pay TV platform for the technical services that only the BSkyB Group can
  supply. Ofcom by means of using the BSkyB Regulatory model, which
  includes a facility to calculate a charge not directly related to the EPG
  service, but is related to other services that BSkyB operate, is aiding and
  abetting a prohibited action under the BSkyB Conditional Access Class
  License. The inclusions of additional charges to Rapture are not ‘Fair


                                                                                      8
      Reasonable and Non-Discriminatory’ it is in fact reducing competition and
      in breach of the ‘First Community Requirement’. To promote
      competition under section (4) section 3 of the Communication Act 2003

      The Communication Act 2003 States;


      (3)    The first Community requirement is a requirement to promote
             competition –
             (a)    in relation to the provision of electronic communications
                    networks and electronic communications services;
             (b)    in relation to the provision and making available of services and
                    facilities that are provided or made available in association with
                    the provision of electronic communications networks or
                    electronic communications services; and
             (c)    in relation to the supply of directories capable of being used in
                    connection with the use of electronic communications networks
                    or electronic communications services.


      Ofcom by allowing BSkyB to make charges for the supply of an EPG
      service, which contains charges that are not related to the supply of the
      EPG service is restricting competition. Rapture does not require the other
      CA and AC services and does not benefit from the marketing campaigns
      that BSkyB run for their own Pay TV service, which have never included
      any mention of Rapture so that cannot benefit Rapture.

      Any charge over and above the actual cost of supplying the EPG service
      will have a commercial impact on the company that is being charged the
      extra fee. Even if the charge is relatively small it could make the
      difference between a business failing or succeeding and therefore will
      restrict competition in the market place. This would be in direct conflict
      with the above 1st Community Requirement.



I believe the above clearly demonstrates that BSkyB has not treated either Power
TV Limited in a fair and reasonable manner or Rapture Television PLC. With
BSkyB refusing to negotiate the level of Fees for the EPG service even after
sustained efforts by myself it is clear that Ofcom can only come to the obvious
decision that BSkyB did not comply with its FRND requirement and find in favour
of Rapture Television PLC.

Regards




David Henry
Managing Director




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