Watchdog to curb Sky charges to rival broadcasters

The media regulator Ofcom appears set to clamp down on the controversial charges levied by BSkyB to other broadcasters that want to be carried on its satellite TV service.

The move could save millions of pounds for rival broadcasters such as ITV, five and Channel 4. It would be important for ITV in particular, which has complained loudly about the £17m a year it pays for its channels to be available on the Sky platform.

And, with the auction under way for rights to screen Premiership football matches, the amount that any successful bidder would have to pay to be aired on Sky could be a crucial factor in their business model.

Ofcom is drawing up new rules for determining Sky's charges, to make sure they are "fair, reasonable and non-discriminatory". Its conclusions, expected soon, will set much tighter parameters for the charges, industry insiders believe.

One source said: "The current guidelines give Sky carte blanche to charge what they want. And the regulation that does exist does not bite." Rupert Murdoch's Sky is by far the most successful pay-television supplier, with about a third of the country's homes signed to its subscription service. That means that niche and mass-market channels need to be present on the platform, analysts said.

Under the current guidelines, Sky is allowed to levy a charge that can range from the incremental cost of carrying an additional channel - perhaps a few tens of thousands of pounds a year - to a sum equivalent to that channel having to replicate the satellite distribution system itself - which would amount to tens or hundreds of millions of pounds.

Sky's costs include encrypting channels, regionalising coverage and including new stations on its electronic programme guide.

Public service broadcasters - the BBC, ITV and Channel 4 - have tried and failed in the past to rein in Sky's charges or to convince the authorities to force Sky to carry public service broadcasters for free. At various times, BBC and ITV have even threatened to start their own "free" satellite service.

The BBC has tackled the problem by broadcasting its channels without encryption or "in the clear", a move the corporation has estimated would save it £85m over five years.

ITV's carriage deal with Sky formally ended late last year and the broadcaster is continuing to pay at the old rate, on a temporary basis, until Ofcom provides new guidelines on the charges.

ITV has complained at least twice to the regulator over the issue. Ofcom is expected to make the fees more transparent and clear. Currently most of the deals are not done using the official rate card that is published by Sky.