1999/781/EC: Commission Decision of 15 September 1999 relating to a proceeding under Article 81 of the EC Treaty (Case IV/36.539 - Britisch Interactive Broadcasting/Open) (notified under document number C(1999/2935)) (Only the English text is authentic)
Date: 1999-09-15
Institutions: European Commission
Subjects: interactive network, joint venture, merger control, restrictive trade practice, television, transmission network

6.12.1999

EN

Official Journal of the European Communities

L 312/1

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 15 September 1999

relating to a proceeding under Article 81 of the EC Treaty

(Case IV/36.539 (cid:151) British Interactive Broadcasting/Open)

(notified under document number C(1999/2935))

(Only the English text is authentic)

(1999/781/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

I. THE FACTS

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation No 17 of 6 February
1962, First Regulation implementing Articles 85 and 86 of the
Treaty (1), as last amended by Regulation (EC) No 1216/
1999 (2), and in particular Articles 6 and 8 thereof,

Having regard to the application for negative clearance and the
notification for exemption submitted, pursuant to Articles 2
and 4 of Regulation No 17, on 13 June 1997,

Having regard to the summary of
the application and
notification published pursuant to Article 19(3) of Regulation
No 17 (3),

After consultation with the Advisory Committee for Restrictive
Practices and Dominant Positions;

Whereas:

(1) OJ 13, 21.2.1962, pp. 204 to 62.
(2) OJ L148, 15.6.1999, p. 5.
(3) OJ C 322, 21.10.1998, p. 6.

A. INTRODUCTION

(1) On 13 June 1997,

the parties notified to the
Commission the creation of a joint venture company,
British Interactive Broadcasting Ltd (BiB, now named
Open)
and/or
exemption pursuant to Regulation No 17. BiB’s parent
companies are BSkyB Ltd, BT Holdings Limited, Midland
Bank plc and Matsushita Electric Europe (Headquarters)
Limited.

requested

clearance

negative

and

(2) BiB is

to consumers

to provide a new type of

infrastructure
such as banks,

service, digital
interactive television services,
in the
United Kingdom. This involves putting in place the
necessary
allow
supermarkets and travel
companies,
agents,
to interact directly with the consumer. An
important element of this infrastructure is a digital set-
top box. BiB will subsidise the retail selling price of
digital satellite set-top boxes, satellite dishes and low-
noise blocks (4) (LNBs).

services

and

to

(4) A low-noise block converter (LNB) detects the signal relayed from
the feed, converts it to an electrical current, amplifies it and lowers
its frequency.

L 312/2

EN

Official Journal of the European Communities

6.12.1999

(3) The same infrastructure will be used by television
allow them to integrate
companies,
interactivity into their services: for instance, interactive
advertisements and voting in quiz shows.

it will

as

3. Midland Bank plc

(4) BiB will also provide certain services direct
(cid:145)walled garden(cid:146)
such as e-mail,

consumer,
access (5) and downloading of computer games.
service is expected to begin in the autumn of 1999.

to the
Internet
Its

(8) Midland Bank plc

It

is

a public

limited company
authorised by the Bank of England to carry on a
the HSBC group of
banking business.
is part of
companies and a direct
the holding
company, HSBC Holdings plc. Midland and the other
companies in the HSBC group provide a range of
banking and financial services in the United Kingdom
and around the world.

subsidiary of

B. THE PARTIES

4. Matsushita
Limited

Electric

Europe

(Headquarters)

1. BT Holdings Limited

(5) BT Holdings Limited is a wholly-owned subsidiary of
British Telecommunications plc (BT). BT is licensed to
run certain telecommunications services in the United
Kingdom. It supplies telephone exchange lines to homes
and businesses;
(to and
from the United Kingdom) telephone calls and other
telecommunications
for
customers’ premises.

local, trunk and international

equipment

services

and

(9) Matsushita

Europe

Electric

(MEI). MEI

(Headquarters)

Limited
(Matsushita) is a wholly-owned subsidiary of Matsushita
Electric Industrial Co. Ltd.
is a designer,
developer and manufacturer of electronic and electrical
products
and information
technology for home,
industrial and commercial uses.
The MEI group operates world-wide and manufactures
and/or trades through a number of subsidiaries in the
United Kingdom and other Member States.

and associated software

2. British Sky Broadcasting Ltd

(6) British Sky Broadcasting Ltd (BSkyB) is a wholly-owned
subsidiary of British Sky Broadcasting Group plc. News
Corporation owns 39,88 % of
the shares of BSkyB
Group plc’s shares.

(7) BSkyB is a broadcaster of analogue pay television ((cid:145)pay-
tv(cid:146)) services delivered by the ASTRA satellites for direct-
to-home (DTH) and cable reception in the United
Kingdom and Ireland. BSkyB operates at both retail and
wholesale levels in these areas.
launched a digital
satellite pay-tv service on 1 October 1998 using the
digital set-top box, satellite dish and low-noise block
which BiB will subsidise. BSkyB Group is also active in
the provision of conditional access services and other
technical services necessary for pay television.

It

(5) The parties use this term to describe access to a limited amount of

Internet content.

C. THE RELEVANT MARKETS

(10) BiB will be principally active on the digital interactive
television services market and on the technical services
market. Two of its parent companies, BSkyB and BT, are
present in markets which are closely related to one or
more of these markets.

1. Product markets

(a) Digital interactive television services

(11) The following services will form part of the BiB digital
interactive television service: home banking, home
shopping, holiday and travel services, down-loading of
games, learning on-line, entertainment and leisure, sorts,
motor world, a limited collection of
(cid:145)walled garden(cid:146)
Internet sites provided by a third party and e-mail and
public services. BiB describes retailers which offer goods
or services over its infrastructure as (cid:145)content providers(cid:146).

6.12.1999

EN

Official Journal of the European Communities

L 312/3

(12)

In the view of the Commission, the digital interactive
television services market is a separate market.

(13)

the

likely

response of

In defining product markets, the most important factor
is evaluation of demand substitutability. Given that
digital interactive television services, such as those to be
offered by BiB, are not currently available throughout
the United Kingdom (6), past data does not exist
to
evaluate
to a
small, non-transitory change in relative
hypothetical
services and possible substitutes (7).
prices of BiB’s
Demand substitutability
assessed by
comparing the characteristics of products or services in
order to determine whether they are particularly suited
to satisfy constant needs and are only to a limited
extent
or
services (8).

interchangeable with

can also be

customers

products

other

(14) The Commission contacted BiB’s main prospective
customers and the main companies in the industry to
ask for their views about the boundaries of the relevant
market and to obtain the necessary factual evidence to
reach a conclusion. In this context, the Commission also
has taken into account the fact that content providers’
willingness to pay BiB to be part of its service, and their
likely reaction to a small permanent
increase in the
price charged, will ultimately depend on the attitude of
retail-demand
therefore
end-users.
substitutability for digital
interactive television services
which is determinant in defining the upstream market
of the supply of digital interactive television services by
service providers, such as BiB, to content providers.

the

is

It

the

content providers’

services will increase the number of potential customers
television
for
interface will also allow content providers access to a
unique mass market
their products or services,
reaching potentially almost 100 % of British households.

services. The

for

(16) End-user demand substitutability for a package of
is distinguishable from demand
interactive services
substitutability of
the individual services which form
part of the package or from close alternative sources of
supply for the customers of BiB’s services such as high-
interactive services via personal
street
computers. The digital interactive television services and
pay-television services are different markets.

retailing or

(17) As it explained in recitals 18 to 23, this conclusion is
based on the different characteristics of the types of
goods and services provided and on the consumers’
views on their
substitutability which mean that
customers will not be in a position to switch easily to
available alternative products and/or
to
suppliers located elsewhere.

services or

Market distinct from high-street retailing

(15) Prospective content providers have confirmed to the
Commission that it is the breadth of the package of
services which will attract them to a digital interactive
television services platform, as they believe that it is the
availability of a broad range of services which will
attract consumers (9). In other words, such a range of

(6) However, commercial trials in limited areas are underway.
(7) See Commission Notice on the definition of the relevant market for
(OJ C 372,

the purposes of Community competition law,
9.12.1997, p. 5).

(8) In its judgment of 26 November 1998,

in Case C-7/97, Oscar
Bronner GmbH Co. KG v Mediaprint [1998] ECR I-7791, the Court
of Justice repeated the formula (paragraph 33) that (cid:145)the market for
the product or service in question comprises all the products or
services which in view of their characteristics are particularly suited
to satisfy constant needs and are only to a limited extent
interchangeable with other products or services (Case 31/80 L’OrØal
v De Nieuwe AMCK [1980] ECR 3775, paragraph 25; Case C-62/86
AKZO v Commission [1991] ECR I-3359, paragraph 51)(cid:146).

(9) An operator explained that (cid:145)what seems clear (cid:133) is that shopping is
not a sufficient stand alone reason for customers to want to invest
in the equipment for such services. The offer must be part of a
larger offer,
including entertainment and education, which again
favours the BSkyB based channel as it is part of the wider digital
relaunch of the network(cid:146).

(18) Retailing services represent only one part of the typical
package of services forming digital interactive television
computer games,
services. E-mail, downloading of
limited Internet access and information services will also
form part of the package. There are economies of scope
in the provision of such a package of services, because
the infrastructure required for each of the individual
services is the same. BiB will market this package of
services and has entered into an agreement with BSkyB
to this end. The promotion of an interactive service
brand, distinct
the individual content
providers, strongly suggests that BiB regards its own
services as distinct from those of high-street retailing.

from that of

(19) The characteristics of the retailing services of the type to
be offered by BiB and high-street retailing are markedly
different. For example, the range of products or services
offered on-line by retailers is likely to be far more

L 312/4

EN

Official Journal of the European Communities

6.12.1999

limited than what is available in high-street shops. This
is most likely to be the case with perishable goods, such
as food, or bulky goods where storage and delivery
charges would be high. There will be a price difference
between goods or services purchased in the high street
and those obtained via a package of digital interactive
if only on account of the delivery
television services,
charge.
it seems that consumers
would be willing to pay a premium for the convenience
of home shopping (10).

In terms of price,

interactivity can be integrated into traditional broadcast
entertainment channels.

(22) This distinction is confirmed by the reaction of some
retailers (12) who have said that they will target different
customers using different brands belonging to the same
group of companies when providing digital interactive
services
and personal
computers (13).

television sets

available via

(20)

It follows from the above that the market for digital
interactive television services is separate from that for
the traditional retailing of goods and services in high
streets.

Market separate from pay television

interactive services
Distinction between markets for digital
available via televisions and those available via personal
computers

of

on

services

available

existence

(21) Both the demand-substitutability test and differences in
interactive services available via
the characteristics of
television sets and via personal computers lead to the
conclusion that they are separate product markets. A
small permanent increase in the price of such services
available via televisions is unlikely to be constrained by
personal
the
computers. While television sets are ubiquitous, in the
United Kingdom only some 25 % of households have a
personal computer and fewer than half of
these are
equipped with a modem. Moreover, the relatively high
cost of personal computers means that the switching
cost for end-users would be high. The parties themselves
have pointed out that consumer demand for services
available via television is different from that for services
to
delivered via personal
differences both in purchase prices of televisions and
personal computers and in their characteristics of
use (11). Digital
to
televisions can also be distinguished from services
that
delivered to personal computers by the fact

computers. They point

interactive

delivered

services

(10) Binary Compass Enterprises Report, 1997, by David Reibstein and
rated price

Sunil Gupta (cid:145)The online retail commerce report(cid:146)
competition fourth in what was important to customers.

July 1998, policy

(11) The parties’ statements coincide with independent analysis. See
(cid:145)Regulating Communications: approaching convergence in the
Information age(cid:146)
document of British
Departments of Trade and Industry and of Culture, Media and
(cid:145)Traditional television and radio
Sport at paragraphs 1.13-1.15:
are likely to retain their strong and distinctive position because of
their ubiquity,
low cost and ease of use. The
environments of the living room (the traditional place for the TV)
and the work room (the home of the PC) are generally quite
distinct.(cid:146) Furthermore, BiB will offer limited internet access via TV
sets.

familiarity,

(23) Finally, the demand for, and characteristics and intended
use of, pay-television services are largely different from
those of digital interactive television services, the former
being largely entertainment services,
the latter being
largely transactional or informational services (14). The
business scope of interactive television service providers
such as BiB excludes forms of entertainment where
viewing itself is the primary form of entertainment for
the viewer, such as pay-television channels. The digital
interactive television services market is complementary
to and separate from, that for pay-television.

(b) Pay-television

(24) Pay-television constitutes a product market

separate
from that for free-access television, namely advertising-
financed television and television financed wholly or
partly through licence fees (15). While, in the case of fee-
and advertising-financed television,
there is a trade
relationship only between the programme supplier and
the advertising industry,
in the case of pay-television
there is a trade relationship between the programme
supplier and the viewer as subscriber. The conditions of
competition are accordingly different for the two types
and
of

television. Whereas

case of

in the

fee-

(12)

(cid:145)We see BiB and the current Internet offers as being differing
customer groups, rather than two ways to reach the same group(cid:146).
(cid:145)mass market development on on-line retail requires a TV interface
rather than a PC/internet channel which we see as being relatively
limited for mass market apparel(cid:146). (cid:145)PC and TV delivered services are
(cid:147)complementary(cid:146)(cid:146)(cid:145)(cid:146).

(13) This distinction is similar to the one made in the advertising
markets in that different distribution mechanisms reach different
target audiences. See Commission Decision 96/346/EC (IV/M.553-
RTL-Veronica-Endemol) (OJ L 134, 5.6.1996, p. 32, in particular
recital 23).

(14) See Commission Decision 94/922/EC (IV/M.469-MSG Media

Service) (OJ L 364, 31.12.1994, p. 1, recital 38).

(15) See MSG Media Service, at paragraphs 32 and 33; Commission
Decision 1999/153/EC (IV/M993-Bertelsmann/Kirch/Premiere) (OJ
L 53, 27.2.1999, p. 1, recital 18); Commission Decision 1999/
242/EC (IV/36.237(cid:150)TPS) (OJ L 90, 2.4.1999, p. 6).

6.12.1999

EN

Official Journal of the European Communities

L 312/5

advertising-financed television the audience share and
the advertising rates are the key parameters, in the case
of pay-television the key factors are the shaping of
programmes to meet the interests of the target groups
and the level of subscriptions.

(c) Markets for the wholesale supply of films and

sports channels for pay-television

(25) The Commission has stated in the past that there is no
reason to distinguish between markets for analogue and
digital pay television (16). Digital pay-television is only a
further development of analogue pay-television and
therefore does not constitute a separate relevant product
market. Moreover, account should be taken of the fact
that
few years analogue broadcast pay-
television will be completely superseded by digital
broadcast pay-television.

in the next

to

by

services

between

provided

distinguish

one means

(26) Pay-television is available to subscribers in the United
transmission: digital
Kingdom by various means of
terrestrial,
satellite (analogue and digital) and cable
(analogue, with digital cable services expected to start
up in the near future). In the United Kingdom, it is not
appropriate
pay-television
markets on the basis of their mode of transmission. Pay-
television
of
transmission act as a competitive constraint on their
provision using other means. Historical data shows this
to be the case in respect of pay-television delivered by
satellite and cable. It is clear from end-user behaviour
that
the services are considered as substitutes. The
composition of cable and satellite pay-television services
is broadly similar (17) as is the price. BSkyB’s penetration
rate is [(cid:133)] (*). Moreover, BSkyB’s (cid:145)churn rate(cid:146) (18)
is
[(cid:133)] (*). Thus, the fact that satellite customers may have
purchased a satellite set-top box and/or satellite dish
lock-in effect that
does not create such a significant
switching between satellite and cable services is unlikely.
There is no justification, either,
for distinguishing a
separate product market in respect of digital terrestrial
pay television.

(27) There is, therefore, a single pay-television market in the
United Kingdom, with no distinction between analogue
and digital, nor between modes of transmission.

(16) Bertelsmann/Kirch/Premiere, recital 18 and TPS.
(17) In terms of premium film and sports channels, BSkyB’s channels
are available via both satellite and cable. Differences in the
composition of the basic packages of service are not significant.
(*) Parts of this text have been edited to ensure that confidential
information is not disclosed; those parts are enclosed in square
brackets and marked with an asterisk.

(18) (cid:145)Churn rate(cid:146) represents the average number of customers who stop
their subscription to a pay-television service over a given period of
time.

reflects

channels

Pay-television

Pay-television

identified (cid:145)movies

and sports
operators’

as key
demand
the demand of

(28) Experience has shown that, to be successful as a pay-
it is essential to include film and
television operator,
sports channels as part of the service (19). BSkyB has
sales
itself
drivers(cid:146) (20).
for
their
particular
subscribers.
of
recently released films and live exclusive coverage of
attractive sports events attract
the largest viewing
figures (21). The subscriptions to such channels are the
most expensive: while thematic or general interest pay-
television channels are supplied to customers as part of
a package, film and sports channels are charged on an
individual basis. For pay-television, the fact that sports
and films programmes achieve very high viewing rates
is crucial as it is a reflection of viewer’s willingness to
pay more for sports and films channels.

composed

channels

(29) The wholesale price of acquiring film and sports
channels is also far higher than that of other channels:
small permanent increases in relative prices have been
profitable. Taking the figures most favourable to BSkyB
from BSkyB’s wholesale price list
for the
supply of its channels to cable operators, the cost to a
sport
cable operator of acquiring a single film or
channel
is at least seven times as much as the most
expensive Sky basic channel (22). This demonstrates that
the wholesale supply of film and sports channels forms

(rate card)

(19) See Bertelsmann/Kirch/Premiere Decision, in particular recitals 34

and 48.

(20) BSkyB annual report 1997, page 3. See also conclusion in the The
Director-General’s Review of BSkyB’s Position in the Wholesale
Pay-TV Market, December 1996, point 2.18: (cid:145)We concluded that
premium sports and movie channels were the main drivers of
subscription to pay-TV. Without rights to high quality sports and/
or movies there seems no way that competing broadcasters would
be able to enter the market at the premium level(cid:146).

(21) In the United Kingdom in 1995, 44 of the top 50 satellite pay
television programmes in terms of audience ratings were either
films or sports. Sports programmes accounted for 27 of the top
films for 17 and other programmes for 6.
50 programmes,
Football alone accounted for 22 of
the top 50 programmes,
amongst which 14 of the top 20. Source: Cable and Satellite
Express, 25 January 1996. The four top programmes ever on
cable and satellite television in the United Kingdom were all sports
programmes: the top programme was a football match, number
two a boxing match, followed by two football matches. Source:
New Media Markets, 21 March 1996. In the United Kingdom in
1997, 42 of the top 50 pay-television programmes available on
cable and satellite were either
films or sports. The top 10
programmes were all films or sports; films accounted for 26 of
the top 50 programmes; and sports for 16. Source: Cable and
satellite Express, 29 January 1998.

(22) [(cid:133)](*).

L 312/6

EN

Official Journal of the European Communities

6.12.1999

a separate market (23). For the purposes of this case, it is
not necessary to decide whether there are separate
wholesale markets
films and sports
in respect of
channels (24).

electronic programme guide. For the latter, provision of
is,
conditional access services for non-broadcast
on-line) data ((cid:145)access control services(cid:146)) and transaction
management services are needed.

(that

(d) Technical services for digital interactive television

services and pay television

provision

conditional
cards,

of
the
including
smart
services (27) and possibly the

(30) The Commission has defined a product market for the
wholesale provision of the technical services necessary
for pay-television in a number of decisions (25). These
services essentially comprise the making available of set-
access
boxes,
top
services (26)
subscriber
services
management
relating to accessing the electronic programme guide (28)
and the writing of applications compatible with the
application programming interface included in the set-
top box (29).
the provision of digital
interactive television services also requires a system to
allow financial transactions to be conducted in a secure
environment. A transaction management system (TMS)
forms part of this system. It is a software system for
authorising and undertaking financial transactions, and
connects to the on-line servers of the various content
providers. The TMS also routes requests for payment to
the
the (cid:145)merchant acquirer(cid:146): merchant acquiring is
general processing of credit and debit card payments
made through retailers and other vendors of goods and
services.

In addition,

(31) There is a very large area of overlap between the
technical services necessary for pay-television and the
services necessary for digital interactive television such
the
as

the making available of

set-top boxes or

(23) See Commission Decision of 3 December 1998 (Case No IV/
233,

M.1327 (cid:151) NC/Canal+/CDPQ/BankAmerica)
14.8.1999, p. 51).

(OJ

C

(24) The British Office of Fair Trading concluded that films and sports
each constitute separate wholesale programming supply markets
for pay-television,
in The Director-General’s Review of BSkyB’s
Position in the Wholesale Pay-TV Market, December 1996.

(25) See for example, Bertelsmann/Kirch/Premiere, paragraphs 19, 20

and 21.

(26) Conditional access is the means by which only viewers who are

authorised to watch a service are able to do so.

from viewers. This

(27) Subscriber management services are necessary in order to collect
subscriptions
involves maintenance of
information on subscribers so that they may be authorised and
billed for the services which they view.
(28) An electronic programme guide (EPG)

is a navigation system
which lists channels and services and via which viewers are able
to tune to different data signals, and thus to change channels or
services.

(29) An application programming interface (API) allows applications to
be written to run on a set-top box. In order to write applications
compatible with the API embedded in a particular set-top box,
authoring tools are also necessary.

(32) The skills and technologies underlying each of

the
individual technical services necessary for pay-television
and/or digital interactive television services are different
in some aspects. Narrower product markets may,
therefore, exist (30). However,
is not necessary to
determine this point for the purposes of this case. The
relevant product market is therefore that for technical
services necessary
television
services and for pay television (31).

for digital

interactive

it

(e) Customer

access

infrastructure market

for

telecommunications and related services

(33) The demand from consumers for telecommunications
services in the past was almost exclusively for voice
telephony services, although more recently demand for
data services,
Internet access, has grown
significantly. To provide these services, companies need
infrastructure capable of bringing them into the home.

such as

(34) The fact that telecommunications services, by definition,
require two-way communication capability has imposed
a constraint on the types of infrastructure that can be
used for such services. Historically, that demand could
only be fulfilled by a copper-based public switched
telecommunications network, although in recent years
alternative
cable TV
networks and wireless networks, have developed.

access mechanisms,

such as

(35) Cable television networks are capable of providing a
range of services from basic telephony through on-
demand services to full broadcast services.

(36) Wireless fixed networks are generally less costly to
current
than wire networks. However,
install
generation of wireless networks
in the UK have
relatively limited bandwidth and cannot be used for the

the

(30) See Joint Oftel and DTI Notice and Consultation (cid:151) July 1997,
Chapter 3, paragraph 25: (cid:145)There can be very different supply and
demand conditions surrounding the different (technical) services
so that in principle they could be represented as separate product
markets. However, in practice it is likely to be possible to exploit
economies of scope (and possibly scale)
in the SMS, SAS and
customer management functions. There is also likely to be a close
association between a particular encryption technology and the
organisation of these associated administration services.(cid:146)

(31) See MSG Media Service, recital (31)(f).

6.12.1999

EN

Official Journal of the European Communities

L 312/7

range of services that can be provided over cable.
Wireless networks should probably not form part of the
relevant product market, although the conclusions in
this case would not be changed if wireless networks
were to be included in the market definition.

and will be priced

will be reliant on retailers with national or regional
in sterling. The
operations
information services will be largely related to national
demand for
for digital
information. The market
interactive services is national and in this case is limited
to the United Kingdom.

(37) Digital mobile networks based on the GSM standard or
on the DCS 1800 standard cannot provide the same
range of services as copper or cable networks, although
this may change in the medium to long term, with the
introduction of the next generation mobile standard, the
universal mobile telecommunications system (UMTS). At
present, given the differing characteristics and prices for
voice telephony services provided over fixed or wireless
networks as compared with those services provided over
digital mobile, the services constitute separate markets.
In addition, given the very limited data transmission
capacity of mobile networks at present, they cannot be
regarded as substitutes at the infrastructure level.

(b) Pay-television

(42) Pay-television broadcasting markets are,

licensing and copyright

largely for
linguistic, cultural,
reasons,
generally national or extend to single linguistic areas. In
this case, whether the market is the United Kingdom or
also covers Ireland, would make no difference to the
legal assessment.

(38) A market

therefore exists

the provision of a
customer-access telecommunications infrastructure. This
market includes the traditional copper network of BT,
and the cable networks of the cable operators.

for

(39) For present purposes it

is not necessary to decide
whether separate customer-access markets exist for call-
origination and call-termination markets.

2. Geographic markets

(40) The United Kingdom is the geographic market in which
should be

the abovementioned relevant markets

all
assessed.

(a) Digital interactive television services

close

between

(41) BiB is to operate in the United Kingdom. There is an
extremely
digital
relationship
interactive television services to be provided by the joint
venture and the digital pay-television services provided
by BSkyB in the United Kingdom. Both kinds of service
are adapted to the national
taste. The transaction,
information and services to be provided by BiB will all
largely have national demand: the transaction services

the

(c) Wholesale supply of film and sport channels for

pay-television

(43) BSkyB owns most of the underlying programme rights,
and supplies the channels in both the United Kingdom
and Ireland. National preferences,
in particular with
regard to sporting events, would point to a national
service market. However,
the
market is the United Kingdom or also covers Ireland,
would make no difference to the legal assessment.

in this case, whether

(d) Technical services for pay-television and digital

interactive television services

(44) The same geographic market definition as

in pay-
television applies to this market which the Commission
has already recognised as being closely linked to the
pay-television market (32).

(45) The finding that this market is national in character is
there being a specific
corroborated by the fact of
regulatory regime in the United Kingdom in the
framework
European
Parliament and Council Directive 95/47/EC of 24
the
October 1995 on the use of
transmission of television signals (33).

implementation

standards

the

for

of

of

(32) MSG Media Service (OJ L 364, 31.12.1994); Bertelsmann/Kirch/

Premiere.

(33) OJ L 281, 23.11.1995, p. 51.

L 312/8

EN

Official Journal of the European Communities

6.12.1999

(46) Pursuant

to Directive 95/47/EC,

implemented in the
United Kingdom by statute law and by statutory
instrument (34), suppliers of conditional access services
television broadcast services must supply
for digital
conditional
and non-
access on fair,
discriminatory terms. In the United Kingdom, suppliers
of such services must comply with the terms of the
Conditional Access Class Licence, granted on 7 January
1997, pursuant to Section 7 of the Telecommunications
Act 1984.

reasonable

(47) The obligations in Directive 95/47/EC relating to digital
conditional access services are limited in scope to the
provision of such services to (cid:145)broadcasters(cid:146) for (cid:145)digital
television services(cid:146). Neither of these terms is defined.
However, conditional access will be used both for non-
broadcast services (such as on-line services) and for
services other than television (such as digital radio). The
United Kingdom regulatory
to the
provision of conditional access for these services as
access control services. A class licence for the provision
of access control services has been established by the
the
Office
Department of Trade and Industry (DTI) which came
into effect on 31 December 1997 (35). This licence
extends
the television standards
Directive by extending the rights granted to broadcasters
to other service providers.

Telecommunications

the obligations of

regime

(Oftel)

refers

and

of

(48) Access to electronic programme guides is regulated in
the United Kingdom by both the Independent Television
Commission (ITC) and Oftel. In 1997, the ITC issued a
Code of Conduct on Electronic Programming Guides
(EPG) (36), the object of which is to ensure that access
to EPGs
reasonable and non-
discriminatory terms (37). In particular, the code requires
EPG providers to ensure that the EPG does not prevent
or hinder viewers from accessing free-to-air services.
requires vertically integrated EPG
The code further
providers, such as BSkyB, to treat television services of
other broadcasters/service providers on an equal footing

is granted on fair,

(34) SI 1996/3151 (cid:151) The Advanced Television Services Regulations
1996 (cid:151) implements most of the provisions of the Directive. It
came into force on 7 January 1997. The statutory instrument has
been supplemented by guidelines from Oftel (cid:151) the UK regulatory
body charged with enforcing the statutory instrument (cid:151) (cid:145)Digital
Television and Interactive Services/Ensuring access on fair,
reasonable and non-discriminatory terms. A statement issued by
the Director-General
of
conditional access and access control services/Oftel Guidelines
April 1999(cid:146). Article 2 (save the last paragraph) of the Directive
dealing with transmission signals is implemented for broadcasters
other than the BBC by Section 142 of the Broadcasting Act 1996,
and regulated by the Independent Television Commission (ITC).
(35) Telecommunications Class Licence, as revoked and re-issued on 31
December 1997, pursuant to section 7 of the Telecommunications
Act 1984.

Telecommunications.

Pricing

for

(36) A licensee found to be acting in a manner which impedes fair and
effective competition is liable to directions and/or sanctions as set
out in the Broadcasting Acts of 1990 and 1996,
including the
imposition of financial penalties and the revocation of its licence.

(37) ITC Code of Conduct on Electronic Programming Guides of 13

June 1997.

to the Regulation of

laid down similar principles (38)

with its own, or connected, services when granting
access. Oftel
in its
Guidelines
the Provision of
Conditional Access for Digital Television Services (39).
Oftel considers the EPG to be part of the conditional
access system in so far as it controls access by viewers
to television services.
to be a
technical conditional access service within the scope of
the Conditional Access Class Licence which implements
the provisions
is
consequently an obligation to offer such services on a
fair, reasonable and non-discriminatory basis.

of Directive 95/47/EC. There

thus considers

It

it

(49)

In any event, whether the market is the United Kingdom
or also covers Ireland, would make no difference to the
legal assessment.

(e) Customer

access

infrastructure market

for

telecommunications and related services

(50) Finally, given the national nature of BT’s

former
telecommunications monopoly, the national nature of
the regulatory regime, and the national nature of
the
demand for
telecommunications
for
infrastructure,
customer access infrastructure should also be regarded
as national.

to be delivered across
the market

services

3. Market structure

(a) Digital interactive television services

(51) The services to be provided by BiB are not yet provided

on a significant scale in the British market (40).

(52) There

are

under
of
development or undergoing early deployment which

projects

number

other

a

(38) The Guidelines list instances where Oftel believes that competitive
include vertically
neutrality would not be
integrated EPG providers that
favour their own or connected
television service by granting special terms of access, by the design
the television services
of
provided.

the EPG and/or by the listing of

achieved. These

(39) Oftel Guidelines: The Regulation of Conditional Access for Digital
Television Services of 3 April 1997. Section 6. Electronic
Programming Guides.
(40) Limited trials are under way.

6.12.1999

EN

Official Journal of the European Communities

L 312/9

would allow television sets to be used as display devices
for viewing Internet-based content or content which is
proprietary to the particular service. Other, similar,
services are therefore likely to be launched on the
British market in the short to medium term (41).

Racing Channel(cid:146) (dedicated to horse racing) and (cid:145)Zee TV(cid:146)
(Indian-language programming) are also provided via
satellite. Subscriber numbers to BSkyB’s pay-television
service
niche
those
far
channels (43).

individual

outstrip

to

(53) Cable networks in the United Kingdom have two-way
capability. For the moment, both digital satellite and
digital terrestrial transmission are capable of only one-
interactivity is made
way communication. However,
possible
switched
of
the
telecommunications network (PSTN) as a return path. In
the short to medium term, it will be possible to provide
such services using only the PSTN, as digital technology
such as the (cid:145)Digital Subscriber Line(cid:146)
family of
technologies can be used to upgrade its capability.

public

(DSL)

use

the

by

(54) The means of

terrestrial

transmission employed can have an
impact on the nature of the digital interactive television
services provided. For example, capacity constraints on
the number of
transmission limit
digital
services which can be provided. In addition, there is a
regulatory limit, whereby only a maximum of 10 % of
digital
terrestrial broadcast capacity can be used for
non-programme services such as text or data (42). There
regulatory constraints on
are no such technical or
digital cable or digital satellite, which is the means of
transmission which BiB will use. A broader range of
services can therefore be provided via digital satellite
terrestrial
transmission. Although
than via digital
technically
analogue
of
the
in
broadcasting, it is the digitisation of broadcasting that
allows BiB to provide the particular range and type of
services proposed.

context

feasible

(b) Pay-television

Identity of pay-television operators in the United Kingdom

S a t e l l i t e

(55) Satellite pay-television services are offered principally by
BSkyB, although individual niche channels such as (cid:145)The

(41) For example, Microsoft’s Web TV has announced trials of

its
service combining internet access with some of its own content.
The three largest cable operators in the United Kingdom, Cable &
Wireless, Telewest and NTL, also have plans to launch television-
delivered services similar to that of BiB, although their plans also
include provision of full access to the Internet from television sets.
It is not yet clear whether interactive services will be offered via
digital terrestrial television in the United Kingdom.

(42) Limit set by the Broadcasting Act 1996.

(56) BSkyB’s

satellite pay-television service is comprised,
variously, of wholly-owned BSkyB channels, channels in
which BSkyB has an interest, and third-party channels.
BSkyB owns and operates 13 channels:
six basic
channels (44), six premium film and sports channels (45)
and the pay-per-view channel, Sky Box Office.
In
addition, BSkyB operates 11 channels in joint ventures
with third parties (46).

(57) On 1 October 1998, BSkyB launched a digital pay-
in addition to its analogue service.
television service,
Both the analogue and digital
services distinguish
between basic and premium channels (47). However,
while BSkyB offers a single analogue basic package of
channels (the (cid:145)Sky Multi Channels Package(cid:146) comprising
29 channels), it offers a number of different digital basic
packages. In addition, the digital service offers a wider
choice of premium services,
radio
services. In total, BSkyB’s digital pay-television service
comprises some 200 channels.

including digital

(58) Roughly [(cid:133)] (*) % of BSkyB’s analogue subscribers take
premium film and sport channels in addition to basic
channels.

(59) BSkyB’s analogue service is transmitted via the Astra
satellites and is available to subscribers in the UK and

(43) In fact, the total number of subscribers to such satellite niche pay-
television channels is less than 5 % of the number of subscribers
to BSkyB’s satellite pay-television service.

(44) BSkyB wholly-owned basic channels are: Sky 1, Sky News, Sky
Sports News (launched in 1998), Sky Travel, Sky Soap and (cid:145).tv(cid:146)
(re-named in 1998, previously The Computer Channel). Source:
BSkyB Group plc 1998 annual report.

(45) BSkyB wholly-owned premium channels are: Sky Premier, Sky
Moviemax, Sky Cinema (re-launched in 1998, previously known
as The Movie Channel, Sky Movies and Sky Movies Gold), Sky
Sports 1, 2 and 3. Source: BSkyB Group plc 1998 annual report.

(46) Joint venture basic channels are: Nickelodeon (50 %), QVC (20 %),
The Paramount Comedy Channel (25 %), Granada Plus, Granada
Men and Motors and Granada Breeze (re-named in 1998,
previously Granada Good Life) (all 49,5 %), The History Channel
(50 %), National Geographic Channel
(50 %) and Music Choice
(49 %). Joint venture premium channels: Playboy TV UK (30 %)
and MUTV (Manchester United TV) (33,3 %). Source: BSkyB Group
plc 1998 annual report.

(47) Basic channels are supplied in the form of a package of channels.
The customer cannot choose to subscribe to the individual
channels comprised in the package, but must subscribe to the
package as a whole. Premium channels are primarily films and
sports channels, and are only available to customers who
subscribe to basic services.

L 312/10

EN

Official Journal of the European Communities

6.12.1999

these

countries. BSkyB’s digital

Ireland. Satellite reception is possible in almost all areas
is also
of
transmitted via Astra satellites. However,
it is not yet
available in Ireland, although BSkyB intends to launch
services there in the future.

service

on

15 November

1998. Capacity
Broadcasting)
from offering as many
constraints prevent ONdigital
channels as BSkyB or cable operators. Initially,
it will
offer some 15 channels comprising both basic and
premium channels.

C a b l e

In contrast

(60) A number of cable operators also supply pay(cid:150)television
services in the United Kingdom. Cable operators must
franchises in which they may offer
bid for regional
to the situation in some other
services.
European countries, cable networks
in the United
Kingdom have been built to supply both television and
telephony services. As at 1 July 1998, slightly more
than 75 % (48) of British television households were
within an existing cable franchise. However, only some
48 % of British television households were,
in fact,
passed by a cable network at that date (49). Although the
construction rate of
recently
slowed (50), cable coverage of the United Kingdom is
expected to reach more than 70 % of the population
over the next five years.

cable operators has

(61) The three largest cable operators are Cable & Wireless
Communications, Telewest and NTL. Both Telewest and
NTL carry the Front Row pay-per-view channel (51),
which is independent of BSkyB.

(65) ONdigital’s parent companies will each supply certain
channels, as will
supply
ONdigital with its premium film and sports channels
under contract for the first [(cid:133)] (*) years of its operation.
It will also supply ONdigital with one of
its basic
channels.

third parties. BSkyB will

Market position of pay-television operators in the United
Kingdom

(66) As at 30 June 1998, roughly a quarter of domestic
television households (53)
in the United Kingdom
subscribe to a pay-television service (54) in addition to
paying a licence fee which entitles them to watch the
five terrestrial free-to-air channels which are available
there.

(67)

If the domestic subscribers to pay-television, according
to BSkyB [(cid:133)] (*) % subscribe to BSkyB and [(cid:133)] (*) % to
the various cable pay-television operators (55).

(62) Cable operators in the United Kingdom offer both pay-
television and telephony services. This combination of
services appears to be a major reason why subscribers
In fact, only 17,9 % (52) of
take cable pay-television.
subscribers
to cable pay-television take cable pay-
television alone; the remainder are dual subscribers.

(68)

It should be noted, however, that the figures (56) for the
number of cable pay-television subscribers published by
the
in the United
Kingdom, the Independent Television Commission (ITC),

competent

regulator

industry

(63) Various cable companies in the United Kingdom began
digital pay-television services in the course of 1999 and
others have announced their intention of doing so
shortly.

D i g i t a l t e r r e s t r i a l

(64) Digital terrestrial pay-television services were launched
(previously known as British Digital

by ONdigital

(48) Financial Times New Media Markets, 17 September 1998, page 9.
(49) Independent Television Commission News Release (82/98) of 16

September 1998.

(50) The number of homes passed by cable increased by 3 % in the
quarter to 1 July 1998, as opposed to 17 % over the previous nine
months. Source: Cable Europe Volume 8, Issue 20, September 30,
1998.

(51) Operated by a consortium of cable operators, including Telewest

and NTL.

(53) It should also be noted that there are commercial subscribers to
pay-television in addition to domestic subscribers. Commercial
subscribers are typically hotels or pubs. Commercial subscribers
are interested essentially in either premium film or premium
sports channels. They do not normally subscribe to basic channels.
By the end of June 1998, there was a total of [(cid:133)]* commercial
subscribers in the United Kingdom. Some [(cid:133)]* of these subscribe
directly to BSkyB’s satellite pay-television service. The remainder
subscribe to BSkyB’s premium film and/or sports channels via a
cable operator.

(54) There were some [(cid:133)]* million such subscribers at this date. This
figure reflects the addition of the total number of subscribers to
BSkyB’s satellite pay-television and the total number of subscribers
to all cable pay-television operators. It does not take account of
subscribers to (cid:145)niche(cid:146) satellite pay-television channels. There are no
figures available to clarify whether subscribers to such channels
are also subscribers to BSkyB’s service. If (cid:145)niche(cid:146) subscribers were
included, there would therefore be a risk of double counting.
Source: BSkyB, response to request for information of 30 October
1998. The total number of domestic television households was
23,86 million: Source: Barb, quoted in New Media Markets,
Volume 16, Number 33, 17 September 1998.

(55) Subscribers to BSkyB at the end of

June 1998, [(cid:133)]* million:
source BSkyB, response to request for information of 9 November
1998. Subscribers to cable operators at the end of June 1998,
[(cid:133)]* million.

(52) Financial Times New Media Markets, 17 September 1998, page 9.

(56) In respect of the same period, i.e. at the end of June 1998.

6.12.1999

EN

Official Journal of the European Communities

L 312/11

suggest that there are [(cid:133)] (*) fewer cable pay-television
subscribers than is suggested by BSkyB (57).
these
figures were relied upon,
then BSkyB would have a
market share of [(cid:133)] (*) % as compared to [(cid:133)] (*) % for
all cable operators.

If

(69)

pay-television

If again we use the ITC figures (58), the largest single
operator, Cable & Wireless
cable
Communications, had 781 944 subscribers at 1 July
1998 (59). This equates to a market share of [(cid:133)] (*) %.

(70) Using figures provided by BSkyB for the period at end
June 1998, all subscribers to cable pay-television take
[(cid:133)] (*). Moreover, some [(cid:133)] (*) % of subscribers to cable
pay-television subscribe to one or more BSkyB premium
channel.

(c) Wholesale supply of channels for pay-television

(73)

In 1996, the Office of Fair Trading (OFT) in the United
Kingdom reviewed BSkyB’s position in the wholesale
pay-television market and found that it had more than
90 % of
the pay-television rights to first-run major
films (61). The OFT concluded that BSkyB held a (cid:145)very
high market share(cid:146) (62) in each of the separate markets
for the wholesale supply of pay-television film and
sports channels to cable operators. It further concluded
that:

(cid:145)BSkyB was dominant in the supply of sports channels
in the United Kingdom Pay-TV market and was at that
time the only provider of premium sports channels with
the exception of one specialist channel
(The Racing
Channel)(cid:146) (63).

(71) There are significant barriers

to entry in the pay-
television market. Entry into the pay-television market
presupposes in the first place that transmission capacity
is available. Owing to frequency shortages, no analogue
capacity is available for terrestrial
transmission. The
digital terrestrial frequencies have already been allocated.
There is no available capacity on the Astra analogue
satellite transponders which BSkyB uses. Digital satellite
transponder capacity on the Astra satellites is available.
franchises have been
In terms of cable networks,
television
awarded which
some
households
these
in the United Kingdom. While
franchises have recently been made non-exclusive, the
very significant costs of constructing such a network
makes it highly unlikely that a second network operator
would choose to build a cable network within an
existing franchise area.

75 % of

cover

(72) An entrant into the pay-television market also requires
programmes, and above all, premium film and sports
channels (60). These are the basics around which other
channels can be offered to subscribers. Providers of
individual niche channels may be able to enter the
market without
experience
throughout the Community has shown, a pay-television
platform provider
is most unlikely to do so. As
explained in recitals 73 to 81, BSkyB’s position in this
field is particularly strong.
In the medium term,
therefore, entry into the British pay-television market
using digital
satellite transmission independently of
BSkyB appears a remote possibility.

channels. As

such

(74)

its

findings,

light of

In the
the OFT imposed
requirements on the terms and conditions under which
In
BSkyB can supply its channels to cable operators.
particular, BSkyB may supply its channels only in
accordance with terms which have previously been
approved by the OFT (64).

(75) The Commission’s

investigation has confirmed that
there has been little evolution in the situation described
by the OFT in 1996.

(76) At present BSkyB has pay-television rights to first run
contracts with [(cid:133)] (*) major
major
films under
Hollywood studios
independent
larger
and [(cid:133)] (*)
studios. [(cid:133)] (*) of BSkyB’s pay-television rights contracts
they cover new
are (cid:145)output deals(cid:146). This means that
product released by film studios (65). Some also cover
library films. In terms of means of transmission, BSkyB’s
contracts concern exclusive rights
[(cid:133)] (*). The
majority of the contracts continue for at least [(cid:133)] (*)
years from the launch of digital pay-television in 1998.

for

(61)

(cid:145)BSkyB had long term rights contracts with the major Hollywood
studios and with the larger independents which gave BSkyB Pay-
TV rights to over 90 % of first run major films(cid:146) Paragraph 1.7 of
(cid:145)The Director-General’s Review of BSkyB’s position in the
wholesale Pay-TV market(cid:146), December 1996.

(62) The Director-General’s Review of BSkyB’s Position in the

Wholesale Pay-TV Market, December 1996, point 1.2.

(57) Independent Television Commission News Release (82/98) of 16

(63) The Director-General’s Review of BSkyB’s Position in the

September 1998.

(58) BSkyB has not provided figures which distinguish between the

various cable operators.

(59) Independent Television Commission News Release (82/98) of 16

September 1998.

Wholesale Pay-TV Market, December 1996, point 2.19.

(64) Informal undertakings published in OFT press release No. 32/96
of 24 July 1996 and at appendix A to The Director-General’s
Review of BSkyB’s Position in the Wholesale Pay-TV Market,
December 1996.

(60) Bertelsmann/Kirch/Premiere, in particular recitals 34,48 and 49.

(65) Sometimes referred to as (cid:145)first run(cid:146) or (cid:145)first release(cid:146) rights.

L 312/12

EN

Official Journal of the European Communities

6.12.1999

(77) BSkyB’s pay-per-view agreements are [(cid:133)] (*). In other

respects their terms vary: [(cid:133)] (*).

share of BSkyB’s competitors on the pay-television
market would, to a certain extent, be offset by increased
revenue from the wholesale supply of film and sports
channels.

rights contracts
(78) BSkyB’s major pay-television sports
include rights to almost all national
league football,
rugby football, cricket, golf and boxing. The contracts
relate to [(cid:133)] (*). As with films,
rights
contracts generally cover [(cid:133)] (*). In line with industry
practice the duration of the agreements is shorter than
for films. The precise duration of the agreements varies:
the majority continue until [(cid:133)] (*).

the sports

and sports

contracts prevent

(79) The extent and duration of BSkyB’s exclusive film
the
rights
contracts
emergence of any significant competition to BSkyB in
the supply of pay-television film and sports channels in,
at least, the medium term (66). The fact that the rights
contracts cover
transmission also
[(cid:133)] (*) modes of
means that BSkyB’s retail pay-television competitors, the
various cable operators and ONdigital, have no choice
but to purchase BSkyB’s film and sports channels if they
are to offer such channels as part of their own services
to subscribers.

(80) BSkyB supplies both British cable operators

and
ONdigital with its premium film and sports channels, in
addition to certain of
its basic channels [(cid:133)] (*) % of
subscribers to cable pay-television take at least one of
BSkyB’s film or sports channels. On average, BSkyB
wholly-owned basic and premium film and sports
channels
total
programming costs for cable operators. On average,
acquisition of BSkyB film and sports channels accounts
total
for
programming costs (67). Again on average, between
[(cid:133)] (*) % of expenditure on film and sports channels is
paid to BSkyB.

[(cid:133)] (*) % of

[(cid:133)] (*) % of

operators’

account

some

some

cable

for

(81) BSkyB’s control of

that BSkyB obtains

the pay-television rights to most
major films and many of the most popular sports also
means
revenue from its pay-
television competitors as both cable companies and
ONdigital are dependent on BSkyB for the supply of
such channels. In the medium term, any gain in market

(66) This has been recognised by independent analysts. See for
example, page 23 of the Nat West Markets analysis of Digital
Broadcasting (cid:145)Looking for Direction (cid:151) UK Media Sector(cid:146) October
1997: (cid:145)(cid:133) the fact is that BSkyB’s movie contracts remain in place
through the first three years of its transition to digital. There is
simply no route to market for aspiring competitors in the initial
stages of
these
contracts remain in place for some six years.

the development of digital services(cid:146).

In fact,

(67) [(cid:133)](*) % of BSkyB’s expenditure on programmes is accounted for

by films and sports.

(d) Technical services necessary for pay-television and

digital interactive television services

(82) The various cable operators and ONdigital each use

different technical services to BSkyB.

(83) BSkyB Group brings together a number of companies
that deal with various aspects of these technical and
administrative services (68). Sky Subscribers Services Ltd
(SSSL) will provide Videoguard digital conditional access
and access control services both to BSkyB Ltd and to
third parties under
the British regulatory regime,
including BiB. BSkyB, through SSSL, has an exclusive
licence for the United Kingdom and Ireland to use, and
to offer
the Videoguard system
developed
by New International’s wholly-owned
subsidiary, News Data Systems (69).

to third parties,

(84) As the parties themselves recognise, (cid:145)demand for set-top
boxes is directly linked to demand for TV broadcasting
since the only purpose of purchasing a set-top box is to
access the broadcast TV market(cid:146) (70). It follows from this
that
technical
services is largely determined by the position on the
pay-television market of the companies which use its
services in their set-top boxes. BSkyB, through SSSL,
therefore controls some [(cid:133)] (*) % of
installed set-top
boxes in the United Kingdom.

the market position of a supplier of

(85) BSkyB’s position in the technical services market is also
secured by its control of the content markets described
at recitals 76 to 79 (71).

(68) Sky Subscribers Services Ltd (SSSL) and Satellite Encryption
Services Ltd (SESL) are both wholly-owned subsidiaries of BSkyB
Ltd. SSSL provides analogue conditional access and subscriber
management services to BSkyB Ltd. SESL provides the same
services
to third party satellite direct-to-home pay-television
broadcasters using ASTRA transponders. Sky In-Home Services
Limited (SIHSL, formerly Tele-Aerials Satellite Limited) is also a
involved in the sale and
wholly-owned subsidiary. SIHSL is
installation of analogue and digital satellite dishes.

(69) BSkyB Group has a similar exclusive licence in respect of

its

analogue conditional access system, VideoCrypt.

(70) Form A/B, p. 51.
(71) Bertelsmann/Kirch/Premiere, in particular at recital 108.

6.12.1999

EN

Official Journal of the European Communities

L 312/13

(e) Customer access telecommunications infrastructure
market for telecommunications and related services

providers of residential telecommunications services use
the BT network in order to terminate the majority of
calls in the United Kingdom.

(86) BT is the former telecommunications monopolist in the
United Kingdom. Its telecommunications network covers
almost
the United Kingdom. 86 % of
residential fixed lines in use were provided by BT (72).
The remainder were mainly provided by cable operators.

the whole of

D. THE OPERATION

(87) BT has made significant

investments in digitising its
network in recent years and now almost 100 % of BT’s
exchanges are digital.

1. The notified arrangements

(88) BT faces competition at both the infrastructure and
service provision levels of its business. Looking only at
residential services, BT competes with cable operators at
both the infrastructure and the service level. In addition,
the service level with a number of
BT competes at
operators who use BT’s network to deliver services to
consumers.

(89) Cable operators’ networks currently pass 48 % of homes
in the United Kingdom. This is expected to rise to 70 to
80 % over the coming years. In areas covered by cable
an average of
networks,
approximately
residential
customers.

cable operators

potential

attract

four

one

in

(90)

of

be

used

power-line

technology may

infrastructure may

It is unclear whether there will be significant coverage
of the United Kingdom by wireless fixed networks in
the short to medium term. In the longer term, other
forms
for
telecommunications services in the United Kingdom. For
example,
allow data
transmission over existing domestic electricity cables.
There are also four digital mobile networks based on
the GSM standard which provide almost complete
coverage of the United Kingdom. At present, the data
capacity of GSM networks is relatively limited, and
voice services provided over GSM networks in the
United Kingdom tend to be more expensive than those
delivered over fixed lines.

(91) The significant sunk costs involved in constructing a
access
nation-wide
telecommunications
network make it very unlikely that a new entrant would
do so.
the cable
networks, BT continues to have a market share of some
86 % of
telephony lines in use to
receive services. Both as a result of the coverage of its
its market share, other
network and as a result of

Indeed, despite the existence of

fixed residential

customer

(92) The notification essentially comprised the joint venture
agreement between the parties,
together with its
annexes. For present purposes, the most important of
the annexed agreements
the marketing services
is
agreement between BiB and BSkyB which provided
details of the parties’ plans with respect to subsidisation
set-top boxes,
of BiB-compatible digital
digital satellite dishes and low-noise blocks, [(cid:133)] (*) and
the conditions under which consumers were eligible to
purchase it. Three further agreements between BiB and
Midland were notified, concerning Midland’s provision
to BiB of a transaction management system, merchant
acquiring services and Mondex cards respectively.

interactive

(93) A number of related agreements were provided to the
Commission for information purposes, although they do
not form part of the notification. The most important of
these are the agreements between BSkyB and Open TV
concerning the application programming interface in
BiB-compatible digital interactive set-top boxes, and that
between BiB and Open TV concerning the authoring
tools for that application programming interface.

2. Structure of joint venture

(94) The shareholdings in BiB will be as follows: BSkyB
32,5 %, BT 32,5 %, Midland 20 % and Matsushita 15 %.
The Board will consist of 10 Directors: three appointed
by BSkyB, three by BT, two by Midland and two by
Matsushita.

(95) BiB has been established for an indefinite duration.
Certain major decisions, including material variations to
the business plan, concerning BiB will
require the
consent of each shareholder whose interest in BiB is at
least 10 % (73). For example, if BiB wished to subsidise

(72) For the period January to March 1998. Source: Oftel Market

(73) Below this 10 % threshold, a shareholder loses the right to Board

Information Update, November 1998.

representation and joint control.

L 312/14

EN

Official Journal of the European Communities

6.12.1999

for

transmission means other

set-top boxes
than
satellite, this would require the unanimous consent of
the shareholders. BiB will be jointly controlled by its
parent companies.

3. Scope and purpose of joint venture

(96) BiB has been created in order

to develop the
infrastructure necessary for
the provision of digital
interactive television services and to provide such
services over that infrastructure. BiB will also provide
technical
interactive
television services. The geographic
scope of BiB’s
activities is limited to the United Kingdom.

services necessary

for digital

(a) Infrastructure

for

the

provision

of

digital

interactive television services

(97) The BiB infrastructure has been developed specifically to
via

interactive

television

services

digital

provide
satellite (74).

(98) BiB will provide the content providers with all

the
infrastructure necessary to provide interactive services: a
broadcast and on-line delivery system, conditional access
and access control services, a system to allow financial
transactions to be completed, a service-creation system
and access to a digital interactive set-top box.

Broadcast and on-line delivery system

(99) Digital satellite transponder capacity will be sub-leased
from BSkyB. The up-link of broadcast content to the
satellite will be provided by BT, as will the transmission
to the up-link site. The software for the broadcast server
will be supplied by Oracle and will be based upon
Oracle’s standard packages. BT has entered into an
agreement with Oracle for certain enhancements of the
Oracle software. Access to the on-line system is through
a network of access points
the United
Kingdom (Point of Presence network). BT will contract
with BiB to supply these services for an initial period of
three years.

throughout

Conditional access and access control services

(100) Essentially for reasons of copyright protection, both the
content broadcast via satellite and delivered on-line will
be encrypted. This also prevents unauthorised signals
from corrupting set-top boxes. SSSL, BSkyB’s wholly-
owned subsidiary, will supply BiB with both conditional
access and access control services.

System to allow financial transactions on platform

(101) The completion of transactions on the BiB infrastructure
requires a secure environment such that consumers and
content providers are willing to transact. BiB has
contracted with Midland to provide a transaction
management system (TMS). BiB has granted Midland a
10-year exclusivity in respect of the TMS. The TMS will
interface with a merchant acquiring system. Midland
will similarly supply merchant acquiring services to BiB
content providers, on the basis of a 10-year exclusive
contract. The present exclusivity is twofold as it affects
both content providers and consumers which will
contract with BiB the use of BiB’s platform or the
provision of digital interactive television services.

(102) Neither of

these

exclusive

to provide

agreements prevents

a
different interactive services company which uses the
BiB infrastructure
from using
different TMS and merchant acquiring services from
those envisaged in the agreements. The BiB-subsidised
set-top box also has a slot
into which electronic
payment cards, such as Mondex, can be slotted. The slot
is standardised and will
therefore accept alternative
payment cards.

services

Service creation system

(103) The interactive applications of content providers must
be so written as to be compatible with the application
programming interface (API) of BiB subsidised set-top
boxes. BiB will write applications for content providers
on its digital interactive TV services platform, although
content providers may also do so themselves.

(74) Although the parties have indicated that

they intend to enter
negotiations with a view to making the BiB service available
alongside the digital broadcast entertainment services transmitted
on digital terrestrial and digital cable in the United Kingdom.

(104) Broadcasters and interactive advertisers will also need
authoring tools to write applications compatible with

6.12.1999

EN

Official Journal of the European Communities

L 312/15

the enhanced Open TV API, whether for purposes of
(cid:145)side-channels(cid:146) or to carry out interactive transactions.

(105) Under the Open Author Agreement between BiB and
Open TV, BiB is granted a non-exclusive licence for the
necessary authoring tools. The licence covers the United
Kingdom and Ireland. Third parties can obtain the
necessary authoring tools either from BiB or from Open
TV direct.

(109) The intellectual property rights for these enhancements
will vest in Open TV. By virtue of clause 12.4 of the
agreement between BSkyB and Open TV, Open TV
undertook not to license these enhancements to any
third party in the United Kingdom for two years from
the launch date of BiB services. However, following the
Commission’s intervention, the parties have given up
their veto over the licensing of the Open TV 1.2 API
enhancements.

Digital interactive set-top box

E l e c t r o n i c P r o g r a m m e G u i d e

(106) The most important element of the infrastructure from
the end consumer is a BiB-
box. Any

the point of view of
compatible
telephone line can be used to access BiB services.

interactive

set-top

digital

interactive set-top box,

(107) BSkyB, with input from the BiB parties, has specified a
the Digibox, which
digital
embeds BSkyB’s proprietary conditional access (CA) and
access control (AC) systems and BSkyB has ordered such
boxes from manufacturers. As the box does not contain
a common interface, this means that it is tied to BSkyB’s
the Commission has
CA and AC systems. However,
imposed as a condition that BSkyB shall develop and
operate Simulcrypt arrangements (75). The box includes
a digital satellite demodulator and has interface ports
onto which
and
cable,
sidecar
broadband
demodulators can be attached. This means that BiB-
could be used with all other
compatible boxes
transmission systems
sidecars were
attached. The box will also include a modem and a
standardised slot for electronic payment cards.

telecommunications

appropriate

terrestrial

network

digital

digital

if

the

(110) BSkyB’s specifications for the set-top box allow only one
EPG to run, which is its own proprietary EPG. BiB will
therefore have a menu position on the BSkyB EPG. As
originally notified, Clause 4 of
joint venture
agreement (JVA) had provided that BiB would be the
exclusive provider of digital interactive TV services via
the BSkyB EPG for a period of 10 years. Clause 4 also
provided that
if a subsidy-recovery mechanism was
agreed between the parties and the relevant regulatory
the exclusivity would be limited to 18
authorities,
months. Following the Commission’s intervention the
parties have ended the exclusivity for BiB in respect of
the BSkyB EPG.

S u b s i d i s a t i o n
s a t e l l i t e d i s h a n d L N B :

o f

s e t - t o p

b o x ,

d i g i t a l

(cid:145) B o x p a c k a g e s (cid:146)

A p p l i c a t i o n P r o g r a m m i n g I n t e r f a c e

(108) The application programming interface (API) in the box
is supplied by Open TV (76). BSkyB has commissioned
Open TV to develop enhancements to the Open TV 1.2
API. These enhancements allow the box to decode high
quality still pictures broadcast via satellite (MPEG or
JPEG) in addition to moving pictures (MPEG); the quality
of sound via PSTN (on-line) is improved (G 729 audio)
and finally they allow the API to (cid:145)talk(cid:146) to the interface
modules (such as alternative demodulator sidecars or
games consoles).

(75) Condition No 6 of this Decision.
(76) Formerly known as Thomson Sun Interactive.

(111) BiB will

subsidise (cid:145)box packages(cid:146) with a view to
reducing the retail selling price of such set-top boxes,
dishes and LNBs to what the parties consider to be an
affordable price below GBP 200 including VAT (77).

(112) BiB’s largest business cost over the first 10 years of its
operation will consist of subsidising the retail price of
such box packages. The purchase of such packages both
by customers who presently take BSkyB’s analogue
services and by new customers will be subsidised. BiB
the
will pay a higher level of subsidy in respect of
former. The BiB Business Plan envisages that
for a
substantial number of years most of the subsidy will be
directed towards existing BSkyB retail customers.

(77) The JVA originally provided that BiB would also subsidise the
costs of installation of the box and installation or upgrade of a
digital
consumer’s home. However,
subsidisation of installation costs was removed from the business
scope of BiB in the agreements signed on 4 August 1998.

dish in the

satellite

L 312/16

EN

Official Journal of the European Communities

6.12.1999

(b) Sources of revenue of BiB

for

certain services which it will

(113) BiB will have essentially three sources of revenue. First,
it will charge content providers which form part of its
own digital interactive service. Secondly, it will charge
end-users
itself
provide (78). Thirdly, it will require all service providers
which wish to access BiB-subsidised digital
interactive
set-top boxes to provide their own encrypted services to
contribute
costs of
subsidisation. Thus, BiB’s main sources of revenue are
derived at the wholesale level, rather than direct from
end-users.

to its historic

and ongoing

(114) BiB proposes

to both its
to recover contributions
historic and its ongoing subsidy costs from two sources.
First, BiB expects to recover a proportion indirectly
through its general
charging mechanisms vis-(cid:224)-vis
content providers. Secondly, BiB proposes to recover
subsidy contributions directly from all broadcasters or
interactive
(including BiB’s own
services business and BSkyB) who intend to use the box,
save for un-encrypted free-to-air broadcasters. All such
require conditional access and/or access
users will
control from SSSL, and SSSL will, as part of its charges
for conditional access/access control, levy a contribution
to subsidy recovery,
in respect of which it will be
invoiced by BiB.

services providers

(115) The parties’

initial proposal was that (a) broadcasters
subsidy and interactive services
would pay 5 % of
providers would pay 95 % and (b) third parties who
were required to pay subsidy recovery would have to
initial payment equivalent
pay a substantial
to their
the unrecovered historic subsidy costs. The
share of
Commission
the
as
modification of the operation of the subsidy recovery
mechanism (79).

condition

imposed

has

a

(c) Non-competition provisions

(116) The draft

joint venture agreement,

forwarded to the
Commission on 14 July 1998, stated that for so long as
the parties or any affiliate hold shares in BiB and two
years thereafter, they would not:

(cid:151) provide and operate, or hold more than a 20 %
interest in a company which provides and operates,
a platform for the provision of digital
interactive
television services in the United Kingdom via any
transmission means; or

software and know-how for

(cid:151) supply or license to any person the majority of the
such a
hardware,
the purpose of providing digital
platform for
interactive television services in the United Kingdom
via any transmission means.

(117) This

non-competitive

digital
interactive television services associated with video-on-
demand entertainment services.

obligation

included

4. Relationship with BSkyB’s services

(118) There is a close relationship between BiB and BSkyB’s
digital services. The respective infrastructures needed are
largely complementary. This is particularly the case for
the set-top box. The JVA (80) commits the parties to
promote only digital satellite set-top boxes which are
capable of receiving the BiB service for so long as BiB is
subsidising set-top boxes. BSkyB may not therefore use
a set-top box which is not compatible with BiB for its
own digital pay-television service (81). Indeed, the parties
television
have
services’ business would not be viable unless it were
closely associated with traditional broadcast services,
such as BSkyB’s, with which consumers are more
familiar (82).

stated that BiB’s digital

interactive

(119) Along the same lines BSkyB has agreed that

reasonable

the
subscription price for its digital pay-television service
will be no higher than that of similar analogue packages
of satellite entertainment services (83). It has also agreed
to use
all
endeavours
programmes broadcast on BSkyB’s analogue satellite
service will be broadcast simultaneously on BSkyB’s
digital satellite service (84) and to spend a substantial
amount of money on the marketing of its digital pay-
television services (85). The close relationship between
the two services is further reinforced by the provisions
the BiB
of

the JVA requiring certain advertising of

to ensure

that

(80) Clause 20.4 of JVA.
(81) However, BSkyB may promote any other set-top box where the
purpose of such promotion relates to the use of such boxes in
homes which already have a BiB subsidised set-top box.

(78) BiB’s service will generally be available free to customers with the
exception of down-loading of games, learning on-line and limited
Internet access for which a separate fee may be charged.

(79) Condition No 7 of this Decision.

(82) Pages 47 and 49 of Form A/B.
(83) Clause 19 of JVA.
(84) Clause 19 of JVA.
(85) Clause 20 of JVA.

6.12.1999

EN

Official Journal of the European Communities

L 312/17

service to be integrated with BSkyB advertising (86) and
committing BiB, in its early financial years, to spend a
substantial proportion of its total marketing expenditure
on advertising via digital television (87).

changes to the notified agreements are set out in recitals
124 to 134. These are reflected in the new version of
the JVA signed on 4 August 1998.

(120) For the end-user,

the two services are closely linked
because purchase of the equipment necessary to receive
the BSkyB service automatically gives access to that of
to the original marketing
BiB. Moreover, pursuant
services agreement, it was a condition of purchase of a
BiB subsidised set-top box that consumers subscribed to
BSkyB’s digital pay-television service for the minimum
contract term of 12 months. The latter requirement has
been removed.

5. Relationship with BT’s services

(121) The JVA (88) requires the parties to negotiate in good
faith with a view to BT’s and BiB’s entering into an
agreement under which BT will supply to BiB all BiB’s
telecommunications requirements for the period ending
three years after BiB’s launch.

(122) Pursuant to clause 3.3 (A) of the JVA, the parties agree
that a shareholder who wishes
to provide digital
interactive television services by means of a broadband
system can do so only where it has given BiB a right of
first refusal to provide such a service and BiB has not
agreed to provide such a service on terms at least as
favourable as those offered by a third party within six
months of the offer or 31 March 1999, whichever is
the later. This provision is of most relevance to BT.

E. CHANGES MADE FURTHER TO THE COMMISSION’S
INTERVENTION

(123) On the basis of

the analysis carried out by the
Commission, and of the comments received from third
parties following the publication in the Official Journal of
the European Communities of a first notice inviting third
party comment (89) and then of a notice published
pursuant to Article 19(3) of Regulation No 17, certain
features of
the notified agreements appeared to be
incompatible with Community competition rules. The
Commission informed the parties of its concerns. The

(86) Clause 17 of JVA.
(87) Clause 18 of JVA.
(88) Clause 8 of JVA.
(89) OJ C 259, 26.8.1997, p. 3.

(a) Non-competition provisions

interactive television services,

(124) The non-competition provisions in the JVA have been
amended to limit them to the business scope of BiB,
namely digital
including
interactive television services
the provision of digital
associated with broadcast services. Thus, the proviso to
the provision relating to digital
interactive television
services associated with video-on-demand entertainment
services was deleted as it went beyond the business
scope of BiB.

(125) The parties

further

amended the non-competition
provision so that it applies only to shareholders with
joint control. The non-competition provision continues
to apply to a shareholder for a period of 12 months
after that shareholder loses joint control, where that loss
occurs within three years of the date of the exemption
decision pursuant to Article 81(3) of the EC Treaty.

(b) Legal separation

(126) The Commission was concerned that the combination
relating to the
in a single company of activities
subsidisation of
set-top boxes and the recovery of
subsidies, together with the operation of services using
the set-top box, would lead to a lack of transparency in
the operation of the subsidy recovery mechanism which
could allow the parties to confer benefits on their own
downstream operations
in comparison with third
parties. In order to address this concern the structure of
the joint venture itself has been modified. Two separate
companies have been created (90) for BiB’s subsidies of
set-top boxes and the recovery of subsidy from third
parties (91), and the creation and operation of BiB
interactive services (92).

(127) The Board of each of these wholly-owned subsidiaries
representatives only. No
will consist of shareholder
individual will be a member of both. Each of
the
companies will have its own operational management,
responsible to its respective board. These management
teams will both report to the chief executive officer of
the
the BiB Group, who will be responsible for

(90) Clause 2.2 of JVA.
(91) Marketing Contributions Co (cid:151) (cid:145)McCo(cid:146).
(92) Platform Co.

L 312/18

EN

Official Journal of the European Communities

6.12.1999

management and performance of the whole BiB Group,
and will report to the BiB Board. The two companies
will publish annual audited accounts. Auditors will
certify that all transactions between the two companies
length (93). This new
have been carried out at arms’
management structure ensures transparency and non-
discriminatory treatment between the two operations
and responds to the Commission’s concern.

(c) Access to BiB-subsidised digital interactive set-

top boxes

(d) Commitments given by BSkyB in relation to the

British regime

(131) The

electronic

programme

regulatory requirements placed on BSkyB in
relation to the supply of conditional access and access
to its
services and in relation to access
control
exist
guide
proprietary
independently of
its participation in the BiB joint
venture. In the course of the Commission’s examination
of BiB, BSkyB has informed the Commission of how it
intends to comply with the British regulatory regime.
The Commission considers as a fact basic to the making
of
the decision the British regulatory obligations on
BSkyB. If the relevant British authorities were to bring
these
an action against BSkyB for
this
obligations,
situation under Article 8(3)(a) of Regulation 17.

infringement of
the Commission would consider

the licensing of

(128) The parties have ended the exclusivity for BiB in respect
of the BSkyB EPG. They have also relinquished their
veto over
the Open TV 1.2 API
enhancements. The parties are seeking an agreement
with Open TV to determine the contribution which
Open TV will levy on licences for the Open TV 1.2 API
enhancements
any updates)
supplied to third parties, such levy being based on the
development costs of those enhancements.

(and, where

relevant,

(132) BSkyB has confirmed that its wholly-owned subsidiary,
SSSL, will provide access control services under the
terms of the Telecommunications Services Class Licence
(as granted on 31 December 1997 under Section 7 of
the Telecommunications Act 1984) or any licence
which supersedes the access control provisions of the
Telecommunications Services Class Licence.

(129) The requirement that customers wishing to purchase a
BiB-subsidised set-top box, digital satellite dish and LNB
must subscribe to BSkyB’s pay-television service has
been removed. The only conditions governing purchase
of such box packages are now the following (94). First,
that the customer agrees to connect the set-top box to a
telephone line for a one-year period. Secondly,
if
Midland so requests pursuant to the Mondex agreement,
arrangements will be made for the issue to the customer
of a Mondex card and the opening of a feed bank
account (95). Thirdly, customers agree to the installation
of box packages by an installer approved by the parties.

(130) These amendments to the originally notified agreements
if competing
address the Commission’s concern that
providers of digital
interactive services were to be
denied access to BiB-subsidised set-top boxes, or were to
be granted access on terms less favourable than BiB,
then competition in the digital
interactive television
services market could be eliminated.

services

(within the meaning of

(133) BSkyB has further agreed that when requested to supply
the
access control
British regime), SSSL will comply with the obligations to
cooperate in advance of
in
Regulation 11(4)
the Advanced Television
Services Regulations 1996, as if that Regulation applied
to such services (96). Again, this prevents BSkyB from
relying on a possible loophole in the British regime.

service launch set out

to (8) of

It

(134) The Conditional Access Class Licence prevents providers
of digital conditional access services from bundling the
various services which constitute the conditional access
is unclear whether the British regulatory
services.
regime requires providers of such services to supply
verification (digital signature) services separately. BSkyB
[(cid:133)] (*) is, in principle, willing to allow [(cid:133)] (*) to sign its
own interactive applications subject to [(cid:133)] (*) meeting
certain financial, technical and other criteria and subject
to the agreement of commercial
including a
condition that the third party takes responsibility for
errors in its signing. BSkyB has agreed that it will offer

terms,

(93) Clause 2.2 of JVA.
(94) Marketing Contributions Services Agreement between McCo and

BSkyB of 4 August 1998.

(95) Customers are not charged for this service, nor are they required

to make any deposits on such an account.

(96) And as if

therein were
the reference to the (cid:145)primary duty(cid:146)
references to the duty to provide Access Control Services pursuant
to the British Regime and references to (cid:145)technical services(cid:146) were to
technical services within the said meaning of Access Control
Services.

6.12.1999

EN

Official Journal of the European Communities

L 312/19

such right [(cid:133)] (*) on fair and reasonable terms (97) and
include a
on a non-discriminatory basis (which shall
requirement on such third parties to meet the technical,
commercial
required
[(cid:133)] (*)).

and financial

criteria

are

as

and/or sport programming with interactive applications.
The distributor’s option to remove or keep all of the
icons (98) is extended, subject to an agreement for the
carriage of BiB or BSkyB’s services, to allow a situation
where some of the icons remain on the screen whilst
some of the icons are removed.

F. THIRD PARTY OBSERVATIONS

II. LEGAL ASSESSMENT

(135) Following the publication of a notice pursuant to Article
interested third parties
19(3) of Regulation No 17,
submitted observations
to the Commission. Broadly
speaking, third parties welcome the conditions that the
Commission proposed to apply to BiB and under which
an Article 81(3) exemption could be granted. Concerns
expressed in these observations included:

(138) The Commission has

concluded that

the notified
arrangements as amended fall within the scope of
Article 81(1) of
to
the EC Treaty, but
certain conditions, the criteria of Article 81(3) of the EC
Treaty are met.

that subject

(cid:151) the

restrictions

on
participants in BiB are not indispensable

competition

between

the

A. COOPERATIVE JOINT VENTURE

(cid:151) the duration of the exemption

(cid:151) the Commission should continue to monitor the
joint venture over a number of years, in particular
in the field of access to the local loop if there were
a risk that BT might have an incentive to slow the
development of broadband services
in the UK
because of its stake in BiB

(cid:151) BSkyB should be required to enter into negotiations
with other interactive service providers who wish to
add
BSkyB
programming.

enhancements

interactive

to

(136) The Commission carefully reviewed all

third-party
observations and concluded that concerns expressed
therein have been addressed during the notification
procedure. The conditions attached to this Decision take
these concerns, and third-party
sufficient account of
observations
the
not
Commission’s substantive position as described in the
Article 19(3) notice. However,
in the interest of legal
in greater
certainty the Commission has spelled out
detail in this Decision the scope of certain conditions
imposed on the parties and the fulfilment of the four
conditions which govern exemption under Article 81(3).

therefore

affected

have

(137)

In addition, the Commission considered it necessary, as
a result of third-party observations, to extend the scope
of the condition on the availability of a clean-feed. The
condition imposed in this Decision allows more
flexibility to companies which distribute BSkyB’s movies

(139) The joint venture has to be assessed under Regulation
No 17 because there is a risk of coordination between
the parent companies in the market of the joint venture
and in neighbouring markets such as video-on-demand
entertainment services.

B. ARTICLE 81(1)

(140) BSkyB and BT’s participation in BiB results

in an
appreciable restriction of competition on the market for
digital interactive television services. This restriction of
competition affects trade between Member States. The
creation of the BiB joint venture therefore falls within
the ambit of Article 81(1). The Commission cannot give
negative clearance to the agreements as requested by the
parties in their notification.

1. Applicability of Article 81(1) to the creation of

BiB

(a) Digital interactive television services market

Restriction of competition between the parent companies (cid:151)
BSkyB and BT are potential competitors

(141) Prior to the conclusion of the BiB joint venture, BT and
BSkyB were potential competitors in the provision of

(97) Terms approved by the Director-General for Telecommunications

will be presumed to be fair and reasonable.

(98)

(cid:145)All-or-nothing(cid:146) option in the Article 19(3) Notice.

L 312/20

EN

Official Journal of the European Communities

6.12.1999

digital interactive television services. Both have sufficient
skills and resources to launch such services and both
would be able to bear the technical and financial risks
of doing so alone. The creation of BiB eliminates this
potential competition. Given the market positions of BT
and BSkyB in markets related to the one in which BiB
will be active, the restriction of competition between
them is appreciable.

in

sector

copper-line

development

infrastructure,

for operators

telecommunications

general world-wide

(142) The fact that BT is a potential competitor reflects a
the
more
telecommunications
to seek to
expand the number and types of services provided over
their networks. This diversification increases the return
on the capital employed to build, or in the case of BT,
maintain the network. More particularly, by virtue of
technologies,
the Digital Subscriber Line family of
customer
traditional
access
that of BT, can be
such as
upgraded to allow for the provision of services such as
those to be provided by BiB in addition to other
services such as video telephony, video-on-demand and
high-speed Internet access. One operator in the United
already
Kingdom, Kingston Communications,
committed
its
of
such
infrastructure (99). In other European countries, trials are
conducted extended residential
underway. BT has
trials (100). The latest trial ran until March 1999. Some
service providers will offer a range of services, including
on-demand
information
programming, home shopping and home banking.

has
upgrade

entertainment,

news

itself

and

an

to

(143) The

tendency

towards
to

diversification
provide

of
general
telecommunications
services
operators
similar to those of BiB has been accepted by the parties.
Indeed, the parties themselves have stated that (cid:145)the main
telecommunications operators (other than BT) could
become competitors to BiB(cid:146) (101). The parties’ claim that
BT’s
regarded as potential
competitors, whereas BT itself should not, cannot be
accepted. The joint venture agreement itself envisages
that BT will upgrade its network to allow provision of
services such as those to be provided by BiB (102).

competitors

should be

(144) BSkyB is also a potential competitor in the provision
of digital
interactive television services. BSkyB has
extensive experience in running a popular mass market
television service. It is the digitisation of such services
which allows digital interactive television services to be
introduced. There are significant common costs in the

(99) Source:

Inside Cable & Telecoms Europe, http://www.inside-
to

(cid:145)Kingston first

cable.co.uk, article of 14 December 1998,
commit to ADSL in Europe(cid:146).

(100) Source:

Inside Cable & Telecoms Europe, http://www.inside-
(cid:145)BT’s ADSL Trails (cid:151)

cable.co.uk, article of 22 December 1998,
More Details(cid:146).

(101) Form A/B, at page 77.
(102) Clause 3.3 (A) of JVA, referred to at recital 119.

retail

technical services and infrastructure required for both.
In the absence of BiB, BSkyB would have required a
digital set-top box for its own pay-television business
and would have subsidised its
selling price
itself (103). The marginal cost increase in producing a
set-top box capable of allowing interactivity is relatively
small in comparison with the overall cost of the set-top
box (cid:151) the parties have estimated the marginal cost to
be approximately GBP [(cid:133)] (*) (104). Given the common
infrastructure costs, and given that subsidisation of set-
top boxes is BiB’s largest single cost over the first
[(cid:133)] (*) years of its operation, the marginal cost increase
of establishing an interactive service once the decision
has been made to launch a digital television service is
relatively small (105).

2. Applicability of Article 81(1)

to contractual

provisions

(145) The following contractual provisions and agreements

restrict competition:

1. The non-competition provision between the parties
joint venture
the

contained in Clause 3.1 of
agreement, as amended at
Commission.

the demand of

the

2. The parties’ agreement

interactive

to provide digital

that a shareholder who
television
wishes
services by means of a broadband system may do so
only where it has given BiB a right of first refusal to
provide such a service and BiB has not agreed to
provide
least as
such a service on terms at
favourable as those offered by a third party within
six months of
the offer or 31 March 1999,
whichever is the later (106).

3. The exclusive supply agreements between BiB and
Midland Bank in respect of merchant acquiring and
transaction management services.

(103) ONdigital is subsidising the retail selling price of the digital set-

top boxes necessary for its service.

(104) Response of 8 August 1997 on behalf of BiB parties to request

for information of 25 July 1997.

(105) For example, the total investment in BiB is GBP [(cid:133)](*) million (of
which BSkyB is in any event contributing [(cid:133)](*) %). The peak
annual cost of running the BiB services is GBP [(cid:133)](*) million (in
[(cid:133)](*), of which approximately
to
subsidisation of the set-top box.

attributable

[(cid:133)](*)

is

(106) Clause 3.3 (A) of JVA.

6.12.1999

EN

Official Journal of the European Communities

L 312/21

4. The provisions of

certain
advertising of the BiB service to be integrated with
BSkyB advertising (107).

JVA requiring

the

5. The commitment of the parties to promote only
digital satellite set-top boxes which are capable of
receiving the BiB service for so long as BiB is
subsidising set-top boxes. However, BSkyB may
promote any other set-top box where the purpose
of such promotion relates to the use of such boxes
in homes which already have a BiB-subsidised set-
top box and BSkyB agrees to spend a substantial
amount of money on the marketing of its digital
pay-television service (108).

6. BSkyB’s commitment that the subscription price for
its digital pay-television service will be no higher
than that of similar analogue packages of satellite
entertainment services and its commitment to use
reasonable
all
programmes broadcast on BSkyB’s analogue satellite
service will be broadcast simultaneously on BSkyB’s
digital satellite service (109).

endeavours

ensure

that

to

(146) These

clauses

are directly

related and necessary
restrictions to the creation and operation of BiB with
the exception of the prohibition in the non-competition
in a
clause on holding more than a 20 % interest
company competing with BiB, for the following reasons:

loss occurs within three years of the date on which this
Decision takes effect, is justified as a protection for the
joint venture and for the investors against a parent
company withdrawing from the joint venture and taking
unfair advantage of the know-how acquired during its
participation in the joint venture in order to compete in
the same market.

(149) The Commission

the

has

examined

prohibition
contained in the non-competition provision, which
precludes the BiB parent companies from holding more
than a 20 % interest in a company competing with BiB.
The clause is not limited to the acquisition of material
influence but it does include the purchase of shares for
investment purposes only. Therefore,
this restriction
cannot be considered directly related and necessary to
the operation of
the joint venture. The Commission
needs to examine whether the clause fulfils the criteria
set out in Article 81(3).

(b) BiB’s right of first refusal

(150) This clause limits the scope of

fall

the

between

the
parent

the non-competition
provision. BiB’s right does not go beyond the scope of
non-competition
activities which
under
companies. This
obligations
provision is of particular relevance to BT, which could
in the future be interested in the provision of digital
interactive television services via broadband networks.
BiB’s right of first refusal shows the commitment of the
parent companies to ensuring the success of BiB and of
their investments.

(a) Non-competition provision

(147) Subject

to recital 149,

the agreement amongst

the
to compete in the provision of digital
parties not
interactive television services
is necessary for, and
directly related to, the establishment of BiB, given the
technical and financial risks involved in entering a new
required. The
market, and the level of
uncertainty inherent in such a joint venture, and the
need to ensure a stable base of operations in its early
years, justify this non-competition clause.

investment

(148) The fact that the non-competition clause continues to
apply to a shareholder for a period of 12 months after
that shareholder loses joint control provided that the

(107) Clause 17 of JVA.
(108) Clause 20 of JVA.
(109) Clause 19 of JVA.

(c) Exclusive agreements between BiB and Midland

Bank

(151) Both a transaction management system and merchant
acquiring services are essential parts of the infrastructure
necessary for BiB Platform Co.’s service. Midland was
willing to bear the full cost of developing the software
necessary for the transaction management system,
in
return for a fee equivalent
to a percentage of each
transaction. This allowed BiB to reduce its initial capital
requirements and to match its payments to income in
an economically efficient manner. The financial risk of
the development costs remains with Midland. However,
a period of exclusivity allows Midland the opportunity
to recoup its initial investment, with no guarantee that
it will do so. In terms of merchant acquiring services,
Midland has undertaken to provide the services at an
advantageous fixed rate to help with the establishment
of BiB. Midland, on the other hand, requires a guarantee
that BiB will not change suppliers once it is established.

L 312/22

EN

Official Journal of the European Communities

6.12.1999

The

other

than Midland.

Moreover, neither agreement prevents other providers of
from seeking transaction
interactive services
digital
from
management or merchant
acquiring services
companies
exclusive
agreements, which will play with regard to content
providers and end-users using the BiB platform or
contracting BiB services, thus constitute the necessary
quid pro quo for Midland’s willingness to incur up-front
capital costs for the benefit of the operation of the joint
venture. They are thus crucial to its participation in BiB
and cannot be considered in isolation from the joint
venture.

of the service in other countries are likely to decrease in
the future (111).

(155) BSkyB’s analogue pay-television service is currently
available via both satellite and cable in Ireland.
It is
likely that its digital service will be available there in the
near future, at least via satellite. Given the absence of
the presence of BSkyB, and the
linguistic barriers,
presence of certain retailers in both the United Kingdom
and Ireland, it cannot be excluded that the BiB service,
or a localised version, will be made available in Ireland.
If BSkyB enters the pay-television markets in other
Member States, the geographic scope of activity of BiB
may be similarly extended thereafter.

(d) Commitments of the parent companies in markets
related to BiB’s (Clauses 17, 19 and 20 of the JVA)

(152) These provisions are necessary to the establishment of
BiB and to the penetration in the market of a new
package of services. BSkyB will concentrate its efforts on
the development of BiB’s services. These obligations on
BSkyB are intended to enable BiB to succesfully enter
the new market. These clauses are necessary for and
directly related to the operation of the joint venture.

throughout

interactive television services

(156) However, even if this is not the case, the agreement
affects the competitive structure for the provision of
digital
the
United Kingdom (112). As a result of this operation entry
in the relevant market in the United Kingdom is made
more difficult to other possible Community competitors.
The latter is also applicable to the prohibition to the
BiB’s
non-competition
provision, of holding more than a 20 % interest in a
competing company. Potential entrants in the digital
interactive television services market
in the United
Kingdom cannot rely on the investments of BiB’s parent
companies. Finally, by establishing a prime mover with
substantial advantages, BiB is likely to procure certain
services from other non-British content providers (113).
There will thus be an effect on the flow of trade.

companies,

parent

the

in

3. Effect on trade between Member States

(157) On the basis of recitals 153 to 156, the agreements are

likely to affect trade between Member States.

(153) An agreement which may have an influence, direct or
indirect, actual or potential, on the pattern of
trade
between Member States meets the criterion of effect on
trade between Member States (110).

C. ARTICLE 81(3)

(154) The BiB joint venture agreement

limits the territory
initially provide digital
within which the parties will
interactive television services to the United Kingdom,
Isle of Man and Channel Islands. However, the service is
technically capable of being provided in other European
countries, although certain technical modifications due
to continuing differences in currency would be required.
The parties have stated that the difficulties of provision

(158) The notified agreements

satisfy the criteria for an
exemption set out in Article 81(3) of the EC Treaty, for
the following reasons:

(111)

(cid:145)Over time it could be expected that some or all of [the] barriers
to internationalising the service would decline.
is entirely
It
feasible
transactional platform
to envisage BiB and other
providers in different Member States developing in the medium
term and expanding into other Member States.(cid:146)
(Form A/B, at
page 49).

(112) Cases 6 and 7/73 Commercial Solvents v Commission [1974] ECR

(110) See for example, Case 42/84 Remia v Commission [1985] ECR

223 at paragraphs 30 to 35.

2545.

(113) Form A/B, at page 32.

6.12.1999

EN

Official Journal of the European Communities

L 312/23

1. Improvement

in distribution of goods

and

technical and economic progress

(159)

and

broadcast

the two-way communication inherent

In developing the BiB joint venture, the parties have
overcome the current technological limitations of both
satellite
narrowband
technology
telecommunications customer access infrastructure. The
former is, for the time being, capable of only one-way
communication and could not alone provide interactive
services of the type envisaged by BiB. The latter, while
capable of
in
telephony is not, at the moment, suitable for services
which require a higher bandwidth.
In combination,
however, their use enables provision of a new form of
service which had not been offered yet, available to the
vast majority of consumers in the United Kingdom.
Retailers of goods and services also obtain a new outlet
for their products. The creation of the joint venture,
therefore,
in the
distribution of goods and technical and economic
progress (114).

to an improvement

contributes

(160) The improvements attained as a result of this operation
would not materialise without the prohibition set out in
the non-competition provision on the holding or more
than a 20 % interest
in a competing company. This
clause eliminates the economic incentive for the parties
to transfer to a competitor any ideas and strategies that
are being developed by BiB. Such ideas and strategies
are of enormous value in a new and fast-moving
industry such as the digital interactive television services
market: for instance, the right moment to launch the
service and the modalities of entering the market;
special offers, pricing structure, whether the set-top box
should be offered free of charge to potential subscribers.
These ideas and strategies, which have been first tested
in BiB from the
four parents’
synthesis of
contributions, are not covered by the prohibition of the
non-competition clause on the transfer of the greater
part of the know-how to a competitor.

the

(161) The digital interactive services could also be provided by
upgrading BT’s copper network.
If the medium term
effect of BT’s participation in the joint venture were to
be a reduction in its economic incentive in upgrading
its narrowband telecommunications customer access
infrastructure, the Commission’s positive assessment of
BiB’s impact on technical and economic progress would
require reconsideration in the light of
the broader
developments in the market. As was explained in recital
86, BT owns the only such nation-wide infrastructure
and has a very high market-share of fixed residential
lines in use. If upgraded, it would provide an alternative
national transmission mechanism for the provision of

(114) See Commission Decision 98/536/EEC (Case IV/31.734: Film
purchased by German television stations) (OJ L 284, 3.10.1989, p.
36, at
recital 49); Decision 90/25/EEC (Case IV/32.265 (cid:151)
Concordato Incendio) (OJ L 15, 19.1.1990, p. 25, at recital 25).

access

In addition,

broadband interactive services.
it could
carry other services, such as video telephony, broadband
internet
One
telecommunications operator in the United Kingdom
has already upgraded its network and it is being used
is
for provision of BiB-type
conducting trials.

services. BT itself

video-on-demand.

and

(162) Evaluation of the impact of BT’s participation in BiB on
the development of the customer access infrastructure
market, and therefore on the services market using that
infrastructure, is premature. If BT’s commercial interest
in maintaining and upgrading its exiting network were
lessened as a result of its participation in BiB, then this
would constitute a significant impediment to technical
and economic progress. The result would depend,
in
part, on developments in the geographic coverage of
broadband cable infrastructure in the United Kingdom.

2. Benefit to consumers

(163) Until recently, services comparable to those of BiB have
been available only via the Internet and using personal
computers as a display screen. However, the still limited
penetration of personal
in the United
Kingdom has prevented such services from reaching the
mass market. Almost all households
in the United
Kingdom possess a television set. Purchase of a BiB/
BSkyB digital set-top box would give them access to
interactive
The
introduction of a new service of this type is of benefit
to consumers.

computers

television

screens.

services

via

(164) The benefits for

the consumers resulting from this
operation would not materialise if it were not for the
prohibition, set out in the non-competition clause, on
any holding of more than a 20 % interest
in a
competing company. This clause prevents the parties
and
from transferring to a
strategies that are being developed by BiB in its new
market and ensures the commitment of the parties to
BiB and eventually to BiB’s success in the market.

competitor

ideas

the

(165)

In addition, the Commission has imposed a condition
whereby the parties shall provide information both to
end-users and to their agents for the sale of set-top
that end-users need not subscribe to BSkyB’s
boxes,
digital pay-television service as a condition of
the
purchase of a BiB-subsidised set-top box. The condition
ensures both that
is not
the original
reintroduced at a later date and that end-users are
provided with accurate information. Consequently, the
condition ensures that consumers are given a choice
either to acquire the set-top box with BSkyB’s pay-
television package or to acquire it without subscribing
to BSkyB’s pay-television offer.

requirement

L 312/24

EN

Official Journal of the European Communities

6.12.1999

3. Indispensability

Bank

(166) BT and BSkyB have the necessary expertise to provide
some form of interactive services individually. However,
by cooperating together in BiB they are able to provide
a better service and to do so more quickly. Their
participation,
and
together with Midland
Matsushita, is thus indispensable to the creation of BiB,
and to its ultimate establishment on a new market. BT
has gained skills and experience in the course of its past
interactive television trials
in the development and
integration of interactive multimedia services which it
contributes to the joint venture. This is in addition to its
expertise
telecommunications
services which have been vital to the operation of the
BiB telecommunications return path and its connections
with the servers. BSkyB contributes its experience in set-
top box design and operation,
together with its
knowledge of consumer demand for pay-television.
Midland contributes expertise in the area of merchant
acquiring
the
integration of these services into the BiB infrastructure.
Finally, Panasonic contributes its technical expertise,
particularly in the area of set-top box design.

transaction management,

in the provision of

and

and

(167) The prohibition to hold more than a 20 % interest in a
competing company is indispensable for this operation.
The success of BiB would be jeopardised in case of a
the unique ideas and
transfer
strategies, which are being developed by the parties in
BiB.

to a competitor of

4. Non-elimination of competition in respect of a

substantial part of the products in question.

to launch digital

(168) Companies other than BiB, notably the various cable
operators, have plans
interactive
television services. The BiB parties have estimated that a
subscriber base of at least one million subscribers is
necessary to achieve
the
the necessary scale
television services.
interactive
provision of digital
Following the consolidation in the United Kingdom
cable industry, the cable networks of Cable & Wireless
Communications, NTL and Telewest each have a reach
of more than one million homes. NTL has already
launched a commercial trial (115). Cable operators have

for

an advantage in the provision of such services as their
cable networks have two-way capability. This allows
them alone, or in cooperation with third parties, to use
the network for interactive services. Other companies
also have plans to introduce digital interactive television
services, in particular WebTV and Videonet.

in

(169) However, both BSkyB and BT have very important
positions
in markets
the United Kingdom,
neighbouring and closely related to that in which the
BiB joint venture will be active. Their positions in these
markets are safeguarded, at least in the medium term,
by the existence of barriers to entry. Both therefore
possess a degree of market power which is central to
the legal assessment of the impact of the elimination of
potential competition between BT and BSkyB as a result
of the creation of the BiB joint venture.

(170) Accordingly,

the Commission considered that

the
combination of the very significant market power of BT,
and in particular of BSkyB in related markets, with that
in which BiB will be active such as the customer access
the technical services for pay-
infrastructure market,
television and digital
the pay-
interactive services,
television market and the market
for the wholesale
film and sport channels for pay-television,
supply of
risked eliminating a substantial part of competition on
the markets
television
digital
services (116). The conditions set out in this Decision
should ensure that this risk does not materialise and
that, in particular, competition to BT comes from the
cable networks, that third parties are ensured sufficient
access to BiB’s subsidised set-top boxes and to BSkyB’s
films and sport channels and that set-top boxes other
that BiB’s set-top box can be developed in the market,
so that the digital interactive television services remain
open to competition.

interactive

for

(171) Even given the prohibition in the non-competition
clause, preventing BiB’s parent companies from holding
more than a 20 % interest in a competing company,
there is no chance that competition will be eliminated
the creation of BiB. The conditions
as a result of
the relevant
imposed upon the parties ensure that
face
market will
significant competition. The conditions imposed on the
parties can be summarised as follows:

remain open and that BiB will

(115) NTL is testing the service of Yes Television on its cable network
in Cardiff until Summer 1999. Research is being carried out on
the possibilities of a full-scale launch. Yes Television offers
entertainment and music on demand, along with news and
information services,
travel services, educational services and
home shopping. Source: Inside Cable & Telecoms Europe, http://
www.inside-cable.co.uk, article of 11 January 1999, (cid:145)Cardiff gets
UK’s first interactive TV(cid:146).

(116) In this respect the parties’ revised business plan provided to the
Commission on 12 August 1997 is illuminating. It was based on
little competition would emerge on the
the assumption that
digital
(cid:145)BiB is the sole
provider of digital television interactive services, as defined in the
joint venture agreement,
to both BSkyB subscribers and to
[(cid:133)](*) % of cable subscribers(cid:146).

interactive television services market:

6.12.1999

EN

Official Journal of the European Communities

L 312/25

(a) Competition from the cable networks

(172)

and

that

telecommunication

can be provided via

In the customer access infrastructure market and in the
interactive
corresponding
services markets
this
infrastructure, the most significant competition facing
BT comes from the actual and potential owners of the
cable networks who can compete with BT in the
provision of telecommunication services and with BiB in
the provision of digital interactive services. BT provided
86 % of residential fixed lines in use and is the only
in the United Kingdom
telecommunication operator
with a network which covers almost the whole of the
country: consequently, it is important to safeguard and
encourage competition coming from the cable segment.
If BT were to expand its cable interests and at the same
time participate in the operation of BiB, BT would not
cable
have
to develop,
networks, digital
the
kind to be provided by BiB, and it would not have an
incentive to facilitate third parties to compete with BiB
interactive television
in the provision of these digital
is a
services via its cable networks. Therefore,
to
condition of exemption that BT has agreed not
in the
expand its existing cable television interests
it has
United Kingdom. The Commission notes that
further agreed to divest itself of its existing interests.
This will
allow competition in the provision of
broadband cable infrastructure to develop independently
of BT throughout
the United Kingdom and to
counterbalance the restrictive effects of the combination
of BT and BSkyB in BiB.

interactive television services of

an incentive

through its

it

(b) Third party access to BiB-subsidised set-top boxes

(173) BiB is to subsidise the set-top box which will be used
both for its own service and for BSkyB’s digital pay-
television service. BSkyB and BiB together control the
access of competing digital interactive television services
and pay-television operators to those boxes. BSkyB’s
control
is ensured by its position on the technical
services market (cid:151) that is, by the supply of conditional
access and access control services. BiB controls access
by means of
the subsidy recovery
mechanism which requires all providers of encrypted
services to contribute to its historic and ongoing subsidy
their conditional access and access
costs as part of
control payments.

the operation of

(174) Third party access to BiB-subsidised set-top boxes is
important because of
the market position of BSkyB.
BSkyB has a market share of some [(cid:133)] (*) % in the pay-
television market.
In theory, competitors to BiB and
BSkyB which wished to provide services using digital

could

launch a

competing

satellite
set-top box.
However, the capital costs of establishing a competing
infrastructure, combined with the general reluctance of
consumers to acquire more than one set-top box, makes
this unlikely. This conclusion is reinforced by BSkyB’s
control of film and sports. In practice, therefore, they
are more likely to seek access to BiB/BSkyB’s existing
set-top box infrastructure (117). This has been the case in
respect of analogue pay-television services in the United
Kingdom. There is no reason to presume that it will be
the
different
investment
box
costs
infrastructure are even larger.

in respect of digital
of

services, where
set-top

establishing

a

(175)

interactive services
If competing providers of digital
were to be denied access
to BiB-subsidised set-top
boxes, or were to be granted access on terms less
favourable than BiB and/or BSkyB, then a substantial
part of competition on the downstream services markets
would be eliminated.

Legal separation of BiB

(176) Pursuant

to the amended joint venture agreements
(JVA) (118) BiB will establish legally separate companies
for BiB’s activities in respect of the subsidisation of set-
top boxes and the recovery of monies from third party
users of the box and the creation and operation of the
BiB interactive
services. Each company will have
separate management and each will publish annual
audited accounts. In addition, it has been imposed as a
condition of exemption that auditors shall certify that
all transactions between the two companies have been
carried out at arm’s length,
in accordance with the
in the OECD transfer pricing
set out
principles
guidelines. This should ensure transparency and non-
discriminatory treatment between the two operations,
and prevent the subsidy mechanism from being used as
an artificial barrier to entry on the market for digital
interactive television services.

Operation of subsidy recovery mechanism

(177) The Commission has

imposed a condition on the
the subsidy recovery mechanism which
operation of
seeks
and non-
discriminatory. The operation of the subsidy recovery
mechanism also falls to be regulated by the United

transparent

to ensure

that

is

it

(117) See Bertelsmann/Kirch/Premiere, at recital 56.
(118) Clause 2 of the JVA.

L 312/26

EN

Official Journal of the European Communities

6.12.1999

Kingdom authorities pursuant
to Directive 95/47/EC
and to national measures. The Commission considers
that compliance with the condition will be presumed
where the parties comply with the British arrangements.

information will be held by BSkyB. However,
this
position may change. To ensure that there is no gap in
the parties’ duty to provide relevant information to third
parties,
information provision conditions are imposed
on both BSkyB and BiB McCo.

(178) According to the condition, third parties will have an
option either to pay an initial sum, or to pay subsidy
contributions on an ongoing basis. The
subsidy
contributions will be related to usage of the box (cid:151)
meaning the number of conditional access cards issued
or the number of access control authentications. This
condition ensures that a smaller operator will not pay
the same as a larger operator in order to facilitate
market entrance.

(179) BiB Platform Co., as an operating provider for digital
interactive services, will contribute to subsidy recovery
in the same way as its competitors. These payments will
form part of its cost base to be covered through its
charges to content providers. BSkyB will also contribute
to subsidy recovery in the same way as other pay-
television operators.

Supply of technical services to third parties

(180) First,

the Commission has imposed a condition that
BSkyB shall offer to develop and operate Simulcrypt
arrangements with
to
interested
appropriate commercial agreements. This should ensure
that users of other conditional access systems will be in
a position, should they so choose, to address customers
who own BiB digital satellite set-top boxes.

subject

parties

the set-top box,

(181) Secondly, downstream service providers which wish to
use BiB-subsidised set-top boxes, and those which do
use the boxes, require information about the technical
specifications of
including proposed
changes to the specifications.
In the absence of such
information, they would be unable to develop their own
services and to continue to up-date them in response to
any changes to the specifications of the set-top box. The
Commission has therefore imposed a condition that
such information be provided to interested parties (119).
It now appears likely that the majority of the relevant

(119) The parties have raised with the Commission as a possible means
of complying with this condition the use of a website, parts or all
of which may be password protected, for the provision of the
non-disclosure agreement and/or
technical
agreement and/or the technical
information. The Commission
considers that this is one of the ways in which the parties could
fulfil
the choice of mechanism is a
this condition. However,
matter appropriately left to the parties.

the supplemental

(c) Third party access

to BSkyB’s pay-television

channels

(182) BSkyB’s channels are supplied both to cable operators
and to the digital terrestrial operator, ONdigital. The
channels are then offered to subscribers as part of the
latter’s own pay-television service. However,
they act
only as distributors of the channels and must distribute
them without modification of their content. They may
indeed remove, any elements without
not add, or
BSkyB’s consent. The parties have indicated that it is
their
the
necessary agreements, to make the BiB service available
to end-users via cable networks or digital
terrestrial
television.

conclusion of

intention,

to the

subject

(183) BiB’s cable and digital terrestrial competitors will not be
able to place interactive links in the most popular pay-
television channels in the United Kingdom. This would
only be possible if both technical (120) and commercial
obstacles were overcome. They would require them to
reach an agreement with a competitor, BSkyB, which
has significant market power in upstream markets and
an incentive
the downstream digital
interactive television services market.

to foreclose

(184)

is,

It
therefore, necessary to impose a condition on
BSkyB’s wholesale supply of its film and sports channels
to its cable and digital terrestrial competitors. BSkyB will
be obliged to offer to distribute its film and sports
channels either with or without ((cid:145)clean-feed(cid:146)) interactive
applications, at the choice of the purchaser on a non-
discriminatory basis. This prevents BSkyB from bundling
interactivity at
the wholesale supply level with its
channels to the detriment of both competitors to BiB on
the digital interactive television services market and its
own competitors in pay-television. BiB’s competitors
would not be able to integrate their own interactive

(120) Both cable operators and ONdigital use different set-top boxes
and interactive technology to BSkyB/BiB. Evidence provided by
BSkyB and third parties indicated that although it would be
possible in theory to re-author
in real-time the interactive
elements in BSkyB’s film and sports channels so that they would
function with these different technologies, doing so would have
cost and timing implications for the competing cable and/or
digital
best
significantly less attractive, and at worst impossible.

terrestrial operators, making

this option at

6.12.1999

EN

Official Journal of the European Communities

L 312/27

services into these channels. However, they would be
able to do so in respect of channels which are not
owned by BSkyB. [(cid:133)] (*) it would also be possible for
BiB’s competitors to negotiate agreements for the use of
their different interactive services in respect of film pay-
per-view services (121). Thus competition with BiB will
not be eliminated.

(d) Contribution to the development of alternative

set-top boxes

(185)

that

extent

the BiB service on cable and/or digital

It is a condition of exemption that BSkyB limits the
exercise of its veto rights in the joint venture agreement
to the
it will be obliged in certain
to subsidise
circumstances to support any proposal
other set-top boxes as part of an agreement for carriage
terrestrial
of
television. Given that companies
requesting BiB to
set-top boxes would in practice be
subsidise other
competitors of BSkyB on its core market, this condition
is intended to address BSkyB’s conflict of interest in its
decisions as a BiB shareholder and its interests as a pay-
television operator. This should ensure that BiB as a
commercial company is free to take decisions in relation
to BSkyB’s competitors on commercial grounds, and is
not limited by BSkyB’s other commercial interests.

(e) Anti-avoidance

it

(186) Given both the complex nature of the arrangements
between the parties, and the ongoing development of
is conceivable that
the BiB joint venture itself,
conditions imposed on one party could be avoided by
actions of other parties or BiB itself. This applies in
particular to the conditions relating to the information
to the retailers that
that a
purchaser of a BiB set-top box should take out a
subscription to any pay-television services, the subsidy
recovery mechanism and the provision of information
to third party users of the set-top box. This condition is
intended to prevent this.

there is no requirement

5. Conclusion

(187) The Commission concludes that

the BiB transactions
meet all four conditions for an individual exemption
pursuant to Article 81(3) of the EC Treaty.

(121) NTL and Telewest operate the Front Row pay-per-view service

which is independent of BSkyB.

D. DURATION OF THE EXEMPTION AND CONDITIONS

(188) Pursuant to Article 8 of Regulation No 17 a decision in
application of Article 81(3) of the EC Treaty has to be
issued for a specified period and conditions and
obligations may be attached thereto. Pursuant to Article
6 of Regulation No 17 the date from which such a
decision takes effect cannot be earlier than the date of
notification.

(189)

In this case, this Decision takes effect from the date on
which all of the changes to the arrangements referred to
in recitals 124 to 134 were made, and the conditions
set out in this Decision were fulfilled. Therefore, the
relevant date is 4 August 1998.

(190) As for the duration of

risk for

financial

the exemption decision,

the
Commission has examined BiB’s business plan, the joint
venture agreements and the conditions prevailing on the
United Kingdom market,
in order to ascertain what
would be the minimum period for which BiB would
need the support of its parent companies, in the form
permitted by this Decision, to establish itself as a viable
business in the new market of the digital
interactive
television services. There is no doubt that the present
the
operation entails a significant
shareholders, who will invest significant resources in a
new market with a considerable degree of uncertainty as
to the response of United Kingdom consumers to the
new digital services proposed. The parties predicted that
BiB would not make an operating profit until [(cid:133)] (*)
and the shareholders would not receive back their initial
[(cid:133)] (*). This prediction is
cash investment until
confirmed by the Business Plan of
the parties. The
Commission considers a period of seven years to be
sufficient and appropriate in the special circumstances
of the United Kingdom market [(cid:133)] (*). The contractual
clauses described in recitals 145 to 152 which are
directly related and necessary to the creation and
operation of BiB are exempted for the same period of
seven years. The prohibition in the non-competition
provision, which has been assessed under Article 81(1)
and (3), is also exempted for a seven-year period which
is the period considered necessary for [(cid:133)] (*).

(191) The most crucial requirements to safeguard competition
are attached as conditions, owing to the need to prevent
an elimination of effective competition on the market
for
Strict
compliance with these requirements is so important that
the Commission must ensure immediate consequences
in the event of a breach.

interactive

television

services.

digital

(192) However,
that

the principle of proportionality requires
commercial

financial

legal,

and

far-reaching

L 312/28

EN

Official Journal of the European Communities

6.12.1999

do not

consequences
from occasional or
ensue
individual mistakes whose effects on the market are
negligible. As a matter of principle, for an exemption to
be based on certain conditions, those conditions must
be proportionate to the competition concern. Trivial
breaches of conditions should not inevitably lead to the
ending of any exemption. The Commission considers
that in relation to the subsidy recovery mechanism and
the
is
appropriate to distinguish between trivial and material
breaches of these conditions. The Commission considers
that the concept of breach as used in Article 3 will
allow national
to
determine whether a condition has been materially
breached.

and national

requirements

information,

authorities

provide

courts

to

it

(193) Accordingly, infringements of Conditions Nos 7, 8 and
9 cannot be considered to breach a condition attached
to this Decision unless such infringements fulfil
the
criteria set out in Article 3.

(194) The Commission has expressed its concerns about the
impact of BT’s participation in BiB on the development
of the customer access infrastructure market. However,
this evaluation is
the Commission concluded that
premature. The Commission therefore may consider it
necessary to conduct a review of BT’s participation in
the joint venture in the medium term. If it were proved
that such participation was impeding the supply of
services using broadband customer access infrastructure
in the United Kingdom, the Commission might consider
this fact
to Article 8(3) of
Regulation No 17,

to be relevant pursuant

HAS ADOPTED THIS DECISION:

Article 1

to Article 81(3) of the EC Treaty and subject

Pursuant
to
Article 2 of this Decision, the provisions of Article 81(1) of
the EC Treaty area hereby declared inapplicable, for a period of
seven years from 4 August 1998 to:

(a)

the joint venture agreement for the creation of a joint
venture company, British Interactive Broadcasting Ltd (now
named Open) by BSkyB Limited, BT Holdings Limited,
Midland Bank plc
Europe
(Headquarters) Limited as notified on 13 June 1997 and
amended on 4 August 1998;

and Matsushita

Electric

(b) all the related agreements notified to the Commission for
the creation of British Interactive Broadcasting Ltd set out
in Annex I to this Decision.

Article 2

The exemption set out in Article 1 of this Decision shall be
subject to the following conditions:

Condition No 1:

(Legal separation of BiB box and services
operations (cid:151) auditors)

The auditors who are required to certify on an annual basis
that the marketing contribution activities of McCo. have been
undertaken at arms’ length to the activities of BiB Services Co.
will interpret the term (cid:145)arms’
length(cid:146) in accordance with the
transfer pricing guidelines.

Condition No 2: (Information on the removal of subscription

tie between BiB boxes and BSkyB services)

of

out

take

should

such equipment

A. The BiB Parties will procure that retailers who sell digital
interactive
reception equipment with the benefit of
marketing contributions and installers of such equipment
are informed in writing that there is no requirement that a
a
purchaser
subscription to any pay-television services and that services
other than BSkyB’s services will be available via the BiB
box including those non-subscription services which are
transmitted via digital satellite for reception on BiB boxes.
further require that purchasers of
The BiB Parties will
equipment benefiting from marketing contributions are
advised in writing at the point of sale that there is no such
requirement and that services other than BSkyB’s services
will be available via the BiB box including those non-
subscription services which are transmitted via digital
satellite for reception on BiB boxes.

B. BSkyB will put in place written procedures, of which it will
provide copies to the Commission, to ensure that all of its
analogue
customers, when offered a subscription to
BSkyB’s digital satellite services ((cid:145)Sky Digital Subscription(cid:146)),
are informed clearly in writing (by notice approved in
writing by the Commission) that there is no requirement
for them to take out a Sky Digital Subscription in order to
be eligible to purchase a BiB box and that services other
than BSkyB’s services will be available via the BiB box
those non-subscription services which are
including
transmitted via digital satellite for reception on BiB boxes.

C. BSkyB will put in place written procedures, of which it will
provide copies to the Commission, to ensure that its agents

6.12.1999

EN

Official Journal of the European Communities

L 312/29

for the sale of Sky Digital Subscriptions who also sell BiB
there is no
boxes are informed clearly in writing that
requirement on the purchaser to take out a Sky Digital
Subscription in order to be eligible to purchase a BiB box
and that services other
than BSkyB’s services will be
available via the BiB box including those non-subscription
services which are transmitted via digital
satellite for
reception on BiB boxes.

Condition No 3: (Availability of a clean feed)

Where movies and/or sports programming (but not advertising
time paid for by parties other than BSkyB or BiB) on any of
BSkyB’s movies and/or sports channels includes on-screen
representations directing the viewer to BiB’s digital interactive
television services and/or BSkyB’s enhanced movies and/or
sports television services, BSkyB will give distributors of such
channels, on a non-discriminatory basis, an option either:

(i) where the distributor is also a distributor of BiB’s digital
interactive television services and/or BSkyB’s enhanced
movies and/or sports television services (as the case may
be), to receive a signal for the channel(s) which include(s)
the on-screen representation and interactive applications
(authored in BSkyB’s chosen technology) directing the
viewer to such of BiB’s digital interactive television services
and/or BSkyB’s enhanced movies and/or sports television
services as the distributor is carrying, or

(ii) to receive a signal for the channel(s) such that the on-
screen representations directing the viewer to such of BiB’s
digital
and/or BSkyB’s
television services
enhanced movies and/or sports television services as the
distributor is not carrying may not be viewed by means of,
at the distributor’s option, either:

interactive

(a)

(b)

(where delivery of the channel is by satellite) a signal
which includes the on-screen representations within a
part of the signal which is transmitted separately from
the main television picture; or

(where delivery of the channel is by landline) a signal
which does not include the on-screen representations
or, at the distributor’s option, includes them within a
part of the signal which is transmitted separately from
the main television picture (122); or

such other means as is agreed by the parties. This is
subject in any such case to the distributor bearing any
costs incurred in the development and ongoing provision
of any such solution, including, where relevant, the costs
relating to the installation, operation and maintenance of a
landline and any related equipment necessary to provide
the feed by landline.

(122) BSkyB shall have the right to refuse a request for delivery by
is approved by a suitable British

landline only where this
regulator.

Condition No 4: (Divestiture of cable)

A. BT shall not buy or seek any broadband cable television
franchises in the United Kingdom beyond its existing
holdings, and shall dispose of any such franchises acquired
in the course of any other transaction. This undertaking
shall however not restrict BT from providing broadcast
services (should BT be permitted to do so in the future),
broadband services or broadband interactive
services
(including for the avoidance of doubt in competition with
the franchises in Westminster and Milton Keynes) over its
own networks.

B. With effect from the date of this Decision (the (cid:145)Exemption
Decision(cid:146)) to divest itself of its broadband cable television
franchises in Westminster and Milton Keynes (together (cid:145)the
Businesses(cid:146)) on the following basis:

(i)

BT shall use its best efforts to arrange for the sale of
the Businesses, at
fair market value, within [(cid:133)] (*)
months of the Exemption Decision;

(ii) BT shall maintain the Businesses in legally separate
entities and shall operate them in a manner which
their
enables
viability, marketability and value pending sale and
final disposal;

to maintain, as

far as possible,

it

(iii) prior to the sale of the Businesses, BT shall separately
manage and hold separate the Businesses from the
other businesses of BT in the United Kingdom
Structural changes to the Businesses, until the date of
such sale, shall not be undertaken by BT until after
BT shall have informed the Commission of any such
proposed change and the Commission shall not have
explicitly opposed such proposed additional change in
writing within two weeks of receiving BT’s notice of
change;

(iv) BT shall, as

a

of

list

three

soon as

nominations

investment banks or

reasonably practicable after
receipt of the Commission’s Decision, submit to the
of
Commission
accountancy firms,
similar
undertakings. One such firm or bank or other body
shall be appointed, subject
the
Commission, as an independent expert. Such expert
if the Commission so requests, report to the
shall,
Commission on whether or not BT is complying with
subparagraph (iii).

to the approval of

C.

If the Businesses have not been sold within the deadline set
out in subparagraph B(i), BT shall appoint, subject to the
approval of the Commission, a trustee in relation to the
Businesses (such trustee may be the expert appointed in
accordance with subparagraph B(iv) above). The terms of
appointment shall be such that the trustee shall use his
best efforts to sell
fair market value
the Businesses at
within [(cid:133)] (*) months of the Exemption Decision or on
such other terms as may be agreed between BT and the
Commission.

L 312/30

EN

Official Journal of the European Communities

6.12.1999

D.

If the trustee has not sold the Businesses in accordance
with paragraph C, the trustee shall be obliged to sell the
Businesses for the best possible price they are reasonably
able to obtain within [(cid:133)] (*) months of the Exemption
Decision.
the
trustee’s appointment shall continue to apply.)

(The remaining terms and conditions of

E. BT or, where

trustee

relevant,

shall notify the
the
Commission in writing of the identity of the proposed
purchaser of the Business. If, within ten working days of
receipt of
such notification the Commission has not
informed BT or the trustee in writing to the contrary, the
proposed purchaser shall be deemed to be acceptable to
the Commission.

has already committed pursuant to the JVA; (b) is not
funded through revenues which would otherwise be
available for distribution to BSkyB as distributable
profits; and (c) does not result in BSkyB losing joint
control of BiB,
the other
shareholders commit additional funding to BiB and
BSkyB does not; and

in the

event

that

(v)

the proposal does not reduce the funds contemplated
as available within the agreed business plan for use as
marketing
towards DTH digital
interactive set-top boxes.

contributions

Condition No 5: (Veto rights)

Condition No 6: (Conditional access and Simulcrypt)

is

its

responsible

subsidiary which

A. BSkyB will vote in favour of any resolution of BiB to
authorise
for
promotional activities by means of marketing contributions
for the subsidisation of set-top boxes ((cid:145)McCo.(cid:146)) to provide
marketing contributions or similar financial contributions
in respect of sales of digital interactive set-top boxes where
such resolution, where relevant
including the proposed
means of financing and any other consequent changes, has
been recommended by the Chief Executive Officer of BiB
and unanimously agreed to by the other BiB partners.

B. This condition will apply subject to the following criteria

being met:

(i)

(ii)

(iii)

the relevant digital
set-top boxes are capable of
receiving and running all of BiB’s interactive services
either in Open TV or reauthored format;

or

contributions

the operator(s) to whom it is proposed to provide
financial
marketing
contributions in respect of sales of digital interactive
set-top boxes have undertaken to make capacity
available for BiB’s interactive services for a period
secured
to that
equivalent
transponder capacity;

for which BiB has

similar

interest

that each of

the three other BiB
in the event
in such a
shareholders has a commercial
proposal (independently of their respective interest in
BiB), BiB’s auditors providing an opinion that
the
proposal is not, when taken as a whole, significantly
less
favourable than the provision of marketing
contributions in respect of sales of BiB boxes set out
in the BiB Business Plan. The auditor may take into
account all factors which appear to the auditor to be
relevant, including the balance of risk and reward to
be derived from such proposal as compared to that to
of marketing
provision
be
contributions in respect of BiB boxes;

from the

derived

A. BSkyB and Sky Subscribers Services Limited ((cid:145)SSSL(cid:146))
confirm that SSSL will offer to develop and to operate
Simulcrypt
access
to non-SSSL digital
providers who administer access
television decoders in the United Kingdom. This offer to
develop and operate Simulcrypt arrangements will remain
open for the duration of the exemption.

arrangements with all

conditional

B. SSSL will (and BSkyB will procure that it will) confirm in
writing its offer
to develop Simulcrypt arrangements
within 21 days of a written request from a conditional
access provider made in the required manner.

endeavours

it will) use all
C. SSSL will
(and BSkyB will procure that
Simulcrypt
to
reasonable
arrangements are operational within 12 months of
the
relevant request or within such other timescale as is agreed
between the parties and to this end BSkyB and SSSL will
cooperate fully with the conditional access provider (and
its technology provider, if different).

procure

that

D.

that BSkyB/SSSL is unable to meet

In the event
these
deadlines, a reasoned request for an extension must be
submitted to OFTEL at least one month before the expiry
of the deadline, which extension must be granted unless
the inability to comply with such time frame is due
primarily or exclusively to culpability on the part of BSkyB
or SSSL. OFTEL will inform in writing the Commission of
its reasons to accept or reject the request for the extension
at
the
two weeks before adopting its decision.
Commission does not object to OFTEL’s proposal within a
the
two weeks,
period of
Commission accepts this proposal.

it will be understood that

least

If

E. This condition is subject to:

(iv)

the proposal (a) does not require BSkyB to commit
funding to BiB or McCo. in addition to that which it

(i)

the conditional access provider who wishes to operate
a
technology
provider, if different) cooperating fully with SSSL, and

arrangement

Simulcrypt

(and

its

6.12.1999

EN

Official Journal of the European Communities

L 312/31

systems Limited (NDS),

if appropriate, SSSL’s
technology provider, News
in developing a
Digital
Simulcrypt arrangement between the NDS technology
administered by SSSL and the conditional access
system employed by the conditional access provider
and agreeing fair and reasonable commercial terms
for such development;

purchasers of conditional access or access control
services or between such classes: broadcasters,
retailers of broadcast services, BiB Services Co.
and its competitors, competitors to BiB Services
Co. inter se, and any other class of purchasers of
conditional access or access control services which
may from time to time emerge;

(ii)

the conditional access provider agreeing with SSSL
terms for ongoing
fair and reasonable commercial
arrangements
the
Simulcrypt arrangement, including, without limitation,
arrangements for the cross carriage of necessary data;
and

to the operation of

relating

conditional

(b) different options taking account of bulk purchases
control
of
services may be offered on a non-discriminatory
basis;

and/or

access

access

(iii)

recovery will be made:

(iii)

the security of
the conditional access provider’s
system not being compromised such that it creates a
threat to the security of the system used by SSSL.

(a)

Condition No 7: (Subsidy recovery)

A. The BiB Parties confirm that McCo. will carry out
in the United Kingdom for

its
the recovery of
activities
marketing contributions under arrangements with SSSL
and, as
relevant, other conditional access and access
control providers each of which is, or will at the relevant
time be, subject to the British regime.

(or

scheme

in accordance with a
schemes)
allocating recovery charges on an objective basis
between customers
conditional
access services and customers for access control
services on each of which the Director-General for
Telecommunications has:

for broadcast

(cid:151) been consulted, and

(cid:151) had prior notice of at least 30 days of the
form of the scheme which is put into practice,
and

(cid:151) raised no objection to that form of scheme

being put into practice

B. The recovery of marketing contributions by McCo. shall be
the following conditions shall

permitted provided that
apply:

or

(i)

recovery in respect of marketing contributions will be
made via:

(a) charges to customers for broadcast conditional

access services (including BSkyB); and

(b) charges to customers for access control services
(including BiB’s subsidiary which carries out the
business of
service platform
operator (cid:145)Services Co.(cid:146))and such charges will be
made on a fair, reasonable and non-discriminatory
basis;

an interactive

(ii)

the subsidy recovery element of any conditional
access and access control charges will be based on a
charge per card entitled (conditional access) or per
authentication (access control) basis which may vary
over time provided that:

(a) different charges may be made for different classes
of conditional access and access control usage, so
long as
such differentiation does not distort,
prevent or restrict competition within or between
the following classes of
members of any of

(b) as otherwise required by the Director-General for

Telecommunications from time to time, or

(c) as determined in the resolution of any dispute:

(cid:151) by a court of competent jurisdiction, or

(cid:151) by a competent national authority, or

(cid:151) by a procedure contemplated by Directive 95/
47/EC or the British regime or any other
regulation
relevant national
implementing the
relevant
national
legislation or regulation governing
the provision of access control services, or

legislation or
same or

any

(cid:151) under

an

appropriate

independent
arbitration procedure which the BiB Parties
will procure is made available to third parties.

and

C. Compliance with this condition shall be presumed where
the BiB Parties have operated in accordance with the
British regime.

L 312/32

EN

Official Journal of the European Communities

6.12.1999

D. References in this condition to the Director-General

for
Telecommunications shall be read as references to such
regulator or regulatory body as from time to time is
entrusted with the regulation of the British regime.

technical agreement,

execution of a supplemental
time
shall run from the date of receipt in the required manner
of the relevant executed supplemental technical agreement,
which shall be made available to the interested party
within ten working days of the relevant request;

Condition No 8: (Provision of information by McCo.)

(d) BSkyB will
specification
manufacturers of BiB boxes;

advise
changes

affected parties
immediately

if
after

the BiB box
advises

it

A. The BiB Parties shall procure that McCo. shall not in any
way discriminate between BiB Services Co. and any other
interested party in connection with:

(e) BSkyB will advise affected parties of any functional change:

(i)

the dissemination of technical information within its
responsibility;

(ii)

the dissemination of changes to technical information
within its responsibility which would affect the ability
of interested parties to utilise the features of BiB for
such purpose.

B. Where a company within the BiB Group receives a request
in the required manner from an interested Party which is
not within its responsibility but is within the responsibility
of another party, it will provide within ten working days
the name and address of each person whom it believes
could supply such technical information and forward the
request to such person or persons.

(i)

as regards the intention to introduce such functional
change, immediately after completion of the technical
specification and before testing together with an
estimate of
the time at which the change will be
implemented;

(ii)

regards any alterations

as
to the intentions and
estimated timings referred to above, immediately after
deciding to make such alterations;

provided that if any information falling within the first
is
exclusion in the definition of
information which will affect the ability of affected parties
to deliver broadcast and/or interactive services through BiB
boxes such information will be advised to them as soon as
reasonably practicable;

functional

change

Condition No 9: (Provision of information by BSkyB)

take the following steps

BSkyB shall
in relation to the
dissemination of technical information regarding the functional
features of BiB boxes:

(a) within ten working days of the date or receipt of a request
made in the required manner from an interested party,
BSkyB or SSSL will make available to such interested party
a non-disclosure agreement;

(f) BSkyB shall procure

that SSSL complies with the
provisions of paragraphs (a) to (e) with regard to technical
information within its sphere of responsibility;

technical

(g) where BSkyB or any member of the BSkyB Group receives
a request in the required manner from an interested party
information which is not within its
for
responsibility, but is within the responsibility of another
party, it will provide within ten working days the name
and address of each person whom it believes could supply
such technical information and forward the request to such
person or persons.

(b) within ten working days of

the date of receipt

in the
required manner of a non-disclosure agreement executed
by such interested party, BSkyB will make available to such
interested party a list of technical information, which shall
specify any item which requires
the execution of a
supplemental technical agreement, should such party wish
to have access to it;

Condition No 10: (Anti-avoidance)

A. The BiB parties will ensure that no other member of the
BiB Group does anything which would, if carried out by
McCo., be a breach of
in
Conditions Nos 2(A), 7 and 8 or which has the effect of
avoiding the effect of any such requirement.

the requirements

set out

(c) within ten working days of the date of receipt of a request
made in the required manner, BSkyB will make available
copies of any item of technical information requested by
any interested party who has received a list of technical
information in accordance with the provision of paragraph
(b) above. Where access to a particular item requires

B. Breaches of the abovementioned requirements shall not be
a breach of this condition unless they would have been a
breach of a condition set out in any of Conditions Nos 2,
7 and 8.

6.12.1999

EN

Official Journal of the European Communities

L 312/33

Article 3

Article 5

Breaches of Conditions Nos 7, 8 and 9 set out in Article 2 or,
where relevant, breaches of the British regime shall not be
considered an infringement of
in
relation to the achievement overall of the objects of those
conditions:

those conditions unless,

(a) such breaches have been clear and serious; or

(b) such breaches have had serious and material adverse affects

on a third party; or

(c) such breaches have resulted in irreparable and serious

damage to a third party; or

(d) although the individual breaches are minor,

there have
been several breaches demonstrating a persistent
failure
properly to comply, provided that, if a breach is shown to
exist in a contractual term used in more than one contract
or in a commonly used commercial practice, only one
breach shall be considered to have occurred, irrespective of
the number of such contracts or examples of such practice;
or

(e) where such breaches relate to interested parties who are
currently providing services using BiB boxes, the breaches
have been of long duration, no regard being made to the
duration of any dispute resolution procedure, and provided
that in the case of a breach shown to exist in a contractual
term, time shall run for the purpose of this indent only
when the circumstances to which the term relates have
arisen and for so long as they continue.

Article 4

For the purpose of the conditions set out in Article 2, the
terms used shall be
construed in accordance with the
definitions set out in Annex II to this Decision.

This Decision is addressed to:

BT Holdings Limited
Newgate Street
London EC1A 7AJ
United Kingdom

British Sky Broadcasting Limited
Grant Way
Isleworth
Middlesex TW7 5QD
United Kingdom

Midland Bank plc
27-32 Poultry
PO Box 648
London EC2P 2BX
United Kingdom

Matsushita Electric Europe (Headquarters) Limited
Furzeground Way
Stockley Park
Uxbridge
Middlesex UB11 1DD
United Kingdom

Done at Brussels, 15 September 1999.

For the Commission

Karel VAN MIERT

Member of the Commission

L 312/34

EN

Official Journal of the European Communities

6.12.1999

ANNEX I

List of notified agreements and chronology of their provision to Commission

1.

In the notification the parties referred to a number of different agreements, not all of which were supplied with the
notification. In response to a request for clarification from the Commission, the parties stated in a letter of 6
August 1997 that the following 16 agreements were notified:

1. The joint venture agreement and its annexes

2. EPG content design, look and feel

3. Start-up costs

4. Business plan and annual operating plan and budget

5. Agreed form completion board/extraordinary general meeting resolutions

6. Agreed form taste and ethics policy

7. Memorandum and Articles of Association

8. Box specification

9. Transponder capacity term sheet

10. Marketing services agreement

11. Technology transfer and licensing agreement

12. Content provider terms

13. Initial commitments agreement

14. Digital terrestrial television commitments (cid:151) deleted in agreements of 4 August 1998

15. Subordinated loan agreement

16. Funding loan agreement.

2. By letter of 30 March 1998, the parties provided the Commission with final drafts of 3 more agreements, dated 27

March 1998, which they requested form part of the notification:

1. Transaction management system agreements, (between BiB and Midland)

2. Merchant acquiring agreement (between BiB and Midland)

3. Mondex agreements (between BiB and Midland).

3. By letter of 14 July 1998, the parties provided the Commission with a revised draft of the joint venture agreement
itself, dated 6 May 1998, without its annexes. Some of the amendments were made to address the Commission’s
concerns.

4. By letter of 25 September 1998, the parties provided the Commission with copies of the joint venture agreement
and its annexes which were completed by the parties on 4 August 1998. The digital
television
commitments agreement (referred to above at point 14) was deleted from the completed agreements, while the

terrestrial

6.12.1999

EN

Official Journal of the European Communities

L 312/35

marketing services agreement (referred to above at point 10) was subdivided into two separate agreements: the
marketing contributions services agreement and the advertising and promotional services agreement. Two new
agreements were signed, namely a loan agreement and the marketing contributions recovery agreement.

5. An incorrect version of one of the completed agreements concerning the payment of subsidy was provided at that
time. The correct version was provided to the Commission on 9 November 1998 in response to a request for
information.

L 312/36

EN

Official Journal of the European Communities

6.12.1999

ANNEX II

(cid:145)Affected party(cid:146): means any interested party who is at the relevant time delivering broadcast and/or interactive services
through BiB boxes (or who is committed to do so and is preparing to commence such services) and who has current
non-disclosure agreement.

(cid:145)Another party(cid:146): means another member of the BSkyB Group, a member of the BiB Group, a BiB Party or a third party.

(cid:145)BiB box(cid:146) or (cid:145)BiB boxes(cid:146) means digital
provided by BiB.

interactive set-top boxes sold with the benefit of marketing contributions

(cid:145)BiB box specification(cid:146): means British Sky Broadcasting STB Specification Issue 3.00 of 30 July 1997, British Sky
Broadcasting STB Specification V3.0 Errata V5.0 and British Sky Broadcasting STB Technical Guidelines Version V1.2
of 23 October 1997 as updated and amended from time to time.

(cid:145)BSkyB Group(cid:146): means British Sky Broadcasting Group plc.

(cid:145)Conditional access provider(cid:146): means a person who is licensed to provide conditional access services pursuant to the
class licence granted by the Secretary of State on 7 January 1997 under Section 7 of the Telecommunications Act 1984
for the running of telecommunications systems for the provision of conditional access services.

(cid:145)Functional change(cid:146): means information which is intended to be implemented to become technical information and
which comprises software intended to be downloaded into BiB boxes for the delivery of broadcast and/or interactive
services, but excluding:

(cid:151) downloads to address problems affecting the operation of software already in BiB boxes,

(cid:151) downloads related to security of BiB boxes or to the security of any conditional access system or access control

system utilised for broadcasts and/or interactive services accessible through BiB boxes.

(cid:145)Interested partiy(cid:146): means any broadcaster, cable operator, telecommunications operator, digital terrestrial television
platform operator or satellite direct to home platform operator, whether for broadcast only or for interactive services or
for any combination thereof, including BiB Services Co.

(cid:145)Marketing contributions(cid:146): means the subsidy which BiB will provide for BiB boxes, as set out in Clause 16 of the JVA
and the marketing services agreement.

(cid:145)Non-disclosure agreement(cid:146): means the standard form confidentiality agreement, which BSkyB or SSSL may require an
interested party to enter into before making available a list of technical information to that interested party and which
must be current in the event that an affected party or an interested party is to have access to any information the
subject of Condition No 9.

(cid:145)Non-SSSL digital
employed by SSSL.

television decoders(cid:146): means decoders which do not contain the conditional access technology

(cid:145)Purpose(cid:146): means,
broadcast services, whether or not interactive, through BiB boxes and no other purpose.

in respect of any interested party, the purpose of utilising the features of BiB boxes to deliver

(cid:145)Request(cid:146): means a written request for any item or items of technical information or for a list of technical information
in either case for the purpose.

(cid:145)Required manner(cid:146): means in respect of any request or other communication by an interested party or conditional
access provider:

(cid:151) to BSkyB: a registered letter sent to BSkyB’s registered office addressed to the head of regulatory affairs,

(cid:151) to BiB: a registered letter sent to BiB’s registered office addressed to the compliance officer.

6.12.1999

EN

Official Journal of the European Communities

L 312/37

(cid:145)Simulcrypt(cid:146): means the use of the European common scrambling algorithm in two populations of digital television
in order to facilitate the ability of
decoders, each population containing a different conditional access technology,
retailers of digital television services using either of such conditional access technologies to opt to offer their services to
consumers via digital television decoders containing the other conditional access technology (subject to such other
population of decoders containing the requisite level of functionality for the type of services proposed to be offered by
such retailer) together with the associated synchronisation of the two technologies required to implement such process.

(cid:145)Supplemental technical agreement(cid:146): means any appropriate licensing agreement which BSkyB or SSSL may require in
relation to the release of a specific item of technical information.

(cid:145)Technical information(cid:146): means information about the current functional technical characteristics of BiB boxes, including
the BiB box specification, which is the subject of completed technical specifications in written and/or diagrammatic
form, but excluding:

(cid:151) information, including information in relation to proprietary technology, which it is essential for a conditional
access services supplier or access control services supplier and/or any of its technology suppliers to maintain in
strict confidence in order to protect the security and integrity of its systems, or of the conditional access services or
access control services which it supplies or intends to supply and/or its ability to provide a secure and confidential
service to each of its customers, and

(cid:151) information which any member of the BiB Group, BSkyB or SSSL has a statutory duty or obligation under any

regulatory licence binding upon it or SSSL to maintain in confidence, and

(cid:151) information which any member of the BiB Group, BSkyB or SSSL is contractually bound to maintain in confidence

and has no right to divulge to third parties, and

(cid:151) information required exclusively for the purpose of manufacturing a box, and

(cid:151) in respect of SSSL, any information which does not relate to the operational and functional aspects of BiB boxes,
which arise from the design of the conditional access or access control system or from the design of the electronic
programme guide,

and, for the avoidance of doubt, the above definition of technical information does not include creative information
about the manner in which the functional technical characteristics of BiB boxes may be utilised for broadcasting and
interactive applications.

(cid:145)Transfer pricing guidelines(cid:146): means the OECD transfer pricing guidelines for multinational enterprises and tax
administrations, as updated from time to time.

(cid:145)British regime(cid:146): means the British regime for conditional access and access control services, which incorporates the
British implementation of the relevant parts of Directive 95/47/EC of the European Parliament and of the Council,
namely:

(cid:151) the Advanced Television Services Regulations 1996 (as amended) (SI 1996 Nos 3151 and 3197), and

(cid:151) the Conditional Access Services Class Licence granted on 7 January 1997 pursuant

to Section 7 of

the

Telecommunications Act 1984, and

(cid:151) the Telecommunications Class Licence ((cid:145)TSL(cid:146)) as revoked and re-issued on 31 December 1997 pursuant to Section

7 of the Telecommunications Act 1984, and

(cid:151) any re-enactment, re-issue or amendment of the above or any of them, provided that the reference in Condition
No 15 to Regulation 11(4)-(8) of the Advanced Television Services Regulations 1996 is to that Regulation as in
force at the date of publication of the Article 19(3) Notice/Decision.

By way of explanation,
Telecommunications of disputes in a number of ways.

the British regime contains provisions for the resolution by the Director-General

for