Q&A: Ofcom's pay-TV review

Why has Ofcom done this? Four of BSkyB's rivals in the UK pay-TV market – BT, Virgin Media, Top Up TV and Setanta, now defunct – complained to Ofcom in December 2007 that Sky exerted a "vicious circle" of control that crushes competition in the sector . Following a long consultation on whether Sky was limiting competition in the pay-TV market , Ofcom has today ordered the company to lower the wholesale prices it charges the rival companies for Sky Sports 1 and Sky Sports 2 . That means Sky's competitors could pass on cost savings to customers. BSkyB must reduce the wholesale price at which it sells Sky Sports 1 and Sky Sports 2 to rivals such as Virgin Media and BT by 23.4% from the current £13.88 to £10.63 per subscriber per month. On the basis that most subscribers buy packages including the sports channels, the reduction for a bundle is 10.5% from £19.15 to £17.14. Ofcom also ruled today BSkyB is restricting the distribution of premium movie rights, with a knock-on effect for the subscription video-on-demand market, and is proposing to refer the issue to the Competition Commission. What does this mean for consumers? It could mean lower prices for Sky's sport and movie channels – eventually. Ofcom had ordered Sky to draw up a tariff of lower prices within six weeks. But Sky has appealed to the Competition Appeal Tribunal, which could overturn Ofom's ruling. CAT could throw out Sky's objections, or it could consider them but insist the new price structure is implemented in the meantime. Crucially, however, CAT could also prevent the decision from coming into effect until it has considered Sky's appeal, which could lead to long delays. Why are sports governing bodies opposed to Ofcom's ruling? Because most of them – the Premier League in particular – have benefited hugely from Sky's largesse. Sky has paid hundreds of millions of pounds over the past 20 years to screen football, cricket, rugby and golf – money which sports bodies argue flows back into the game. They claim forcing Sky to sell on it valuable rights at a lower price will reduce the amount it can pay them and the amount of money they can put into their sports . What will Sky do next? The broadcaster has made it clear it will pursue all legal avenues in an attempt to prevent Ofcom's decision coming into effect. If its CAT appeal does not succeed, it is likely to seek a judicial review in the high court. • To contact the MediaGuardian news desk email [email protected] or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000. • If you are writing a comment for publication, please mark clearly "for publication".