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Competition Law Problems Raised by the Entry of Incumbent Telecommunications Operators in the Media Content Delivery Market


Damien Geradin


George Mason University School of Law; Tilburg University - Tilburg Law and Economics Center (TILEC); Covington & Burling LLP

September 2005


Abstract:     
Over the last few years, the European Commission and the competition authorities of a number of (Member) States have been busy investigating transactions leading to the buying/selling of premium content rights. These cases have been triggered by several factors.

First, premium content (essentially Hollywood movies and football games) has become of critical importance for all media operators. There is a consensus to say that the showing of premium content is what drives audience and thus the fees generated by subscriptions or advertising. The development of the pay-TV industry over the last two decades has been linked to the ability of pay-TV channels to show what would not be available elsewhere, such as, for instance, recent blockbusters or live football games. Many also believe that the development of new services, such as the showing of media content over 3G could be linked to the acquisition by 3G operators of premium content rights. Absence of access to premium content could thus lead existing pay-TV operators to exit the market, as well as prevent new operators from entering the market.

Second, competition authorities have identified a series of practices linked with the buying and selling of premium content, which could generate serious restrictions of competition. The collective selling of football rights, for instance, may impede competition between sellers of such rights. Similarly, the exclusivity that is generally linked with the buying/selling of premium content rights may also produce serious foreclosure effects on the market for the delivery of content, in particular where the exclusivity concerns a large quantity of rights for a long-period of time. Competition authorities have also expressed concern that mergers between media operators could create foreclosure effects by allowing the merged firm to monopolize all valuable rights.

Against this background, the objective of this paper is to provide a brief overview of the various competition law problems that could be raised by the offering of premium content or, more generally, of media content by vertically-integrated incumbent telecommunications operators. As will be seen below, as new entrants, incumbent telecommunications incumbents may find it hard to have access to premium content rights, especially when such rights have been monopolized by one or several pay-TV operators. On the other hand, once they have acquired such rights their vertical integration, as well as the fact they engage in a variety of activities on some of which they are dominant may be the source of specific problems. This is why this paper focuses on incumbent operators, rather than any telecommunications operator.

Until recently, telecommunications incumbents had shown only a limited interest in distributing media content over their wires. Technical limitations made the distribution of movies or football games difficult. Moreover, until the mid-nineties, most vertically-integrated operators enjoyed comfortable monopoly profits, which did not make the search for new sources of revenues so compelling. The delivery of premium content was thus essentially left to pay-TV operators distributing their products through cable or satellites, or free-to-air TV which could finance the acquisition of a limited amount of such content through advertising revenues. The technical limitations impeding the showing of media content over telecommunications networks have, however, largely disappeared through digitization (which allows all types of platforms to deliver content), but also the development of ADSL, which allows telecommunications operators to deliver movies and other forms of content requiring a large band. At the same time, the growing competition faced by incumbent operators following the liberalization of telecommunications networks and services makes the search for new sources of revenues a high priority. The changes in technological and market circumstances have thus triggered a great deal of interest among telecommunications operators for the acquisition and subsequent distribution of media content.

This paper comprises VII parts. Part II discusses the question of market definition in the media industry. Part III analyses the various obstacles telecommunications operators may face when they decide to enter the media content delivery market. Part IV reviews the strategies that can be developed by telecommunications incumbents wishing entering the content delivery market to acquire media content. Part V reviews the various competition law problems that may be raised by the fact incumbent telecommunications operators are generally vertically-integrated and offer a variety of services on some of which they hold a dominant position. Part VI examines the various remedies which can be used to stimulate competition in premium media content delivery markets. Finally, Part VII contains a brief conclusion.

Number of Pages in PDF File: 16

Keywords: competition, antitrust, telecommunications, media, premium content, merger, foreclosure, exclusivity, long-term contracts, sports rights, movie rights

JEL Classification: L41, L43, L51, L82, L96

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Date posted: September 9, 2005  

Suggested Citation

Geradin, Damien, Competition Law Problems Raised by the Entry of Incumbent Telecommunications Operators in the Media Content Delivery Market (September 2005). Available at SSRN: http://ssrn.com/abstract=796066 or http://dx.doi.org/10.2139/ssrn.796066

Contact Information

Damien Geradin (Contact Author)
George Mason University School of Law
3301 Fairfax Drive
Arlington, VA 22201
United States

George Mason Law School Logo

Tilburg University - Tilburg Law and Economics Center (TILEC) ( email )
Warandelaan 2
Tilburg, 5000 LE
Netherlands
HOME PAGE: http://www.tilburguniversity.nl/tilec/
Covington & Burling LLP ( email )
1201 Pennsylvania Avenue, N.W.
Washington, DC 20004-2401
United States
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