Virgin drops competition lawsuit against Sky, agrees to carry channels

The two companies fell out in 2007 when Virgin refused to pay the high fees which it said Sky was charging for the right to show Sky programmes on Virgin's cable network. Virgin dropped all Sky channels from its service and withdrew channels that it controlled from Sky's satellite network.

The two companies have now agreed to carry each other's channels until June 2011 at fixed prices.

Virgin will drop its High Court action, which claimed that Sky was abusing a dominant position in the pay TV market to charge high prices in breach of competition law.

The case was based on the Competition Act and the EC Treaty, which prohibits a company which has a market dominating position from abusing it.

Virgin asked media regulator Ofcom to conduct a study into the pay TV market to determine whether or not Sky had market dominance. Ofcom agreed to conduct the study.

That study was published earlier this year and found that Sky did have market dominance, but only in some areas, such as live Premier League football and Holywood films. Ofcom refused to refer the issue to the Competition Commission.

The Sky channels involved in the new deal are Sky1, Sky2, Sky3, Sky News, Sky Sports News, Sky Arts 1, Sky Arts 2, Sky Real Lives and Sky Real Lives 2. The channels which Virgin Media controls which will be shown on Sky's satellite platform are Living, Living 2, Bravo, Bravo 2, Trouble, Challenge and Virgin 1.

The networks will broadcast each other's channels from 13 November this year until 12 June 2011.

"I believe this agreement represents a fair deal and is the right thing for our customers," said Virgin Media chief executive Neil Berkett. "We recognise the quality and popularity of Sky's channels and look forward to welcoming them back to Virgin Media's TV service."

"This is great news for Sky and Virgin Media customers alike. We want our channels to be enjoyed by as many people as possible so we're delighted to secure their return to the Virgin Media platform," said Sky chief executive Jeremy Darroch.

The dispute over channel carriage in 2007 was complicated by a battle between Virgin Media and Sky for control of terrestrial network ITV. Virgin Media sought to buy the company but were thwarted when Sky secretly acquired a major shareholding and blocked the sale.

Earlier this year the Government backed the Competition Commission's ruling that Sky's 17.9% must be reduced to 7.5% because its shareholding is against the public interest.