Sky pulls basic channels from Virgin cable

Sky has withdrawn its basic channels from Virgin Media 's cable TV service. The channels were pulled at midnight after a bitter dispute between the two companies.

As reported by our sister title What Satellite and Widescreen TV , frantic negotiations were still taking place late last night. At midnight an onscreen message said: "Thanks to Sky, some of the non-premium Sky channels, like Sky One and Sky News, are no longer available. They've picked up their ball and gone home."

"We believe that Sky want to limit your choice and force consumers into switching service."

This morning, Sky claims to have offered Virgin Media "significant concessions and a new annual price of 90 pence per subscriber, or £32.4 million, for carriage of its basic channels on Virgin Media's network," said a Virgin Media statement. "They maintain that this represents an increase of 19 per cent on the existing arrangement."

"Sky is blatantly misrepresenting their offer, which specifically provides for a minimum guaranteed annual payment that is twice the current annual payment.

"Under Sky's proposals, there are no circumstances under which Virgin Media would pay anything less than this doubled amount."

The knock-on effects for Virgin could be significant. A BBC Radio 1 Newsbeat item yesterday suggested that consumers may be able to withdraw from their 12 month contracts because, as one interviewee said, "we won't be getting what we're paying for". Virgin told Radio 1 it would be dealing with each customer on a case by case basis.

Sky's basic channels carry a smattering of popular American imports such as Lost. Virgin attempted to pre-empt the problems caused by these losses by announcing it had secured the rights to on-demand episodes of Lost last week.

The satellite operator said previously it could lose "£15 to £20 million" as a result of the programming being withdrawn, but that it wants to attain a "fair price" for the channels - Sky One, Sky Two, Sky News, Sky Sports News, Sky Travel and Sky Travel Extra. The loss is not just in carriage fees, but the expected downturn in advertising revenues for those channels.

Basic channels "underperforming"

Virgin Media accused Sky of "doubling the price" of what it called the "underperforming basic channels". Sky was also reportedly asking for a guarantee of a minimum-subscription level. The newly-named group, previously NTL:Telewest, also accused Sky of unfair play in a series of 'open letter' newspaper ads.

"The nature of these negotiations leads us to believe that this outcome has been deliberately engineered by Sky in order to suppress competition and coerce Virgin Media's customers into switching to its service by denying them access to the basic channels," said a Virgin statement at the beginning of the week.

Sky disagreed: "We are simply seeking a fair price so that we can continue to provide the great shows and choice that Virgin Media customers value.

"Despite the constructive approach adopted by Sky throughout these negotiations, the recent behaviour of Virgin Media appears at odds with a genuine desire to conclude a commercial agreement... [Sky] continues to be willing to negotiate with Virgin Media in good faith at any time".

When the services shut at midnight, the missing channels were renamed Virgin Central 2. Virgin Central is the network's new on-demand service. Sky adverts on the channels pre-midnight had advised consumers to switch service.

The dispute came to light after the launch of Virgin Media on 8 February. The deal was given extra spice since it was Sky that prevented Sir Richard Branson from taking over ITV by buying a stake in the business. Ofcom said on Tuesday it would be investigating that deal.