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BSkyB’s profitability in the context of the Ofcom market investigation: second report

Oxera assessed whether BSkyB’s interpretation—that the main factor explaining the gap between observed returns and the cost of capital was BSkyB’s continual successful risk-taking and innovation—was a reasonable interpretation of the profitability gap. In particular, Oxera analysed the economic characteristics of BSkyB’s investments, the persistency of returns over time, and the performance of BSkyB relative to expectations. Oxera’s report was published as an Annex to Ofcom’s Final Statement on the third pay-TV market investigation. The analysis contributed significantly to the evidence base supporting Ofcom’s conclusions.