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Virgin Media Set for Legal Action with BSkyB

Virgin Media will argue rival BSkyB has abused a dominant position when their cable versus satellite row over Sky channels reaches court but competition lawyers believe it will be difficult to prove.

The two groups have engaged in a vociferous spat in recent months over how much satellite operator BSkyB should get for allowing its channels to be shown on the Virgin Media cable system.

BSkyB took its basic channels, including hit shows such as "Lost" and "24," off the cable network after the two groups failed to agree a new deal in March.

In response, Virgin Media said it would pursue action in the High Court to challenge BSkyB's "abuse of dominance." Legal action could start on Thursday or early next week.

"This is potentially powerful, as it's illegal under U.K. and European law to abuse a dominant position in a market," Becket McGrath, formerly with the Office of Fair Trading and now a partner at law firm Berwin Leighton Paisner, told Reuters.

"Two of the ways you could abuse a dominant position are by refusing to supply a product which you have previously supplied or through excessive pricing. (But) it would be very difficult to show Sky was dominant in the (supply of basic channels) as there are plenty of other providers of that kind of content."

Virgin's Argument

BSkyB has denied Virgin's accusation that it wanted nearly double the former price for the basic channels and said it simply wanted a fee that reflected its investment in new programming.

The lawyers said Virgin Media could try to link the carriage issue to BSkyB's overall size and argue it wants to weaken Virgin Media's offering in order to reduce its ability to fight for subscribers.

Virgin Media, Britain's only major cable system, has more than 3.3 million TV customers compared to BSkyB's 8.4 million.

"Their most plausible option would be to say that Sky is the dominant pay-TV operator and it is using its control of certain content in order to reinforce its dominance to supply pay-TV," Howard Cartlidge, a partner at Olswang, told Reuters.

However, Cartlidge said that Virgin Media would struggle to show that the basic channels were a key part of its offering, especially as the group has since said it has not lost many customers over the dispute.

"Although that is good from a business point of view, from a competition point of view, it's unhelpful," he said.

The high-profile dispute is also being examined by media regulator Ofcom, which is looking into the pay-TV industry after BSkyB's rivals accused it of trying to suppress competition.

Lawyer Anthony Woolich at Lawrence Graham said the regulator could be a better option.

"The problem with a court is how do you fix what the terms should be. BSkyB would still be entitled to charge a reasonable amount and courts do not like being pricing regulators," he said.

BSkyB has said it will defend itself vigorously in court.