Virgin Media teamed up with BT, Setanta Sports and Top Up Television yesterday to demand that BSkyB’s position in the pay-televison market be investigated by the Competition Commission.

In a joint submission to Ofcom, the communications regulator, the four broadcasters said “a vicious circle” that reinforces the dominance of Sky means that “competition in pay TV in the UK is not working effectively”.

Their arguments prompted an angry response from Sky, which described the lengthy complaint as “misconceived, exaggerated and cynically self-serving” in its own submission to Ofcom. BSkyB is 39.1 per cent owned by News Corporation, parent company of The Times.

Virgin and its allies claimed Sky’s leading position in the ownership of sports and film TV rights cannot easily be broken by market forces - creating the so-called vicious circle.

They argued that Sky had an inherent advantage when it came to bidding for football rights, for example, because it had an established subscriber base that allowed it to “monetise its investments in content faster than firms without a subscriber base”.

In its defence, Sky said its rivals had forgotten to take into account “ongoing changes at almost every level of the audio visual sector in the UK”, including the competition between pay and free-to-air television.

Setanta, which has recently started transmitting live Premier League football matches in conjunction with Sky, said on Monday that it had so far signed up more than 1 million direct subscribers who typically pay £9.99 a month. This growth has been achieved despite direct competition from Sky.

Ofcom will shortly begin a formal examination to see if the Competition Commision should be brought in. This will take until the middle of next year to complete, and any subsequent Competition Commission inquiry would last for several months after that.

Nick Bertolotti, an analyst with Credit Suisse, said that Sky could be forced to make its sports channels available on a “supervised wholesale” basis to all pay television operators. Alternatively, the commission “could restrict Sky’s sports rights ownership”.

Mr Bertolotti also gave warning that Sky faced “a number of impending regulatory issues” – including the inquiry into its 17.9 per cent stake in ITV – creating risks that “are not fully priced into the market”.

BSkyB shares eased 5½p to close at 604½p.

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