Watchdog Ofcom yesterday gave its initial assessment of the industry after a nine-month investigation as it decides whether there should be a full-blown Competition Comm­ission investigation into the industry.

The probe was triggered when Sky’s rivals complained the pay-TV industry was not working effectively and compet­ition was being prevented, restricted or distorted.

BT, Virgin Media, Setanta Sport and Top Up TV Europe accused Sky of exploiting a “vicious circle” by using its customer base to buy the best content, including big sports games and popular films, which attracted more subscribers.

“There are some warning signs, such as areas where consumer choice may be limited,” Ofcom said.

It identified three possible areas of concern, including whether broadcasters had any incentive to make premium content available to rivals. The others were whether there was effective competition when firms bid for content and the practice of forcing customers to buy a basic subscription package before they could watch premium services.

BSkyB shares fell 2p to 599dp. The company is awaiting the Government’s verdict on a competition investigation into its purchase of a 17.9 per cent stake in ITV. It could be forced to sell all or part of the stake.

BSkyB defended its role, saying British viewers enjoyed one of the world’s most competitive marketplaces.

“Ofcom has found no evidence of excessive prices and recognises customers are benefiting from significant and increasing choice in a marketplace that is evolving all the time,” said chief executive Jeremy Darroch.

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