Sky has hit out at Ofcom's decision to investigate the pay-TV market, saying it "fundamentally disagrees" with claims that the market is not dynamic and competitive.
Ofcom launched the investigation after it received a joint submission from BT, Virgin Media, Top Up TV and the Irish-owned broadcaster Setanta, which raised concerns about the competitive nature of the pay-TV industry.
Ofcom announced it would investigate the entire pay- TV market, which includes subscription and video-on- demand television services on cable, digital terrestrial, satellite and TV over DSL.
The regulator intends to obtain market information from pay-TV broadcasters to determine if the case should be referred to the Competition Commission under the Enterprise Act 2002, which deals with unfair competition and cartel operations, or under the 1998 Competition Act.
A Sky spokesman said: "We fundamentally disagree with the view that the pay-TV marketplace is not competitive and dynamic. This is an investigation into the pay-TV market in its entirety and includes Virgin just as much as Sky. Ofcom ought to look at how Virgin has a monopoly on its own cable platform."
However, the investigation has been welcomed by both broadcasters and the National Consumer Council, which called on Ofcom to step in over the collapse of the Virgin Media and Sky carriage deal.
A BT spokesman Giles Deards said broadcasters had issued a joint submission to Ofcom in January, well before the carriage deals collapsed.
He said: "Our broad observations were that Sky has a very significant influence over business at a wholesale level and that effects what retailers do."
A Virgin Media statement said: "This investigation is an opportunity for Ofcom to ensure that fair and effective competition is introduced into the UK's pay-TV market for the benefit of consumers."
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