BSkyB is accused of pushing up prices

The fears have prompted regulator Ofcom to refer studio sales of movie rights to subscription channels and the wholesaling of films to other broadcasters to the Competition Commission as part of a three-year probe into pay-TV.

Ofcom says the way in which the movies are distributed and sold "creates a situation in which Sky has the incentive and ability to distort competition".

"The end result for consumers is less choice, less innovation and higher prices."

The company – which was forced to lower wholesale prices on sports channels in March – may have to cut film prices to rivals such as BT and Virgin as well, if the concerns are upheld.

An estimated half of Sky's 9.8 million customers subscribe to its movie channels, which the regulator said were a "key factor for many consumers" when signing up for pay-TV.

But Ofcom has concerns over a limited pool of films from the six major Hollywood studios and the staggered way in which rights are sold, limiting new entrants. Sky's strong position as a distributor also gives it more leverage with studios, it claims.

Although rivals can compete against Sky for the rights to pay-per-view movies, Sky has an exclusive tie-up with the studios for the first run of movies to subscribers. Ofcom puts more weight on this because of the convenience of not paying for movies individually.

The regulator is also concerned over the studios' selling of

subscription video-on-demand (SVoD) rights for films alongside the rights to air movies on conventional subscription channels.

Ofcom said the current set-up "has resulted in a situation in which Sky has control of premium movie rights".

"We are concerned that Sky will maintain and exploit its market power by restricting the distribution of its movies channels and exploitation of SVoD rights."