Sky may have to share TV channels BSkyB should be forced to make its premium sports and film channels available to rival broadcasters, watchdog Ofcom has proposed.
Ofcom said such a move may be a "most appropriate way of ensuring fair and effective competition".
BSkyB has immediately rejected the proposal, saying it will "use all available legal avenues", and that it "fundamentally" disagreed with Ofcom.
Ofcom has asked interested parties to respond to the proposals by 18 August. 'Enforce rigorously'
The watchdog said it proposed that BSkyB would have to offer the subscription channels to its rival broadcasters at "regulated prices".
Ofcom said its proposal would enable more rival broadcasters to access and offer the channels to viewers, "thereby promoting choice and innovation".
While users of cable service Virgin Media can already subscribe to BSkyB's premium sports channels, Ofcom hopes its proposal will mean a growing number of other companies will be able to air the channels, either through terrestrial digital broadcasters or via the internet.
"We do not believe that this proposed remedy would have a disproportionate impact on Sky, since we consider the proposed prices are above the level required to allow Sky a reasonable return on its content costs," said the watchdog.
Ofcom has yet to give a date for when it expected to publish its final statement, but analysts said this could be released as early as the end of this year.
Barring any successful legal challenge from BSkyB, Ofcom's final decision will be binding.
Telecoms group BT, which runs a TV service called BT Vision that adds on-demand material on top of freeview broadcasts, said it welcomed Ofcom's findings.
"The proposal to force Sky to wholesale its content is welcome, but we now need Ofcom to step up the pace and to enforce this rigorously," said Gavin Patterson, chief executive of BT Retail.
"Prices have been too high for too long but this could all change if Ofcom breaks Sky's stranglehold."
Shares in BSkyB were up one pence or 0.22% to 452.75p in Friday morning trading in London. Premier League dominance
BSkyB is controlled by Rupert Murdoch's News
Corporation, which has a 39% stake.
The broadcaster's dominance of the pay-to-watch sports television market was brought into focus last week following the collapse of its smaller rival Setanta.
Next season, BSkyB will air 92 live English Premier League games, while Setanta's 46 games will now be shown by US firm ESPN.
For the three football seasons from 2010/11 to 2012/13, the number of Premier League games BSkyB will show rises to 115 of the 138 available each year.
A European Commission ruling that Premier League games cannot all go to one broadcaster is currently due to run out in 2012.
Ofcom said that in addition to its proposal that BSkyB has to offer its sports channels to more rivals, it would be talking to the Premier League about a further commitment not to give all the matches to one broadcaster from 2013/14 onwards. THE BBC