Ofcom has launched an investigation into whether BSkyB is "abusing its dominance" under competition law by withholding Sky Sports channels from BT's rival YouView pay-TV offering.

The media regulator intervened after BT complained that Sky had acted "unreasonable and discriminatory" in negotiations over the wholesale supply of Sky Sports 1 and Sky Sports 2 to the fledgling YouView internet-connected TV service.

BT claimed that Sky had refused to supply its flagship sports channels to YouView unless the telecoms company agreed to offer wholesale its new BT Sport channel to the satellite broadcaster.

Currently, Sky customers can only watch BT Sport by purchasing a separate BT subscription.

But Sky wants to be able to bundle BT Sport into its existing subscription package for football fans. Sky further angered BT by providing Sky Sports to TalkTalk's YouView offering on a wholesale basis.

The dispute is the latest in a bitter war of words between the two companies that erupted when BT announced its intention to launch a rival sports channel, which will show 38 live Premier League games each season.

BT upped the stakes in its battle with Sky in May by offering its sports channels for free to broadband customers, after shelling out £738m for Premier League rights over three years. Sky, which over two decades has become the home of live Premier League action, spent £2.3bn for 116 matches over the same period.

Both companies are keen for the impasse to be resolved before the new Premier League seasons starts in August. BT expects to hear back from Ofcom in July, although it is not clear whether the investigation will be concluded that quickly.

In a statement, BT accused Sky of behaving in an "unreasonable and discriminatory manner". It added: "This is because they have refused to provide Sky Sports 1 and 2 to BT on YouView on fair terms whilst providing them to other pay TV retailers such as TalkTalk. While we are continuing to try to resolve this through commercial negotiations, we have asked Ofcom to take urgent action against Sky in the meantime. We are hopeful that Ofcom will deliver an outcome that would be in the best interests of consumers."

Graham McWilliam, BSkyB's group director of corporate affairs, said: "In long negotiations with BT, we have tried hard to uphold a simple principle of mutual supply so that both of us would offer all our customers all Premier League matches from next season. However, BT has remained intent on a one-way deal which is loaded in its favour. This is not something that we – or anyone else – could reasonably have been expected to agree to."

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