Twelve days ago the Commerce Commission announced an investigation, under Section 47 of the Commerce Act, as to whether the new pay TV platform Igloo, a deal between TVNZ and Sky, breaches merger rules.
It was, on the face of it, a show of independence from our competition watchdog, which states its core purpose as achieving the best possible outcomes in competitive and regulated markets for the long-term benefit of New Zealanders. Not monopolies, or big business, but New Zealanders.
Labour encouraged the Commerce Commission to extend its investigation beyond section 47, which deals only with acquisitions. We believe it should encompass all relevant parts of the Commerce Act, including section 27, as to contracts and arrangements substantially lessening competition.
Particularly relevant is the market power that Sky already has as it also owns Prime, a free to air channel, something many countries do not allow to happen. And it’s not only the possible stranglehold that Sky has on content delivery via the traditional broadcast distribution networks, but also via the internet. This isn’t under investigation. Yet. Some might argue it should be.
The Commission’s investigation is not public. But it’s significant. The big question is will it use the opportunity to have a good look at the state of competition in the broadcasting (or video content) sector. In particular, whether the New Zealand consumer is being best served by the dominance of one or two large players in how they can receive video content via their TV screens and how that dominance is likely to flow on when we all start to connect our televisions to the internet via ultrafast broadband.
In many other countries consumers are able to command choice of providers of overseas content. In New Zealand we have Sky.
In Australia there is currently fierce debate over the rules that keep major sports events on free-to-air TV. Communications Minister Stephen Conroy is introducing a law to ensure the biggest games are accessible to all viewers. This is an extension to the existing anti-siphoning legislation in Australia. There is no such equivalent here and we are nowhere near even having that discussion.
We take what we’re given and if we complain we are told that there’s plenty of content on line. Consequently some consumers download their favourite shows and movies from the internet and watch on their computers, bypassing the bigger screen. Often illegally, as some shows aren’t available here via legitimate means. Most of our internet service providers now have deals with Sky.
There are two important issues at play. One is the issue of competition and encouraging other players in the market because that can only be good for consumers. The other is a cultural issue. That’s what anti-siphoning laws are really about – ensuring people get access to content that is cultural in nature and about who we are as NZers. That’s invariably sport.
There’s been a bit of discussion in the media in recent weeks about the alleged stanglehold that Sky has on our video content market. Chris Barton wrote in the NZ Herald that “suddenly internet providers all over New Zealand are providing unmetered plans for Sky’s video content. You can download unlimited data – as long as it’s Sky”.
The big question is whether Sky’s exclusive deals have the effect of preventing other contracts to provide online audiovisual content that compete against Sky. The Igloo deal with TVNZ is a means for the pay TV provider to capture another market at a lower entry price which can potentially be upgraded to a fuller service. Given the convergence of the internet and broadcasting environments this positions TVNZ and Sky to potentially dominate the market in coming years and could prevent other existing and new players providing competition.
The Igloo deal could just be the tip of the iceberg if it means that competitors like Netflix or Hulu can’t enter our market and do deals with internet service providers like Telecom, Vodafone, TelstraClear or Orcon because they’ve been locked out of the market by exclusive clauses in the contracts they have with Sky. Sky denies this.
A couple of year’s ago the dominance of Vodafone and Telecom in our telecommunications mobile phone market was challenged by new entrant 2 Degrees which invested millions, yet found itself squeezed out by the Auckland-centric monopoly of Vodafone and the Southern monopoly of Telecom. A broad alliance of consumer groups including students and farmers forced Commerce Commission intervention.
Labour consistently called for more fair competition in that market. Since then, the competition in the mobile phone market is more robust, the consumers are getting a better deal and all three players are operating in the market.
Not so in the broadcasting space. We are about to lose TVNZ7, our only public broadcaster. TVNZ has become aggressively commercial and since its recent deals with Sky, has made a conscious decision to back away from calls for greater competition. Some might say they’ve been bought off.
Mediaworks (TV3), which is struggling, but still manages to produce quality content on a shoestring budget, is a voice for greater competition. Along with the ISPs and countless industry commentators. Recently some prestigious overseas commentators expressed surprise, even horror, at the skewed and monopolistic nature of our broadcasting, or content sector.
Last month Carleton University professor Dwayne Winseck told the Commerce Commission’s conference on the demand side of the fast fibre networks in Auckland that New Zealand was viewing its telco market through “rose tinted glasses” and needs to get real about data caps, peering issues and the dominance of Sky TV.
I don’t know about rose tinted glasses. I think it’s more that our head is buried firmly in the sand.
The recent articles in Computerworld including interviews with Sky CEO John Fellet pretty much confirm that the contracts between Sky and some telcos restrict net neutrality and arguably stifle competitors, but the Telecommunications Act might be read as excluding content considerations unless it’s video-on-demand. So the concern is to make sure that different parts of the Commerce Commission don’t expediently assume that the hot potato of audiovisual content markets is the other’s problem to deal with.
How the Commerce Commission treats this issue is important. There’s a lot of pressure from the big guns, particularly Sky, to keep our heads stuck in the sand. It seems the government concurs. The new ICT Minister is following Steven Joyce’s lead (instructions?) by insisting there’s no problem and we should continue to allow the skewed market to have its way.
They should be mindful of the metaphor of the boy who stuck his finger in the dyke.
In the meantime, many New Zealanders, frustrated by the lack of quality and up to date content through legal channels are increasingly turning to downloading via the internet.