The Commerce Commission will investigate Sky TV’s contracts with internet service providers, chair Mark Berry announced today.
In a media statement clearing the Igloo pay TV joint venture between TVNZ and SkyTV, Berry says that the Igloo investigation highlighted potential difficulties for those wanting to enter the pay TV market.
“While this was not part of this investigation, we are aware of concerns that access to content and Sky’s contracts with ISPs may be hindering competition. As a result, we have now opened a separate investigation under sections 27 and 36 of the Commerce Act.”
Section 27 prohibits anyone from entering into, or implementing arrangements with the purpose, effect, or likely effect of substantially lessening competition. Section 36 makes it illegal for any business with a significant market power to take advantage of that power to deter or prevent rival businesses from competing effectively.
In March Computerworld ran a series of articles investigating the relationship between Sky TV and the telcos. Our research showed that contracts between Sky TV and ISPs are likely to contain some or all of the following clauses:
- The ISP may be prevented from entering into a joint venture with another parner, yet Sky is free to partner with anyone – for example the Igloo deal with TVNZ.
- The ISP must carry all of Sky’s content, including its Free to Air channels. If an ISP has rights to any content, it must sub-license those rights to Sky on exactly the same terms that it has acquired for itself. And, if an ISP wants additional content it must engage Sky as its agent – for which the ISP pays Sky a fee.
- If what the ISP wants conflicts with rights already held by Sky – or it increases the cost of other programming already held by Sky – then Sky can refuse to acquire the content for the ISP. However, if the ISP is allowed to pursue its own content deal it must only be for specific programming agreed to by Sky.
- An ISP must have Sky’s written agreement to provide Video On Demand services to its customers. It may even have to reveal its commercial plans for VOD services to Sky.
- How the ISP bundles the Sky subscription service with other services (eg phone and broadband) must be approved by Sky. This could mean that the ISP can’t include in a bundled package any product or service from a company that Sky views as a competitor.
- ISP must support Sky’s marketing campaign – thereby extending Sky TV’s reach to its subscriber base. If Sky isn’t happy with the way that the ISP is marketing its service it can require the ISP to provide subscribers' details so it can market to those customers itself.
Computerworld noted then that the ISP contracts will only be open to public scrutiny during an enquiry by the Commerce Commission of Sky TV under Section 36 of the Commere Act.
Sky TV has contracts with the four largest ISPs in New Zealand – Telecom, Vodafone, TelstraClear and CallPlus.