ComCom investigation prompted by 'competitors': Sky TV

Update 3.30pm: Reaction from TelstraClear, Vodafone, Telecom, Mediaworks and Quickflix

Sky TV says that complaints from Mediaworks, TelstraClear and other telcos have prompted the Commerce Commission’s investigation into contracts between the pay TV company and ISPs.

In a press statement Sky TV CEO John Fellet claims that the investigation under section’s 27 and 36 of the Commerce Act is “because of complaints by our competitors”.

Computerworld asked Sky TV spokesperson Kirsty Way to define who those competitors are:

“It’s television or telco providers or aspiring television providers, excluding TVNZ and SkyTV. Telcos and TV companies like Mediaworks, TelstraClear and other telcos.”

Which other telcos? Computerworld asked.

“I think that Mediaworks and TelstraClear have been quite vocal in their opposition to the joint venture. I’m not sure if other telcos have said anything publicly.”

When it was pointed out that TelstraClear is a partner of Sky TV, Way replied, “TelstraClear has aspirations to provide other television content.”

Computerworld asked TelstraClear if it had asked for the Section 27 and 36 investigation under the Commerce Act, as alleged by Sky TV.

Spokesperson Diane Robinson emailed the following reply: "We have been cooperating with the Commission in furthering their investigation."

"TelstraClear look forward to a favourable outcome so that we may freely partner with the global content industry to provide our customers choice, control and fair value to enjoy the TV, movies and music when and how they want."

In the Sky TV media statement Fellet points out that Quickflix is an example of online pay TV competition.

“As proved by the entry of Quickflix to New Zealand just a few weeks ago, a new pay TV provider can enter the market at any time. All they need to do is make an investment in getting content and delivering that content to customers, as Sky did when it started more than 20 years ago. Obviously the options for delivering content to customers are even broader now,” Fellet says.

“We will, of course, work with the Commission on its investigation into our content and ISP agreements. We understand why the Commerce Commission had to investigate the Igloo venture – because of complaints by competitors of TVNZ and SKY. We also understand why the Commerce Commission wants to review the ISP agreements we have – once again because of complaints from our competitors.”

“When Sky started back in 1990, it faced a range of entry conditions, including the need to secure new content. All content is owned by someone and you have to go out and buy it in a competitive market. Once you buy this content you have to figure out to recover the costs. It took Sky 14 years to break even. New Zealand may be one of the most competitive television markets in the world, between Freeview and Sky there are more channels per capita than in any other market, and there is competition from new entrants, especially from overseas such as Quickflix. Competition for content in New Zealand is so intense that the price that content providers receive from NZ broadcasters for shows like Desperate Housewives, CSI, Downton Abbey and for the rugby is probably the highest per capita in the world as well”.

Fellet welcomed the decision by the Commerce Commission to allow the Igloo joint venture between TVNZ and Sky TV to proceed.

Update: 1.35pm

Telecom has responded to the Commission's investigation with the following comment: ‘We’ll assist the Commerce Commission with any information it requests as part of its investigation.’

The telco says it did not complain to the Commission about its contract with Sky TV.

Meanwhile, at 1.35pm the Sky TV share price had fallen by 7.34 percent to $5.050.

Update 2.10pm

Vodafone responds: "As you know, we have a commercial relationship with Sky. It is always Vodafone’s preference to seek commercially negotiated outcomes, and if asked, we will co-operate with the Commission on its enquiry, as we always do."

Update 2.45pm

Quickflix says it raised the issue of Sky TV dominance in submissions it made to the Commission in relation to the current study into barriers to uptake of high speed broadband.

“We are pleased to see that the Commerce Commission is opening a new investigation into Sky’s contracts with Internet Service Providers and access to content,” says Quickflix MD Paddy Buckley. “Our own experiences in launching Quickflix here have illustrated that the issues raised by the Commission are serious and real, and we will be sharing our information with the Commission and assisting it with its investigation. In the meantime, we’re getting on with business and, despite the challenges, are delighted with the uptake of Quickflix in New Zealand so far.” Update 3.30pm Mediaworks lambasts Commerce Commission decision to allow the Igloo joint venture to go ahead. "MediaWorks remains concerned about the impact of this joint venture between Sky - NZ's monopoly pay provider and state owned TVNZ. We firmly believe the JV will hamper any potential for competition in the pay market and undermine the strength and diversity of free to air television in New Zealand. Allowing these parties to join forces (with Sky holding a majority interest in the JV) will, we believe, simply further cement Sky's control of premium content and dominance of the pay sector of New Zealand television while at the same time creating a conflict for TVNZ regarding its role in Freeview. New Zealanders are again being told that they must enter into contracts and be prepared to pay to watch premium content on television - even content (like that shown on TVNZ's Heartland) that has been taxpayer funded."

"We are pleased that the Commerce Commission is beginning a more thorough investigation of Sky's content agreements but surprised they have not recognised the harm inherent in the Igloo JV."

At 3.35pm, the Sky TV share price was $5.060.

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