Sky TV and the telcos: What is in the contracts between ISPs and Sky TV?

Sky TV's contracts may prevent ISPs from forming joint ventures with other content providers

What kind of market will Netflix, and other Over the Top players, discover if they arrive on New Zealand shores?

Sky TV CEO John Fellet claims that he has no exclusive subscription video on demand rights. But could it be that the exclusivity exists at the distribution end - that is, in the contracts that have been signed between Sky TV and the ISPs that resell Sky TV’s services?

Computerworld, through research which includes reviewing published articles, interviews, and information about the way other News Corporation (the company that owns a majority stake in Sky TV) operate overseas, understands that existing contracts between ISPs and Sky in New Zealand are likely to contain the following conditions.

Joint ventures

The ISP may be prevented from entering into a joint venture for content with a provider other than Sky, yet Sky is free to partner with anyone – for example the Igloo deal with TVNZ which is currently under investigation by the Commerce Commission.

Content control

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.

Computerworld understands that if the additional content that 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.

Content delivery

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.

In addition, an 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.

Who owns the subscribers?

If Sky decides to become an ISP itself (as Sky TV did in Britain, although Fellet has ruled this out in an interview with Computerworld) and the ISP objects, then the contract can be terminated. However Sky has up to a year to migrate those ISP customers to its own retail service and can contact those customers directly.

In other words, it appears that the Sky subscribers acquired by the ISP belong to Sky.

It is likely that these commercial contracts would only be open to public scrutiny during an enquiry by the Commerce Commission or if an action is brought against Sky TV under Section 36 of the Commere Act which “prohibits persons who have a substantial degree of market power in a market from taking advantage of that position for anti-competitive purposes, including preventing or deterring competitive conduct by others."

*This is the third article in a series about Sky TV and its relationship to telecommunications in New Zealand that will run this week. Tomorrow we ask the chief executive of a major New Zealand telecommunications company about his contract with Sky.

See also Is Video on demand a telco service?, Is there a case for content becoming a telco service?, TelstraClear boss tackles content issues and How will copyright notices, datacaps and peering affect content delivery?

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