Sky TV and the telcos: Is there a case for content becoming a telco service?

The first article in an online series this week examining the relationship between Sky TV and telecommunications

Nobody had heard of him and his speaking slot, directly after afternoon tea on the first day of the conference, made it clear that Dwayne Winseck, professor of journalism and communication at Carleton University in Canada, was not considered a keynote speaker.

But by the time he sat down an hour later, Winseck had demonstrated to the Commerce Commission’s ‘The Future of High Speed Broadband’ conference in Auckland that the only thing pedestrian about his presentation was its title: “Consumer segment issues.”

Winseck had spent the last four months studying the New Zealand telecommunications and broadcasting market from his academic perch in the northern hemisphere and he did not like what he found.

“New Zealand is not alone in its high levels of [market] concentration,” he told the conference. “However, what sets it apart is the combination of high levels of concentration, consistently low rankings in the OECD league tables, and uncertain willingness to deal with significant market power.”

Winseck blasted the Copyright (Infringing File Sharing) Amendment Act, in which he said “ISPs have been dragooned into a policy regime that has been pushed heavily by the RIAA and IFPI since 2008, and New Zealand is one of about a dozen wins for that agenda.”

He claimed there was no link between charges and costs when it came to datacaps. “ISPs in New Zealand typically charge $2 per GB for excess usage, but the cost to produce a GB is about $0.08 cents,” he said.

Winseck referred to New Zealand’s anti-regulatory approach to telecommunications in the 1990s as an “unfortunate experiment” where “free market fantasies” dominated, while “the rest of the world moved in the opposite direction.”

In 1990 there were 14 telecomms and media regulators worldwide, today there are 155, he pointed out.

He praised the open systems integration architecture model of the UFB, noting that it is based on a seven-layer approach where “openness reigns across all layers”.

However while he praised the model as being “technically elegant”, not enough attention had been paid to the top layer: “content and what people do with media.”

Then he took at aim at Sky TV

“And besides layer seven, there’s layer eight: money, power and politics,” Winseck said. “This has largely been kept out of public but ought to brought more clearly into focus.”

He said that a “series of unregulated deals struck between Sky and all the key telecomms and ISP players since late-2009 already reveal a bid by incumbents to graft Ultra Fast Broadband onto current business models.”

Winseck was referring to Sky deals with the group of major ISPs that dominate the retail broadband market. Sky TV CEO John Fellet later told Computerworld that the contracts are the same for all the “phone companies”.

Fellet denied Winseck’s suggestion that the contracts stipulate that ISPs enforce “zero-rated content” – that is downloading material from iSky (effectively Sky TV via the internet) doesn’t count towards a customer’s datacap. Although Vodafone, CallPlus/Slingshot and Orcon offer this service.

Winseck claimed – based on journalistic accounts, News Corporation’s practices, leaks and ‘educated quesses’ – that the agreements, “are not based on withholding content, but making sure that Sky’s programming is on every distribution platform.”

“Essentially, they hand editorial control of their networks over to Sky to programme for anything that looks like entertainment: television, film, music and sporting events. Through these agreements, the telecom-ISPs forego their own opportunity to cultivate a catalogue of programming and other services to become effective providers of such things in the marketplace and in competition with Sky.”

Fellet told Computerworld that under the contracts, ISPs can’t negotiate directly with a US content provider for their own content and then only get the sports programming from Sky TV, because if they did so “they would be trying to take advantage of all our discounts. Part of the reason why we sell the whole package - if we sold just the sports tier, happy to do that, but it’s going to cost a lot more than what it does now.”

Fellet says that ISPs are entitled to get content themselves if Sky is unable to.“Our contract says ‘take ours – if you want anything we don’t have we’ll have to go get it. If we can’t get it for you, you go get it.’”

Fellet also disputes the claim made by Netflix executive Brett Ayrey at the ITEX Computerworld conference last year when he said that the considerable challenges Netflix faces in getting distribution agreements from the major studios – along with data caps and poor broadband penetration rates – was keeping the company out of New Zealand.

“That right (to distribute content) is known as subscription video on demand, I don’t have any of those rights. The studios won’t let me buy rights unless I’ve got a way to exploit it. Even if they did, you can’t get an exclusive,” Fellet told Computerworld.

Fellet’s view is that Netflix is focusing on the bigger markets in the Northern Hemisphere first, and that the company will eventually launch its services in New Zealand.

Govt rules out joint regulator

The day after Winseck’s speech at the conference, ICT minister Amy Adams, in her address to the conference, ruled out the idea of a single regulator for broadcasting and telecommunications.

“I’m equally sceptical about the benefits of shaking up the regulatory structure to deal with an issue that has yet to form into a clear shape and which the markets may yet resolve. The prime minister has used the expression of it being a solution in search of a problem and I share that view,” she said.

“... however you should know that I will continue to monitor developments very closely for evidence of the innovative and flexible solutions that are beginning to emerge overseas, and I would be disappointed not to see signs of this occurring.”

A reader later noted to Computerworld that Adams’ speech echoed a speech made in 1996 by the then Communications Minister Maurice Williamson, entitled “Telecommunications – New Zealand’s Competitive Edge.”

“Regulatory or technical barriers that inhibit development or the free exchange of telecommunications services will have a negative impact on economic activity generally,” Williamson said. “In this respect, countries have a common interest in ensuring that an effective international environment is maintained. New Zealand is well placed to participate in the current international initiatives on telecommunications services.”

*This is the first in a series about Sky TV and its relationship to telecommunications in New Zealand that will run this week. Tomorrow we examine the question of whether Video on Demand is a broadcasting or a telecommunications service.

See also: Is Video on Demand a telco service?, What is in the contracts between ISPs and Sky TV?, TelstraClear boss tackles content issues, How will copyright notices, datacaps and peering affect content delivery?

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