Forum: Break the broadcast monopoly

Prime Minister John Key passed up a big opportunity when he neglected to combine the communications and broadcasting portfolios late last year

Prime Minister John Key passed up an opportunity to boost uptake on the taxpayer-supported Ultra Fast Broadband network when he neglected to combine the communications and broadcasting portfolios late last year.

Instead the portfolios remain separated with new cabinet ministers Amy Adams being handed ICT and Craig Foss given broadcasting. A sign perhaps that the government intends to remain hands-off in the area of content regulation.

The previous ICT Minister Steven Joyce told Computerworld last year there were no plans to regulate to ensure Sky TV doesn’t have exclusive access to premium content such as rugby matches and movies – the kind of programming that New Zealanders are prepared to pay high monthly subscription fees for.

He seemed to think that sports franchises might go straight to the customer – although I can’t imagine why they would when they get huge sums of money from distributors for their content and don’t have to bother with all those pesky customer service issues that come with servicing a mass consumer market.

Broadcasting regulation today is like telecommunications (non) regulation was in 1990s and early 2000s when Telecom’s share price was at a record high – its shareholders benefiting from an entrenched monopoly position that was staunchly defended in the law courts. When Local Loop Unbundling came to every market in the OECD except New Zealand and Mexico, and end users in Europe, Australia and the US were able to enjoy the benefits that competition brings such as real choice and cheaper prices.

Across the Tasman, Australian Senator Stephen Conroy is minister for both communications and broadcasting in a government which has also pledged billions of taxpayer money towards a state-funded fibre network (in Australia’s case substantially more than in New Zealand).

Broadband customers of large ISPs can buy content packages from Fletch TV that start from around A$10 a month. For example, the Fletch TV option available from iiNet provides 30 free movies a month, as well as free-to-air and additional TV channels. At Telstra, deals start at around A$9.50 a month for 30 Foxtel channels, which include sport and movie options.

Let’s compare that with what New Zealand ISPs are offering. You can get a version of Sky TV from ISPs such as Vodafone and TelstraClear and you will pay, for a basic entertainment package, about $45 a month. Telecom appears to be sticking with TiVo for the time being.

In other words, in New Zealand it is identical content, delivered at the same time and day, for around the same price. There is no choice and there are no cheap deals.

Don’t count on competition in this market any time soon. Netflix – the IPTV service that offers unlimited movies for around US$10 a month says it won’t be coming to New Zealand, citing poor broadband infrastructure (which is being addressed) and exclusive content deals.

What about the local alternatives? Could Fatso, whose current business model is to home-deliver DVDs, turn itself into an online delivery channel? I wouldn’t hold my breath – it is majority-owned by Sky TV.

What about TVNZ, surely the big old state broadcaster will muscle into IPTV territory? Unlikely, given it has just done a deal with Sky TV for a discount pay television service called Igloo.

Maybe TVNZ is running scared after TiVo failed to fire in New Zealand. Its former CEO Rick Ellis has now jumped the ditch to head Telstra’s new digital media division. Ellis understands content deals, he told a telco industry conference last year that content asset management is a fraught business: “When you walk into a negotiation with Disney and so on, you walk into a voracious and complex environment,” he told them.

It’s puzzling why the government is remaining so hands-off when it comes to broadcasting, because it risks turning the Ultra Fast Broadband network, which has a $1.5 billion taxpayer contribution, into a white elephant if it doesn’t find ways to entice consumers off the copper and onto the fibre network. Premium content would appear to be a very good carrot.

This issue may gain some prominence when the Commerce Commission releases the third paper in its high speed broadband services demand side study which will look at content. It is also sure to be a hot topic at the Commission’s conference in February, where Sky TV CEO John Fellet is apparently scheduled to speak on a panel discussion.

Let’s hope that Key’s ministers are listening.

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