Sky TV and TVNZ's joint venture, Igloo, has gotten the go-ahead from the Commerce Commission, and looks set to launch next month as planned – but a separate investigation is now underway into Sky's content contracts with ISPs.
The commission decided the pay TV market would not be less competitive as a result of the venture, despite receiving a number of complaints to that effect (see report here).
In November, TVNZ entered into a joint venture agreement with Sky to launch a new low-cost subscription TV service, known as Igloo.
It opened an investigation to determine whether there was any likely breach of sections 47 or 27 (which respectively prohibit a business acquiring assets or shares if the acquisition would have, or would be likely to have, the effect of substantially lessening competition in a market, and anyone from entering into, or implementing arrangements with the purpose or likely effect of substantially lessening competition) of the Commerce Act.
“Our role in this investigation was not to judge the level of competition in the market, but whether the joint venture would change the level of competition. When we looked at two possible future scenarios, one with TVNZ’s involvement in the joint venture, and one without, we found the level of competition was essentially unchanged," said chair Dr Mark Berry.
Berry said the contractual restrictions on TVNZ in the joint venture agreement are relatively narrow, relating only to the service that Igloo will offer – linear pay TV via digital terrestrial television.
This leaves scope for TVNZ and Sky to compete across a range of other pay TV services, including video on demand and pay TV over the internet.
“We also found that a number of other potential competitors may enter the market.”
Sky potentially 'hindering competition'
However, he said the commission’s investigation highlighted potential difficulties a new entrant would face in entering 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 internet service providers may be hindering competition."
Now, a separate probe has been launched under sections 27 and 36 of the Commerce Act into Sky's dealings with ISPs. Section 36 makes it illegal for any business with a substantial degree of market power to take advantage of that power to deter or prevent rival businesses from competing effectively.
At the Igloo launch event in December, all questions about Sky’s monopoly were deflected and departing TVNZ chief executive Rick Ellis said he had no qualms about competition issues. “Igloo is adding choice,” he said (at the time, Ellis refuted allegations that he made submissions to the review on broadcasting, and criticised the dominance of Sky a few years back and dismissed the fact that Freeview will be undermined by this move because it is not a commercial company).
While Sky's John Fellet maintains there is sufficient competition in the market, movie and TV streaming service Quickflix has expressed concern about Sky's dominance and was quick to welcome the new investigation (the two have recently been embroiled in a war of words).
"Our own experiences in launching Quickflix here have illustrated that the issues raised by the commission are serious and real," managing director Paddy Buckley said.
And last week new ISP Fyx killed off its global mode feature (which would have allowed customes to circumvent geo-blocked services like Netflix and Hulu) shortly after hitting the market (some speculate that content suppliers had objected to Fyx).
TelstraClear chief Allan Freeth previously criticised Sky to the Herald and hinted TelstraClear might abandon its "restrictive" deal for rebroadcasting Sky material.
About 45,000 TelstraClear customers use the company’s T-Box set-top boxes to receive TV via cable, with content provided by Sky in a wholesale partnership. The contract prevents TelstraClear charging for content not sourced through Sky.
Fellet said he understood why the Commission wants to review the ISP agreement - "because of complaints from our competitors".
Igloo: what you need to know
Igloo is a joint partnership between Sky (51 percent) and TVNZ (49 percent) offering both free-to-air and pay television channels.
The Igloo box will cost under $200 and the basic package $25 month, including all channels currently on TVNZ. The lack of a MySky style decoder and installation fees will keep costs down.
The package will include access to 11 channels: BBC News, BBC Knowledge, UKTV, National Geographic, Animal Planet, Heartland, Vibe, Food Television, Kidzone24, MTV Hits and Comedy Central.
Live pay-per-view sports events are available to purchase, as are more than 1,000 movies and TV episodes. On Demand films and TV episodes are streamed over broadband connections and are available to view for 48 hours. Users also have the option to cancel the service for a month and then restart it again, with no termination fee.
Content will be in HD where available, movies are between $4.99 and $6.99 and TV episodes are $1.99 (identical to iSKY), and there will be no downloading, just streaming.
Critics such as new streaming TV/film service Quickflix say it will entrench market dominance.