Who wants to see a rerun on television?

20:49, May 20 2012
Desperate Housewives
DESPERATE TIMES: Kiwis may be paying the highest rates in the world for hit TV shows.

Sky Television's revelation that New Zealand broadcasters may be paying the highest rates in the world, per capita, for hit television series such as CSI, Downton Abbey and Desperate Housewives seems like an own goal as it faces a Commerce Commission probe.

Sky's dominance of the pay- television market could have a silver lining for viewers if it were able to act as a Pharmac-like monopsony, using monopoly buyer power to force cheap programming deals from overseas studios.

But if competition means Sky is indeed negotiating the world's worst content deals, one might wonder just what value it has as an intermediary.

Does that make Sky a sitting duck for Telecom-style reforms? Certainly, it doesn't appear to have learned greatly from Telecom's experience, which was that politicians will ultimately do what's popular.

Just at a time last year, when it might have been wise for Sky to have considered nipping unrest in the bud by offering consumers significantly better value for money, it decided to tie up more of its content behind another premium paywall in the form of its extra-cost SoHo channel.

In another case of questionable timing, Sky announced an uptick in its subscription fees just before the release of the Commerce Commission report, which said the commission would look both at Sky's deals with content suppliers and internet providers.


Communications Minister Amy Adams hasn't rushed to the company's defence. She commented on Wednesday that it was good the commission was looking at the issues because it was "always my view that was within their jurisdiction". Just how ominous that comment is for Sky was reflected by her Opposition counterpart Clare Curran's claim that Adams was "rewriting history".

But if there is any lesson to be learned from five years of chaos in the telecommunications industry, it is that it makes sense to work out what the ideal structure of the broadcasting industry would be before assembling the lynch mob.

There is little evidence the Labour government's 2006 telecommunications industry reforms were ever going to deliver much for consumers, aside from the cabinetisation of Telecom's network which was actually a concession extracted from Telecom in return for the Government not regulating further.

The Commerce Commission declared unbundling a success only by some fairly twisted criteria and by pricing it to undercut other forms of industry investment, thereby encouraging tens of millions of dollars to be sunk into a short-term effort to duplicate existing infrastructure.

National was probably wise to overwrite the reforms with what Labour's David Cunliffe described as its "Stalinist" ultrafast broadband (UFB) initiative. If it had left it longer for competition to fragment the network industry, the investment in fibre would probably have become a pipe dream.

Regulating for competition without a clear eye on the end goal led to the inefficiencies of National's disliked electricity industry reforms and, to take an even more extreme example, the farce that is the current British rail system.

Competition is a similarly prickly beast in the television sector. The risk is that the types of reforms the Commerce Commission is most likely to promote through its Commerce Act investigation of Sky, while encouraging the development of a more competitive wholesale market for television content, could also fragment that market and destroy what economists call "consumer surplus", throwing the baby (bucket-list programming) out with the bath water (Sky's profits).

TelstraClear chief executive Allan Freeth spelt out what it could mean in practice last month. In the entertainment world of the future, TelstraClear might have the rights to Top Gear and Telecom the rights to Doctor Who and consumers might have to choose which they went with, and switch provider if those rights changed, he said.

Some of the angst that would cause could be avoided if the commission adopted the same approach set out in the National Broadband Plan unveiled by the United States Federal Communications Commission in 2010.

The FCC concluded cable and satellite television providers should be required to put a "gateway device" in their set-top boxes that would let them receive services from different providers using a variety of technologies, including broadband.

Set-top boxes should be able to display those services "without restrictions or requirements on the device's user interface" - the idea being that that would let consumers view any programming that was available from competing providers.

If the Commerce Commission starts tinkering in broadcasting without a view to the big picture - without recognising that consumers don't want competition for the sake of it, but rather to get more stuff, more cheaply - chances are the Government will have to step in later with a whole new set of reforms and history really will have repeated.

The Dominion Post