Sky TV must step up to the measuring rod

Fairfax Media

SKY TV HOLIDAY: It is now six months since Broadcasting Minister Jonathan Coleman canned the previous government's review of broadcasting regulation.

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OPINION: It is now six months since Broadcasting Minister Jonathan Coleman canned the previous government's review of broadcasting regulation.

That may be the longest vacation Sky Television is going to get from regulatory uncertainty.

Clouds are starting to gather on distant shores, threatening to interrupt normal transmission. In Britain, regulators are circling the wagons of Sky's sister company BSkyB, plotting to forcibly loosen its grip over premium sports broadcasting rights.

Meanwhile, communications regulator Ofcom wants to force BSkyB to offer the pay-TV equivalent of unbundled bitstream, by making it wholesale channels to rivals at a meaningful discount.

On past trends, Sky could be in half of all New Zealand homes next year. That will be a watershed that is likely to trigger fresh debate over the structure of the market here.

The Commerce Commission has expressed some appetite to look more closely at the video on-demand market, raising the prospect that as the broadcasting and telecommunications markets converge, parts of the pay-TV sector may start to fall within the ambit of its regular telecommunications market monitoring reports.

That would be a potential slippery slope toward intervention and regulation.

If Sky starts doing deals with internet providers and downloads programmes and services to its set-top boxes via broadband, there is a risk it may invite unwanted attention from the commission, which could put its business under the microscope of the Telecommunications Act. Regrettably, that prospect imposes an incentive on Sky to stick to its knitting and delay innovation.

It might be better if the commission began comprehensively monitoring the broadcasting market now, a move unsurprisingly endorsed by Freeview chief executive Sam Irvine.

It is arguable some changes might be required to the Telecommunications Act to allow that to happen, but it would be a modest step that could ensure any future debate over regulation was at least well-informed and mitigate against emotive market interventions.

It could be that an efficient pay-TV monopoly would suit New Zealand well. In its annual report, Sky draws a few comparisons through a "Big Mac" index that shows how many Big Macs could be bought for the cost of a basic pay-TV service in four countries.

It uses these to imply that it has secured a better deal for the public than its overseas sister companies, lining up a decent mix of content at a price that matches our thinner wallets.

However, it is not very scientific. Sky's pay-TV offerings are extremely difficult to compare because of the different services, bundles, and channel offerings. BSkyB offers no fewer than 35 HD channels, for instance, but the structure of its website makes it hard even to see what is included in its base 18 monthly subscription. Comparisons would have more currency if they came from an independent source, such as the commission.

Just as relevant as the price and volume of content is whether Sky is bringing innovations to New Zealand as fast as it is in markets where it faces more competition. The availability of services such as internet downloads, 3D television and the volume of high-definition content are all considerations the commission might want to examine, were it to start monitoring the sector.

If Sky can keep up with its peers, offer prices that do not exceed international benchmarks and act in a manner that ensures its market power has no adverse effect on local content production and media diversity, those would be good arguments for the Government to stick to its laissez-faire approach to regulation. These are benchmarks by which Sky should be judged. Someone needs to start measuring.