Juha Saarinen is a tech blogger for nzherald.co.nz.

Juha Saarinen: Vodafone/Sky merger not over yet

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"Hey, let's grab some cold ones and watch the game at your place. "

"Oh, nah... I'm on Spark UFB so we can't watch it at my place. Do you know anyone who's on Vodafone?"

There's the reason why the Commerce Commission said no to the mega merger (for New Zealand) between Vodafone and Sky Television. Spark and 2 Degrees must be breathing easier now that the Commission didn't pull the rug from under their feet by clearing the merger.

From a local perspective, it's hard to see what else the Commission could've done.
Competition in the internet provision market is fragile in New Zealand, thanks to increasing consolidation - Vodafone was allowed to buy TelstraClear, and this year, Spark said it wants to snaffle up TeamTalk.

Vodafone's big as it is, and giving it some magic sauce like exclusive access to All Blacks and Black Caps games, as well as international sports events, would make it the default ISP choice in the New Zealand market for many people.

In the short term, that scenario wouldn't benefit anyone apart from Vodafone and Sky TV owners and shareholders.

It also goes in the opposite direction of how the internet is evolving, with people using multiple providers without thinking about it. Nobody wants to be tied down to a single provider for anything.

Long term however, the picture is less clear. Sky has an obsolete and expensive to maintain satellite content delivery platform that will become increasingly hard to sell.

Let's be honest here: if you had a choice of installing a dish on your house, run thick cables into a decoder and then pay $100 something a month for the privilege, would you not cast side-eyes towards that UFB connection and try to get the content that way?

Vodafone likewise owns infrastructure spread out over several different networks, fixed and mobile, that it has to maintain and develop to keep customers from shifting to other providers.

Both Vodafone and Sky TV must've known they're up against global internet-borne competition, but they felt complacent and sat on their hands for years.

There's a hard limit to how much that customer connectivity business can grow. Gallingly enough for Vodafone, the likes of Netflix, Amazon, Facebook, Google and other over the top providers contribute nothing to its infrastructure costs while they earn money of the telco's customers.

Faced with competition from over the top providers, telcos are trying to lock in content and puff themselves up by acquiring subscribers - like Verizon in the United States buying Yahoo for NZ$6.25 billion - to remain relevant.

That's a good chunk'o'change but eyeballs aren't worth what they used to be. In 2008, Microsoft wanted to buy Yahoo for US$44.6 billion or ten times as much as what's on the table today.

Both Vodafone and Sky TV must've known they're up against global internet-borne competition, but they felt complacent and sat on their hands for years. The merger scheme might have worked out if it had had some unbundling and content wholesale guarantees built into it which could've made the deal good for all local providers fighting against the overseas giants.

Imagine if you're a small wireless provider in the regions and able to offer sports packages that were locked away in the past: not only would that build your business, but it would be an incentive to investment in the network to keep up with demand.

Under that scenario, Vodafone's global overlords would've still had an exit strategy for the local subsidiary which would be attractive for buyers, and Sky TV could quietly start thinking about how to wind down the satellite service.

This could still happen of course, but only if Vodafone and Sky TV act fast. That's just the way it has to happen in the internet era, because nobody will wait while you mull things over.

- NZ Herald

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Juha Saarinen is a tech blogger for nzherald.co.nz.

Juha Saarinen is a technology journalist and writer living in Auckland. Apart from contributing to the New Zealand Herald over the years, he has written for the Guardian, Wired, PC World, Computerworld and ITnews Australia, covering networking, hardware, software, enterprise IT as well as the business and social aspects of computing. A firm believer in the principle that trying stuff out makes you understand things better, he spends way too much time wondering why things just don’t work.

Read more by Juha Saarinen

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