Prime time for a battle over TV channels

By John Drinnan

Rival broadcasters Television New Zealand and MediaWorks, including TV3 and C4, will join forces next year to convince the new National government to force Sky Television to divest free-to-air channel Prime.

The question is how the National Government will balance its traditional support for the private sector and Rupert Murdoch's Sky against the free-to-air broadcasters' concerns that the company's dominance will overwhelm the free industry if it is not regulated.

Will National regulate Sky or take the same hands-off approach it took to Telecom in the 1990s?

Prime is a key part of Sky's strategy to dominate sports coverage, which TVNZ and Mediaworks say is uncompetitive because by bidding for free-to-air alongside its pay TV rights it has the power to force them out of top programming.

For viewers it is also useful. While viewed by many as essentially unviable as a standalone venture and run as part of Sky's strategic plans, it provides an attractive programming mix, including niche public service programming absent from state-owned TVNZ.

Government departments are preparing the first ever review of broadcasting regulations.

TV3 has called for rules that would ensure that some sports events would be set aside for free-to-air coverage only.

TVNZ and MediaWorks sources suggest the anti-siphoning rules are unlikely to be enacted.

But they will proceed with a regulatory push.

Sky has expanded too far unregulated and puts the advertising-led free-to-air industry under threat.

Anti-siphoning rules, while common in other countries, are unlikely here.

If nothing else Sky will be pushing sporting codes to lobby against the change and many believe that Sky is too entrenched in controlling sports right now to turn back the clock.

But they say that anti-siphoning suggestions made by MediaWorks at the early stages of the broadcasting regulatory review would be a bargaining chip.

They argue that with New Zealand's hands-off broadcasting regime, Sky and pay television have developed an astonishing dominance. Sky has bided its time and has not pushed too hard.

But left untouched, Sky would dominate television in the way that Telecom did within telecommunications.

The question now is whether National - which ignored competitors' complaints and allowed Telecom to entrench anti-competitive practices in the 1990s - will move to prevent Sky achieving similar dominance in television and media.

The regulation review, which will consider calls for divestment, will be a key battle in the television war between Sky and the free-to-air platform represented through the free to air platform Freeview

It will be decided by a new National Government - in particular newbie Broadcasting and Communication Ministers Jonathan Coleman and Stephen Joyce.

One Ministry for Economic Development insider said officials and consultants reporting to the regulation review will look at the logical issues of competition and the future of television in this country.

But the television war was a battle between an unregulated Sky and the free-to-air channels.

This was a part of a closely felt personal campaign - an ideological battle - that was now besetting the broadcasting world, said the ministry insider.

With Sky so big the question is how far should support go for an alternative platform like Freeview, and whether the size of the New Zealand market is so small that duplication is avoided by moving free-to-air on to the Sky platform.

Publicly listed and Rupert Murdoch-controlled Sky, which was established by Terry Jarvis and Craig Heatley, has been praised by National.

Slowly and quietly - uniquely without the oversight of regulators - pay television has increased subscribers to the point that it is the leading force in the television business.

TELEVISION WARS

* The Government is encouraging people to move on to digital television so that analogue signals can be switched off. New Zealand on Air says that may occur by 2012.

* Currently 45 per cent of New Zealanders get their TV through Sky Digital and 10 per cent on the digital free-to-air platform, Freeview.

* Sky and Freeview are at war. Sky is concerned more free channels on Freeview will cap growth for its pay TV monopoly, while Freeview worries that without regulation, free-to-air TV will be squeezed.

* Amid concerns, Labour led the first review of broadcasting regulations including free-to-air calls for controls on Sky.

* National has said it will continue with the review, which is looking at Sky's competitive advantages - to be reported back to Cabinet mid next year.

TUNE IN TO A CONTINUING DRAMA ON THE AIRWAVES

THE POLITICIANS

Former Broadcasting Minister Steve Maharey
Tried to build up public broadcasting companies. A former university media studies lecturer he was wary of Murdoch's global reach. He left the broadcasting regulations review as a ticking timebomb to question Sky's growing dominance, after Labour was gone.

Broadcasting Minister Jonathan Coleman
Intelligent and respected by all parties, Coleman has insisted he supports Freeview and also spoken positively about the role of Sky.

Communications Minister Stephen Joyce
On the face of it, his private sector pedigree would lead him to be sceptical about regulation. But Joyce made his name from broadcasting as he founded radio companies that are currently held by MediaWorks. So regulating and ensuring competition can also be seen to be backing competition. The television war is not solely about the public sector.

THE BROADCASTERS

Television New Zealand
Generous taxpayer grants and questionable use of public money has helped Rick Ellis turn around the state's TV company. But questions remain about how taxpayers benefit from the company that dominates the advertising sector and acts like a commercial broadcaster. Privatisation would make some sense, balancing new regulations for Sky. It is possible, but unlikely.

Sky Television
Sky's chief executive John Fellet and his canny leadership has made him the darling of the investment set and the company is slowly but surely emerging as the dominant player in New Zealand television. Sky argued that Freeview was unnecessary and that with its market share, the Murdoch-controlled company could provide the digital infrastructure for free-to-air television. Critics worry about a Murdoch-controlled, unregulated monopoly, pointing to the relentless increase in Sky subscriptions. The regulation review will look at Sky's future and its impact on free-to-air TV.

MediaWorks
Owned by Australian private equity company Ironbridge, MediaWorks has blasted TVNZ and sided with Sky, but changed sides when Sky bought Prime. While a key part of Freeview, MediaWorks still resents taxpayer subsidies for TVNZ Freeview channels TVNZ 6 and TVNZ 7, subsidies that are not available for the company to meet Freeview obligations.

- NZ Herald

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