Chris Barton: Minister - open your eyes to what Sky is doing

Sky TV chief executive John Fellet. Photo / Natalie Slade

New communications minister Amy Adams doesn't want to know about Sky's distortion of the telecommunications market.

She says things like: "I'm cautious about reaching for regulation as a solution at the stage when it is still too early, in my view, to anticipate how the competitive content market will look in a UFB (ultra-fast broadband) environment."

Earth to Amy: Open your eyes. Sky has put in place a series of un-metered content deals with internet providers that limit consumer choice and lock-out competition. Yet the minister proclaims: "There would have to be clear evidence of a significant long-term problem for the government to cut across the market response."

I don't know what clear evidence she needs, but the arrival of internet TV and movie service Quickflix provided as clear evidence as you could want. Its chief executive, former Prime Television boss Chris Taylor, pointed out that Quickflix is unable to sign deals for its service here with some internet providers because they were contractually locked in into exclusive deals with Sky.

Then there's the issue that Quickflix isn't able to offer HBO content for its service here because Sky New Zealand has the rights to these shows sewn up. It's testimony to Sky boss John Fellet's cunning, because the American network recently became a major stakeholder in the Australian-founded online video streaming and disc rental service.

In the face of two anticompetitive, anti-consumer-choice facts - no streaming HBO content because Sky's sitting on the rights and some internet providers unable to offer unlimited Quckflix because Sky contracts prevent them - Adams looks the other way.

"This is one of the early signs that the market understands the new opportunities that will be available under the ultra-fast broadband initiative," she says. "Having Quickflix enter the market means customers will have access to content that suits them on demand."

No minister, for many consumers it means precisely the opposite - no HBO to stream to their internet-ready TV unless they're a Sky subscriber and, if they're unlucky enough to be a subscriber of one the internet providers locked into Sky, no un-metered Quickflix.

That Adams has a hands-off approach to communications regulation should come as no surprise. National has a long legacy in this space beginning with Maurice Williamson, the minister of communications in 1990 - the champion of "light-handed" regulation and remembered as the minister-who-loved-monopoly. But Adams could do well to read Light-Handed Regulation of Telecommunications: the Unfortunate Experiment which shows just how detrimental this approach to the telecommunications market was.

The minister-who-looks-the-other-way is no doubt guided by the firm, but contradictory hand of her predecessor Steven Joyce. He's the minister who, despite carrying through with the operational separation of Telecom begun by Labour's David Cunliffe, then botched everything by giving the lion's share ($929 million) of the UFB contract to the incumbent monopoly.

When you factor in the interest-free loan period, Joyce's largesse amounted to $1.8 billion gift.

He'll be remembered as the minister who showed signs of evolving into a vertebrate, but preferred the realm of the spineless jellyfish.

It's easy to see Adams as another far right ideologue who reverts to the "let the market decide" mantra as though it's something created by God rather than what it is - a social construct. Despite all the evidence - eg the Global Financial Crisis - that the free market is not infallible, Adams holds that it is because she's programmed that way. Or perhaps, like so many MPs before her, she's fallen for the beguiling wiles of arch Sky lobbyist Tony O'Brien.

It's not all her fault. The real problem here is our Commerce Act 1986, its subset legislation the Telecommunication Act 2001, and the fact the latter doesn't extend to broadcasting and audiovisual content which is left to our Broadcasting Act. In a time when convergence is not just upon us, but running amok in all media, such exclusions are not just out of date, but laughable.

It has also created this current mess. The Telecommunication Act excludes broadcasting-like content services and the Broadcasting Act excludes video-on-demand services, creating a regulatory vacuum. Adam's trust in the market to work it out seems disingenuous, not to mention a familiar default position that we know doesn't work in telecommunications markets. All it does is hand dominance to the monopoly, to the detriment of consumers.

But what's of greater concern is that Adams, and possibly our Commerce Commission, are turning a blind eye to the attack on net neutrality initiated by Sky and followed by Quickflix. Net neutrality is a term that goes straight over the head of most, but is the essence of the functioning of the internet.

That is, a network which takes data packets in at one end and delivers them to their destinations at the other - all the while not giving a hoot what the packets are and treating them all the same way. In other words being "neutral" towards what applications - video, email, web pages, instant messages, music tracks, whatever - those fragments are delivering.

Net neutrality principles find their way into competition law as rules which prohibit internet providers from doing things that upset the competitive ecosystem's balance. Such as prioritising traffic, imposing congestion-related charges, or entering into exclusive relationships with particular content providers.

So when Sky, or anyone else, comes along and sets up deals to treat its traffic differently to other net traffic, we should be very concerned. And, yes minister, we do know how the market will look - absent of competition and with a monopoly in control.